July 2020 Newsletter

Dear Client:

This newsletter is to inform you of current events that can affect you economically.

The new stimulus bill is being refined in the Senate and it appears 90% likely that it will include the following provisions:

First, it will include another round of direct $1,200 payments to many Americans with AGI under $75,000 if single and twice that if married, plus $500 for each dependent regardless of their age.

Second: An extended stimulus unemployment benefit will be enacted at a lower rate of $200 per week instead of $600.

Third: The ban on evictions from Federal backed mortgaged properties will be extended.

Fourth: More testing funds will be available for senior facilities, schools, and child care centers.

Fifth: The proposed bill will restrict lawsuits in coronavirus related cases.

Sixth: There will be additional aid to schools and universities.

The bill will be finalized and publicly announced in the final form Monday next week.

We have offered free financial planning for our clients included in our tax fees. I have been, or am currently, licensed in securities as a Registered Principal, taxes as an Enrolled Agent, and fire, casualty, life & disability insurance agent.

This past week we reviewed the finances of a client and found, although he had good investments, that

his ex-spouse was still the beneficiary of his huge pension. The client was notified and is very grateful. Another client had property above the tree line of the San Gabriel Mountains where it is nice and cool.

The recent fires in Northern California in the past year resulted in a huge increase of mountain residential property casualty rates. The client left his policy information with me. I noticed that he had a good rider to cover the increased costs of replacement construction from damages but the property values were wrong. His property, with a FMV of $350,000, was insured for almost twice the amount. The client saved half of his renewal premium by realistically adjusting the amount of the property of his policy, resulting in no real loss of coverage.

A widowed client was worried about the roller coaster effect of the stock market on her pension. She agreed to buy an insurance annuity through us which will protect her investment.

Another client showed us his considerable inherited investment portfolio which was 100% invested in California tax-free bonds. The wealthy relative had bought them to avoid taxes while she lived in California. The problem was that the client had moved to another state and now all the interest income would be taxable. His broker never advised him. An additional problem is that the bonds are paying high-risk interest dividends because they were rated lower than in the past. This was before California announced a current deficit of over $60 PLUS Billion for this fiscal year (before the new shut-down).

Now the bad news which most financial professionals have been expecting. The following information was gleaned from the Wall Street Journal and my personal client interactions and expectations. After a market shock earlier in the year when the DJIA dropped over 2,000 points in a single day, the market has responded magically. Tesla Motors and gold both hit $1,900 per share and troy ounce setting new records. Equities are up 25% in five months, setting a new record. Silver rose unexpectedly to $23 per troy ounce. NASDAQ and S&P Indexes are up 40% from February. New records break again. Wonderful performances, as the DJIA rallied about a thousand points monthly since the first quarter corporate earnings were announced earlier.

The perfect storm is coming. Economists now estimate the GNP has contracted by 32%, about one third, in the second quarter this year. The virus lockdown continues with the worst contraction on record. While 60% of all closed restaurants will never recover, the financial markets and real estate sales have been defying gravity. Interest rates have been held at artificial lows by the Federal Reserve Bank. Thursday,this week, the Federal Economic Agencies will release their official data.

One other issue on the way in the next two months will be the results of corporate second-quarter earnings. They will reflect the continued exposure to the economic nightmare we have all experienced. The results should be much worse than the news that dropped the Dow from $27,000 to $20,000 earlier this year. We will learn if the recent market contradiction of exuberance versus reality will sustain.

We offer insurance annuities which are guaranteed to never lose principal, offer a 6% sign-up bonus, and honest earnings.

Best wishes and good health to all. Call for financial planning appointments or to buy my new book, Stocks, Bonds, & Taxes, which is all about financial information and estate planning.


Phil Chute, EA & Staff

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