EIDL, PPP, & What does it mean to me?

A lot has changed in the last couple of days, as the government has rolled out their initiative (PPP) to keep small businesses open and employees on the rolls.  To say it has been a cluster would be an understatement.

However, Senator Marco Rubio seemed on top of things as Saturday morning he launched one of the best threads out of Washington in a long time on Twitter.  Basically, he wrote a 13-tweet thread describing issues and resolutions the government has seen with the plan and how it would be addressed.  Lending his voice to help clarify things was a welcome change, and I am sure instilled some confidence in the markets as it portrayed there was some leadership on the issue.

As for the Economic Impact Disaster Loans, that is part of the ‘crisis’ of the week.  This program has made the PPP program rollout, in contrast, seem smooth.  There are still a lot of questions around this and everyone is waiting for clarity.

So how does this impact non-business owners?

In essence, it is designed to for small businesses to retain employees, pay rent, and certain other expenses, in order to keep the economy functioning.  Basically it is supposed to keep the engine of the economy warm until it can heat up earnestly again.  This program is essential to our long-term viability as a country, and so these businesses go, so goes your portfolio.

What’s Next?

The markets for the most part have been fairly orderly the last couple days, and it has been nice to see up days as opposed to down, but I will warn you – we are not out of the woods yet.  Just like pouring drain-o down the pipes, it takes a little time to work its way through.

On the other hand, the headwinds have not turned to tail winds yet, and the biggest concern still lies around testing capabilities.  Don’t get me wrong – we have made significant strides, but we must do more.  A recent survey from the Booth School of the University of Chicago asked the question of what required element would be needed in order restart the economy…and clearly there is much agreement that a massive increase in testing capabilities is needed.

Once this occurs, I think everyone will feel better about where we are at and we can start to think about the reopening of the economy.

But what if I sold at the top? Then bought at the bottom….

Inevitably, we all go through the expanse of emotions during a market sell off…fear, remorse, relief, and exuberance, just to name a few.  As our statements come in for the quarter, undoubtedly we will be confronted with second guessing our decisions… Well what if I had gone to all cash?…etc.

As you have heard a million times, it is near impossible to time the market, but I thought I would let society speak for themselves and let the data do the talking.

So I embarked on a little experiment…

On March 9, 2009, we found the bottom in the markets during the Great Financial Crisis.  The S&P 500 closed that day at 676.53.  Investors, however, were almost 5 months behind, and according to Google Search trends, internet user’s searches for ‘buying stock’ did not exceed ‘stock market crash’ until the week of July 26, 2009.  Using the search trends as an indicator of investor sentiment produced some interesting results…

And they were that during that period:

The S&P 500 Return for March 1, 2009 till December 31, 2009:  46.656%

The S&P 500 Return for July 1, 2009 till December 31, 2009: 18.653%

In essence, if you tried to time the market, and missed out on investing from March 1 till July 1, you would have given up 28% in return.

That is why automation and consistency in investing is so crucial to your overall plan, and emotions are not.

Finally, I thought I would share this quote from Jim O’Shaughnessy, founder of OSAM, in relation to what I just mentioned:

“The four horsemen of the investment apocalypse: fear, greed, hope and ignorance…Only one, ignorance, is not an emotion. Fear, greed and hope have wiped out more portfolio value than any bear market ever, any market crash ever”

Green Shoots:

As some of you may know, one of my passions is promoting financial literacy, and for the past couple years I have been working with Ms. Regina Watkins at West Lake Middle School on the stock market game and personal finance.  Unfortunately like most things this year we were cut short, but I am really proud of the classes and their hard work.  This year they were rewarded again by placing 2 teams out of 3 for the middle school division in the North Carolina Council on Economic Educations personal finance challenge!

One cool thing about this quarantine is how celebrities have chosen to interact with their fans.  John Krasinski being one of them, but for you fans of musical theater, be sure to watch around the 10:30 mark, it will surely make your day:

Perspective:

Adam Grant is an organizational psychologist at Wharton.  I have really enjoyed Adam’s writings over the years as he has a way of making this stuff seem fun and fascinating all at once.  Below is a snippet from his most recent e-mail I thought we could all relate to:

Speaking of loneliness: if you’re feeling FOMO in quarantine, it might be time to embrace JOMO, the joy of missing out. My list of things I’m glad to be missing:

(1) Having to change out of sweatpants

(2) Commuting

(3) Awkward interactions with strangers

(4) Awkward interactions with people I know