Highlights of the CARES Act

Late last week the senate passed and the President signed the CARES stimulus package designed to, among many things, curb the financial turmoil created in the wake of the Coronavirus. This $2.2 trillion, 800+ page legislation offers meaningful help to investors, business owners, and those directly impacted by layoffs or the virus.

Using several sources we’ve compiled a list of some of these benefits that our clients might find most helpful. If one stands out to you, please reach out to us and we’ll be happy to walk through how it might apply to your situation. We’d also recommend connecting with your CPA regarding tax-related items.

Here are some of the highlights:

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Improving Investor Behavior – Investing in Panic

A lot can change in 30 days. One short month ago, markets were knocking on the door of all-time highs, businesses were doing well, and Joe Biden was behind several candidates in the Democratic primaries.

Oh, how things change quickly. Very quickly.

Even when compared to historic drops, the decline of about 18 percent that we’ve seen in the broad market indices took only 13 days. The start of the Great Depression took 28 days to reach that level. In 1998, it took 31 days. The Great Recession didn’t even make it in the top five fastest drops.

I want to focus on two questions in this column: First, to what can this speed of this market drop be attributed; and second, is it warranted?

All dramas need a villain. This time it’s the Coronavirus. The rapid spread of the virus led to ghost towns (Wuhan), which in turn led to locking down an entire country (Italy). This is a serious virus, and any amount of death or damage caused by it is too much. I don’t intend to trivialize it, nor the efforts of healthcare workers around the world fighting on the front lines.

But as investors, we have a mandate to try and understand where to draw the line between reasonable concern and emotion-driven panic. Too much emotion leads to panic selling, which in turn creates opportunities for those willing to buy when others are fearful.

I’d argue that we are well over the line of reasonable concern and deep into an emotional panic. During the 2008-2009 recession, corporate profits declined 46 percent, according to Brian Wesbury, Chief Economist at First Trust. Comparably, the current declines point to an estimated profit decline of 50-80 percent. Effectively, the market is saying that Coronavirus will have a greater effect on American businesses than the Great Recession, a time in which the entire monetary system seemed to be teetering on edge.

Consider these five critical elements of an economy: The Federal Reserve, taxes, regulatory policy, trade policy, and spending. What’s the status of these? The Federal Reserve just announced yet another cut to rates last week, making them even more accommodative than they already were. We just passed significant tax reform two years ago. Burdensome regulatory policies have been reduced. Trade policies (while challenging) have shown progress. All that to say that our economy is a pretty good place for business right now, and far better than it was during 2008-2009.

If the economy is strong and unemployment continues to be at an all-time low of 3.5 percent, why is there such a panic? I think part of it is the unknown. We’ve seen movies and TV shows designed to scare us with viruses. A disease that demolishes populations, creates zombies and generally wreaks havoc. We’re seeing something we don’t fully understand, and governments around the globe are reacting. Social media posts are encouraging everyone to start wearing gas masks and stockpiling toilet paper. Media, both traditional and social, perpetuates panic with continuous updates from a variety of “experts.” Couple that with the financial industries’ recent trend of eliminating trading costs and arming investors with phone apps, and you start to understand how easy it is for investors to panic sell with virtually no barriers.

On February 3, some 12,000 Robin Hood (a “free trading” app) investors bought Tesla shares for the first time. It reminds me of Bitcoin in 2017 and the dot.com bubble of 1999. Greed is a powerful emotion. When prices decline, human nature extrapolates that values will go to zero. Fear overtakes common sense, rising to panic.

Going one level deeper, consider a popular investment these days called exchange-traded funds (ETFs). These derivatives are designed to mirror the performance of a basket of underlying assets, usually stocks. For example, this allows an investor to buy a share of an ETF that reflects the performance of the entire S&P 500. Investors like them as they provide a low-cost method of diversification.

But behind the scenes, there’s a lot of trading going on to keep the derivative in line with the underlying asset. This gets complicated quickly, but suffice it to say that I think ETFs may be contributing to the dramatic swings we’ve seen lately. Liquidity, options, and other derivatives drive big moves, and these funds utilize tons of them. Computer-driven buying and selling mean it can all happen in a moment’s notice. I think the very financial instrument that was designed to give investors an edge has increased volatility and speculation.

Even when armed with logic and facts, our emotions can still get the better of us. There’s no doubt that headlines are scary, and the market drops are meaningful. But logic has to win over emotion. Think about this: during the Apollo 13 mission of 1970, the moon landing turned bad when two oxygen tanks and two fuel tanks failed. According to Jack Swigert, the chief pilot on the mission, had those variables been thrown at them during the simulator drills, they would have responded, “Come on, you are not realistic.” No one could have seen this coming, but it happened. One month ago this whole scenario seemed impossible, but here we are.

It’s during times like these we are reminded of the importance of good investor, and indeed financial, behavior. Get back to basics: Do you have a financial plan? Do you have savings? Do you have a project account set aside for emergencies? Are you spending less than you make? Are your investments diversified?

If all these boxes are checked, good investors will look at moments like these as opportunities. Asset prices have declined, allowing us to purchase some of the best companies in the world at discounts unimaginable only 30 days ago.

Steve Booren

Steve Booren

Steve Booren is the Owner and Founder of Prosperion Financial Advisors, located in Greenwood Village, Colo. He is the author of Intelligent Investing: Your Guide to a Growing Retirement Income and a regular columnist in The Denver Post. He was recently named a Forbes Top Wealth Advisor in Colorado.

