Tom’s Quarterly Reads

Here are the best articles I read over the past three months, mostly all finance-related. I’ve moved to grouping the links by topic, but the topics will shift each quarter based on the set of articles. 

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Analyzing The CARES Act: From Rebate Checks To Small Business Relief For The Coronavirus Pandemic (Kitces): The recently passed CARES Act has many different features, and this helps break them down depending on what is relevant to you. For a quick summary, see this graphic.

Use the terms below to find relevant topics in the article. Are you:

• An American human? “Recovery Rebates”
• Paying back student loans? “Relief For Student Loan Borrowers”
• A business owner? “Paycheck Protection Program And Forgivable Loans”
• Facing unemployment? “Unemployment Compensation Benefits”
• Facing RMDs? “Required Minimum Distributions Are Waived In 2020”

Small business owners in particular should review this, with special attention to the Paycheck Protection Program, Deferral of Payroll Taxes, and the Employee Retention Credit. See this article for more specifics on getting cash for your small business.

It’s impossible to avoid the topic of Covid-19 this quarter, despite my contrarian nature’s push for me to ignore it in this space. I’ve also moved this section up in the newsletter; last quarter I talked about the relationship between human capital and your asset allocation, but hid it at the bottom. Please feel free to skip down to the article links below if you haven’t already.

As the Covid-19 pandemic spread across the world, the initial market panic was a bit different from past crises; everything went downhill together. Further, the volatility in the market – all those days with huge losses and huge gains mixed together – was essentially identical to the Great Depression. The numbers and data points trying to quantify the impact have boggled the mind, and will continue to do so. As others have done, I’ll quote Lenin: “There are decades where nothing happens; and there are weeks where decades happen.”

Through all of this, I remain optimistic even though the impacts of this pandemic have been massive – and will likely be more persistent than I initially supposed. Supply chains will be disrupted or broken. Personal liberty and the greater good will continue to wrestle. But a combination of human perserverence and science will eventually win out. After all, good news and bad news can coexist.

There’s been a bit of a recovery in the market recently; are we currently seeing a dead cat bounce, or have we already seen the bottom? I have no idea. No one does. Investing is pain; anyone who says differently is selling something.

But what do we actually do during this crazy time? Everyone gets to play their own version of March Madness: just survive and advance. Track your income and spending. Identify sources of liquidity (cash) in case you need it. Try not to sabatoge your long-term goals; stick to the investment plan you laid out before the pandemic broke out. For some perspective: the S&P 500 is down only 10% from a year ago. And it’s almost unchanged from January 9th of last year (yes, I cherry-picked that date). Remember: the stock market and the economy are two different, albeit related, things.

This is a time for personal finance basics. Keep things simple. But simple doesn’t necessarily mean easy.

7 Reasons Why Video Gaming Will Take Over (Matthew Ball): Video games have already taken over; we just don’t fully realize it yet – and this was published before we all had to start social distancing. One of many great nuggets in here: “Pokémon has now generated more revenue than any other franchise, including Marvel, Star Wars and Mickey Mouse”.

How to Fake a Traffic Jam on Google Maps (Vice): “By pulling 99 phones down empty streets, artist Simon Weckert made it look like they were gridlocked on Google Maps.” We certainly are all morphing into cyborgs; I rely extremely heavily on my phone to tell me what the traffic or the weather is, and I react accordingly. This also seems – to me – to push the boundary of what can be defined as ‘art’.

Do you sometimes feel like a fraud? (The Economist): A little impostor syndrome might be good: “We want successful people to have both enough self-awareness and enough self-doubt to question what they are doing and why…. the more expert you become in a field, the stronger your feeling of impostorism.” (Side note: when this came out in January, the use of “epidemic” in the article didn’t seem as strange.)

An elegy for cash: the technology we might never replace (Technology Review): In 2006, cash accounted for 64% of the total value of transactions in Japan. By 2016, it was only 23%. This takes a privacy-centered look at the disappearance of cash transactions.

The End of the Beginning (Stratechery): “The beginning era of technology, where new challengers were started every year, has come to an end; however, that does not mean the impact of technology is somehow diminished: it in fact means the impact is only getting started…. That is exactly what happened with the automobile: its existence stopped being interesting in its own right, while the implications of its existence changed everything.”

One Portfolio Risk to Rule Them All (Movement Capital): First and foremost, I’m a sucker for a Lord of the Rings-themed article. Secondly, it’s very important for savers and investors to understand the concept of sequence risk. The current market downturn illustrates just how important managing sequence risk is for all ages, but particularly for those nearing retirement.

Centuries of interest rate data (mrzepczynski): The increasing prevalence of negative real interest rates may not be all that abnormal; it may be the natural continuation of a multi-century trend (really interesting charts here). What may be abnormal is how wildly interest rates have fluctuated over the last 100 years. But at the very least, don’t use trends over the last decade or two when extrapolating interest rates; it’s far too short a timeframe.

Does Personal Finance Still Work in Our Changing Economy? (New York Times): Rules of thumb in personal finance are a good place to start (as opposed to winging it), but they are not iron-clad guarantees of success. Understanding you situation and then tailoring your approach to best fit that situation is the best way to move you towards financial goals.

Selecting Income-Driven Repayment (IDR) Plans To Manage Student Loan Obligations (Kitces): A guide to IDR plans for those with student loans. The author, Ryan Frailich, is another phenomenal financial advisor located in New Orleans.