Retirement Watch Lighthouse Logo

Bob’s Journal for 3/12

Last update on: Jun 15 2020

Many of you have seen and asked about promotions for Retirement Watch that offer a book, “The New American Retirement Plan.” This book and the promotion are a way to introduce new readers to the newsletter.

You’ve seen all the material in the book, because it was taken from past issues of the newsletter. That book and all of our reports are available to all of my subscribers on the members’ section of the website. We update and revise the online publications regularly, so it’s a good idea to check for the latest version. You can find the reports by clicking here.

Opportunity In the Sell-Off

The stock market decline is creating a tax and estate planning opportunity for many people.

One way you can benefit is by converting a traditional IRA to a Roth IRA while investment portfolio values are down. When a traditional IRA is converted to a Roth IRA, the amount that is converted is included in your gross income and taxed. The value of the assets on the date of the conversion is the amount included in gross income.

With stock prices down, you can convert more shares of stocks and mutual funds at the same tax cost that you could have only a few weeks ago. Or, you could convert the same number of shares at a lower tax cost. Either way, it is less expensive to convert an IRA now than it was before the market decline.

I’ve said repeatedly that a good time to consider converting an IRA is after a portfolio decline. If you have a stock heavy IRA or 401(k), this is the time to review your decision to convert to a Roth IRA and take action before the market recovers.

Converting to a Roth IRA is a good way for many people to increase their after-tax wealth in retirement. It also is a good estate planning tool, even after the SECURE Act ended the Stretch IRA. I’ll have more details about that strategy in the upcoming April issue of Retirement Watch.

Stocks Doing Well in the Downturn

While the market indexes declined substantially, not all stocks are falling. In fact, some stocks are doing quite well. Some are even in overbought territory, according to technical indicators.

Most of the stocks that are doing well belong to companies that investors believe will benefit from the coronavirus pandemic. Others sell products that investors believe are likely to see increased demand during this period.

Stocks that did well over the last five days include Clorox, the Campbell Soup Company, Gilead Sciences, Hormel Foods, Johnson & Johnson, Regeneron Pharmaceuticals, Teladoc and Take-Two Interactive.

Bespoke Investment Group recommends that investors also take a look at stocks that are down a lot, but whose products or services might do well as people self-quarantine and stay home from work.

These stocks include Amazon.com, Activision, Electronic Arts, Facebook, Netflix and PetMedExpress.

Beware of the Scams

Every disaster is accompanied by scams seeking to capitalize on either people’s desperation or their desire to help others in need. The coronavirus pandemic is no different.

One problem in this crisis is the theft of medical supplies from hospitals, doctors’ offices and retailers.

You also need to be aware of some consumer scams. One scam is to trick people into paying for non-existent medical and other supplies. This scam is perpetrated in person or over the telephone. The crooks also conduct the scam online through fake websites and ads on various social media platforms.

A similar scam is for the crooks to pose as health or government professionals. They often claim to be from well-known agencies such as the Centers for Disease Control and Prevention or the World Health Organization. They also may claim that they are surveying people to gather important data and then extract personal and financial information from them.

Plus, many online purveyors are misrepresenting their products and services by claiming they diagnose or cure the coronavirus. The claims have no scientific evidence or backing behind them.

A related investment scam consists of emails and websites which claim that a company has developed a cure, treatment or diagnosis for the disease. Investors are encouraged to buy the thinly traded stock. This is a typical pump-and-dump scam.

Of course, fake charity scams are springing up. Websites, emails and texts encourage people to donate so that medical supplies and other needed goods can be delivered to those in hard-hit areas. Before donating, be sure you know to whom you’re giving.

Look for scam updates on the websites of the Federal Trade Commission and Securities and Exchange Commission.

A Wild Week in Treasury Bonds

While the headlines have focused on volatility in the stock market, the treasury bond market also is very volatile. On a percentage basis, the iShares Barclays 20+ Year Treasury Bond ETF (TLT) had the best day in its history on March 6 with a 5.20% gain and its worst day with a 5.13% decline on March 10.

The Data

Small business owners were feeling optimistic in February before news of the coronavirus outbreak. The National Federation of Independent Business (NFIB) Small Business Optimism Index rose to 104.5 from 104.3. NFIB reports the reading is among the highest 10% in the survey’s 46-year history. But, NFIB has reported that most of the surveys were completed before news of the coronavirus outbreak.

Inflation, as measured by the Consumer Price Index (CPI), was modest in February. The CPI rose by 0.1% for the month and is up 2.3% over 12 months. Excluding food and energy, the CPI rose 0.2% in February and 2.4% over 12 months.

The Producer Price Index reported deflation in wholesale prices. The index declined 0.6% in February and is up 1.3% over 12 months. Excluding food and energy, the index declined 0.3% in February and is up 1.4% over 12 months.

Services continue to be the main driver of inflation. Medical care, for example, increased 5.3% over the last 12 months.

In January, total consumer credit increased at an annual rate of 3.5%. But, the increase was focused on auto and student loans, which rose at a 5.75% annual rate. Revolving credit, which is mostly credit card use, decreased by a 3.25% annual rate. The decline indicates that retail sales weren’t strong.

New unemployment claims declined by 4,000 to 211,000. So, layoffs from the effects of the coronavirus hadn’t begun as of last week.

Last week’s Employment Situation reports were much better than expected, but they related to the economy before the changes due to the coronavirus pandemic happened.

In February, 273,000 new jobs were created and the previous two months’ numbers were revised higher by a total of 243,000. The unemployment rate declined to 3.5%, returning to the lowest level in more than 50 years.

Average hourly wages now are up more than 3% over 12 months.

The Markets

The S&P 500 declined 12.31% for the week that ended with Wednesday’s close. The Dow Jones Industrial Average lost 12.90%. The Russell 2000 fell 17.27%. The All-Country World Index (excluding U.S. stocks) slumped 12.59%. Emerging market equities dropped 10.49%.

Long-term treasuries rose 1.20% for the week. Investment-grade bonds lost 7.15%. Treasury Inflation-Protected Securities (TIPS) fell 6.11%. High-yield bonds declined 7.21%.

On the currency front, the U.S, dollar lost 0.80%.

Energy-based commodities lost 16.18%. Broader-based commodities fell 8.29%. Gold declined 0.26%.

Bob’s News & Updates

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Seriesclick here.

A recent five-star review of my book on amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.”

If you’re interested in my books, check my amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.

bob-carlson-signature

Retirement-Watch-Sitewide-Promo

Log In

Forgot Password

Search