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A Note to Clients on Virus Volatility

As I’m sure many of you are aware, this past week has been a difficult one for investors. The broad market indices have seen swift and dramatic drops, leaving many scared, confused, and upset.

Make no mistake; it is moments like these that define all of us as investors. Fear is an emotion, and one that can quickly snowball into an all-out panic. We’ve often said your behavior as an investor will ultimately have a far greater effect on your outcome than when or how you are invested. This is one such moment.

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PRESS RELEASE: Steve Booren Recognized in Forbes as a 2020 Top Wealth Advisor in Colorado

DENVER, Colo. — January 30, 2020 – Steve Booren of Prosperion Financial Advisors was recently ranked No. 26 in Colorado in the 2020 Best-In-State Wealth Advisors list published by Forbes.

According to Forbes, the annual list spotlights the nation’s top-performing advisors, evaluated based on a methodology developed by SHOOK Research. Advisors are also evaluated based on personal interviews, industry experience and revenue trends, among other criteria.

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From Clutter to Clarity: What to Toss and What to Keep

By Michelle Santaferro, organizing expert and owner of Organomics

Like many during this time of year, you may have found certain documentation painful to retrieve and scattered in several locations.  But there’s good news: you can create a system to quickly file and find anything you need financially. Let’s look at the steps you can take to retrieve things quickly.

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2016 Taught Us These 3 Lessons

If 2016 has taught us anything, it is to expect the unexpected. So as we wrap up a rollercoaster of a year, I find myself looking back to three surprises and the lessons they taught us. In the same way the bottom of a cup is revealed only when the liquid is quickly stirred, sometimes it takes a whirlwind of the unexpected to remind us of a few simple truths.

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Steve Booren

Steve Booren

Steve Booren is the Owner and Founder of Prosperion Financial Advisors, located in Greenwood Village, Colo. He is the author of Intelligent Investing: Your Guide to a Growing Retirement Income and a regular columnist in The Denver Post. He was recently named a Forbes Top Wealth Advisor in Colorado.

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Introducing Prosperion Planning

Introducing Prosperion Planning, the new service from Prosperion Financial Advisors. Learn more at www.prosperionplanning.com

We built Prosperion Planning specifically to help younger families get on the road to financial independence. A service to help them during a time in their lives when making small choices may add up to a big impact. We wanted to make it accessible, valuable, and affordable so it fits within a monthly budget, just like Netflix or a gym membership.

We learn about their needs and priorities and provide advice specifically for their situation. Whether it’s adding to the family, changing jobs, building a business or any number of complicated life decisions, we’re there to help guide them through each turn that life takes.

John Booren

John Booren

John started his investment career in 2012 after graduating from Colorado State University with a bachelor’s degree in Financial Planning. His desire is to provide care and guidance for individuals and families through all aspects of their financial life. Learn more about John here.

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“Revolution” by Brian Westbury

“Elections have consequences and the impact on U.S. economic policy of last week’s election will be enormous. We’re sure we’ll be writing about all of these issues in much greater depth over the next several months, but, for now, here’s a broad outline of what to expect.

One of the Republicans’ first tasks will be repealing much (but not all) of the Affordable Care Act, also known as Obamacare. To get that done, they will use the budget reconciliation process in the US Senate, where they don’t need to break a filibuster with 60 votes; instead, they only need a simple majority. The budget process can be used to eliminate (1) penalties for not getting insurance, (2) subsidies for buying government-approved overly-broad insurance packages, and (3) the expansion of Medicaid.”

Steve Booren

Steve Booren

Steve Booren is the Owner and Founder of Prosperion Financial Advisors, located in Greenwood Village, Colo. He is the author of Intelligent Investing: Your Guide to a Growing Retirement Income and a regular columnist in The Denver Post. He was recently named a Forbes Top Wealth Advisor in Colorado.

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The Fear of Uncertainty and the Uncertainty of Fear

“We have nothing to fear, but fear itself.”

With those words FDR accepted the presidency of the United States in 1933 during one of the most turbulent times in American history. Lesser known are the words that surround that key sentence.

“So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory.”

But human nature is a funny thing. As a society we tend to be emotional and sensitive to fear. Fear preys on our emotions, which in turn have the power to overrule logic, reason, and even common sense.

Putting aside fear is not an easy thing to do, especially faced with the uncertainties of modern life. But if we can, a different story emerges. Read more

Steve Booren

Steve Booren

Steve Booren is the Owner and Founder of Prosperion Financial Advisors, located in Greenwood Village, Colo. He is the author of Intelligent Investing: Your Guide to a Growing Retirement Income and a regular columnist in The Denver Post. He was recently named a Forbes Top Wealth Advisor in Colorado.

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Election Letter from Burt White, Managing Director of LPL Research

“Donald Trump has completed his landmark quest and will become the nation’s 45th President after a contentious and often divisive campaign. In addition, the Republican Party has retained control of both houses of Congress. This outcome marks a significant reversal from just a few weeks ago when a Hillary Clinton presidency was highly probable and even a Democratic party sweep of Congress was possible.

While this outcome is certainly a shock to many, it is important to remember that the result isn’t a surprise to the plurality of American voters that spoke their collective will at the ballot boxes yesterday. The strength of a democracy is not in whether we like the outcome, but rather in how we accept the result as the voice and will of our republic.