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Bob’s Journal for 6/18/20

Published on: Jun 18 2020

Some Notable Events That Grabbed My Attention This Week

This is a good time to put your long-term care plan in order, so you won’t have to suffer the way many long-term care facility residents have during the pandemic.

A high percentage of the novel coronavirus infections and fatalities have been residents of U.S. nursing homes and other long-term care facilities. A study by The Wall Street Journal published this week using data from esteemed Johns Hopkins University found that at least 40% of Covid-19 deaths were residents and staff of long-term care facilities.

Another report this week in Politico found that a little more than half of nursing homes received inspections to determine if they were following proper procedures to prevent transmission of the coronavirus.

Some of the inspections were conducted remotely, such as via telephone interviews with facility staff, rather than in person. The Centers for Medicare and Medicaid recently ordered states to complete in-person inspections by July 31.

This situation is another reason you want to have in place a plan to pay for long-term care if you need it.

None of us wants to need long-term care. But if we do need it, a plan ensures we can receive the care we want at the location we want.

Most long-term care insurance these days pays for care outside of a facility. While many facilities deliver a high level of care, the nature of the facilities makes it easy for a virus to spread among the residents.

You want to be able to receive care at home if possible, and a good long-term care insurance policy will pay for home care.

Now is a good time to put your insurance in place, because the cost is rising.

My insurance expert, David Phillips, tells me that the cost of his favorite policy will increase after July 15. If you have your application filed by July 15, you’ll qualify for the current rates. But applications filed after that date will pay the new rates.

This isn’t a traditional long-term care insurance policy. Instead, it is permanent life insurance with long-term care benefits. Your long-term care benefits will be several times the amount you deposit in the policy.

The policy doesn’t have the use-it-or-lose-it feature of traditional long-term care insurance.

If you don’t need long-term care, your beneficiary receives the life insurance benefits. That means your premiums, probably plus a bit more, will be returned. You also can take from the cash value of the policy during your lifetime if you need to, though that will decrease the long-term care benefits.

The cost increase will be significant. Today, a 60-year-old male who deposits $100,000 in the policy will have an immediate long-term care benefit of $481,529. After July 15, a deposit of $115,000 will be needed to obtain the same benefit, according to Phillips.

This is an indemnity policy. That means the policy pays you a fixed monthly amount. You do whatever you want with that money. You can pay for an assisted living facility or for home care. You can pay a relative to care for you. If your long-term care expenses are less than the monthly benefit, you can spend the money on other expenses or invest it.

To learn more about the policy, visit www.ropltc.com or call 888-892-1102.

Gamblers Dominate the Stock Market During the Pandemic

When live sports stopped because of the spread of the coronavirus, betting operations also shut down. The gamblers had no sports to bet on with their money.

But gamblers need to gamble. When there aren’t live sports, they’ll look for something else on which to place wagers.

Faced with stay-at-home orders, many gamblers were attracted to stock investing, according to a recent story in The New York Times.

Several brokerage firms reported significant increases in new accounts being opened by relatively small investors soon after the stay-at-home orders were issued. Brokerage executives say the surge in new accounts is unique.

There also has been an increase in trading volume in the most speculative investments. Stock options trading jumped. Last week, I reported on extreme price increases in companies that had declined significantly, such as Chesapeake (CHK) and Hertz (HTZ).

One brokerage firm strategist quoted in the Times story said he had no doubt that former sports bettors are a major reason the stock indexes recovered their earlier losses so quickly and have been so volatile.

The Hidden Inflation Surge

The pandemic unleashed deflationary forces on the economy. But not everyone is facing deflation or even lower inflation.

The Consumer Price Index (CPI) and other official inflation measures indicate prices overall declined the last few months.

The CPI is composed of a basket of goods and services that the government believes reflects what an average consumer buys. But that basket does not represent each person’s buying patterns. In addition, buying patterns changed during the pandemic, while the CPI basket remained stable.

A paper published by NBER used payment card data to determine how buying patterns changed during the pandemic. The author concluded that the inflation rate for the average consumer has been higher than the CPI, because of the change in the goods and services purchased.

Consumers are spending more on food and other items for which prices are rising and spending less on items with falling prices, such as transportation. The significant decline in gas prices accounted for a lot of the CPI’s decline, yet many people bought far less gasoline because they weren’t allowed to drive anywhere.

In addition, about 34% of the goods in the CPI had missing prices in April’s report. The goods weren’t available in most markets, so prices couldn’t be determined.

The result is that the real inflation rate for most consumers during the pandemic is significantly different and higher than the CPI.

The Data

New unemployment claims increased by 1.5 million in the latest week. That barely continues the streak of 11 weeks of new claims being less than the previous week’s claims. It is also the 13th week in which new claims exceeded one million. The 1.5 million new unemployment claims were about 200,000 higher than economists’ expectations.

Continuing claims were slightly lower than last week, coming in at 20.5 million. That’s 62,000 less than last week.

Retail sales rose sharply as parts of the economy re-opened. In May, sales rose 17.7% from April’s level. Motor vehicles were a major driver of the increase, along with furniture and apparel.

The monthly increase was the largest since the data began in 1992. Even so, monthly spending still is down 6.1% over 12 months and is almost 8% below February’s level.

The Leading Economic Index from The Conference Board increased 2.8% in May to 99.8. That follows a 6.1% decline in April and a 7.5% decline in March. The Conference Board reported the data indicate that, though improving, the economy will remain in a recession “in the near term.”

Manufacturing still is declining in the New York area, but by a small amount. The Empire State Manufacturing Survey for June was reported as negative 0.2. In May, it was negative 48.5, and analysts were expecting around negative 30.0 for June.

The Philadelphia region’s manufacturing had a major turnaround. The Philadelphia Fed Business Outlook Survey came in at positive 27.5 for June. That compares to May’s negative 43.1 and expectations for a negative 22.7.

Industrial Production increased 1.4% in May, compared to a revised 12.5% decline in April. This was below analysts’ expectations.

But the manufacturing component increased 3.8% in May, which was a little above expectations. Manufacturing declined a revised 15.5% in April.

Optimism surged among home builders in June. The Housing Market Index from the National Association of Home Builders (NAHB) increased to 58 from 37 in May. A reading above 50 indicates a positive new home market. The measure was in the 60s for most of 2019 and was above 70 in January.

Housing starts increased 4.3% in May compared to April’s level. But starts have declined 23.2% over 12 months. Single-family home starts barely increased in May, rising only 0.1%, and are down 17.8% over 12 months.

Building permits increased 14.4% in May but are down 8.8% over 12 months.

Consumer sentiment in early June increased to 78.9 from 72.3. Current conditions rose to 87.8 from 82.3. Expectations increased to 73.1 from 65.9. Consumer Confidence was above 99 in January.

The Markets

The S&P 500 lost 2.30% for the week ended with Wednesday’s close. The Dow Jones Industrial Average declined 3.19%. The Russell 2000 fell 2.70%. The All-Country World Index (excluding U.S. stocks) dropped 1.89%. Emerging market equities tumbled 2.54%.

Long-term treasuries rose lost 0.17% for the week. Investment-grade bonds increased 0.23%. Treasury Inflation-Protected Securities (TIPS) fell 0.31%, while high-yield bonds declined 0.70%.

In the currency arena, the U.S. dollar increased 1.23%.

Energy-based commodities lost 2.21%. Broader-based commodities fell 2.55%. Gold declined 0.54%.

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.

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