Our Thoughts

FJY News to Know #64

The Great Meltdown (2008) vs. the Corona Crash? What’s the Diff?

As we witness the major indices around the world go south (and quickly), it’s all too tempting to compare this decline to the crash of 2008. So what are the differences? One of the more outstanding facets of these recent plummets is the speed of the phenomenon: For example, in 2008, the S&P dropped 30% and took almost a year to do so; This time around, the S&P fell 30% in just one month. Valuation is another facet. However, referencing Robert Shiller’s price-and-earnings ratio — which spans a 10-year period — is difficult because the year isn’t over. Another significant difference is that the 2020 crash was due to a natural disaster/crisis. Several economists and scholars saw the 2008 meltdown coming and the culprits were part of our own economy. There is no villain to this story. To read more about this new perspective on the situation, please visit this page.


Many People Are in a Panic With Their 401(k)s and Other Market-Dependent Assets – but Is It Really Time to Cash Out?

As employees nationwide watch the market drop like a rock, many might think they’re throwing their hard-earned money away on a 401(k) or similar plan. Some might be tempted to get some quick cash. However, there is a severe downside to stopping contributions to these plans. The biggest dangers to retirement savers are to stop contributing or cash out their 401(k) balances, instead of rolling them over into other plans. For more wisdom on what to do with income in these precarious times, click here.


There’s a Timely Demand for Many Things — but the World’s Oil Supply Is Reaching Record Levels

The coronavirus has increased the demand for many things in today’s world, but oil isn’t exactly topping the list. With more people practicing social distancing, along with massive closings, the demand for this commodity has dropped significantly. With the subsequent drop in price, many companies will be forced out of business. But that’s just the beginning.
The industry has another problem on its hands: where to store all the produced surplus. President Trump has stated the U.S. can store excess in huge underground salt cavities. At the same time, a price war has erupted between Saudi Arabia and Russia, which will further compound the problem. That could mean an increase of more than two million barrels per day hitting the market. “I cannot remember having seen such a large potential oversupply situation — ever,” said Bjørnar Tonhaugen, the head of oil markets at Rystad Energy. To read more about the future of oil supply and demand, click here.


Money-Market Funds May Slow Customer Redemptions Soon

U.S. money-market funds have lost more than 10% of their assets, and the hope of funds slowing customer redemptions is rising. Credit-rating agency Moody’s Corp. recently stated, “The risk of funds imposing liquidity fees or gates has risen over the last week and will remain elevated based on our expectation that stress in money markets is likely to persist.” Moody’s mentioned its global outlook on money market funds has switched from stable to negative, owing to new volatility and uncertainty amid the coronavirus pandemic. To read more about its net asset values and credit profile ratings, visit this page.


The Coronavirus Is Galvanizing Estate Planning: What Should You Do If You’re Concerned?

Estate attorneys and financial planners are seeing a new wave of inquiries and activity in the wake of the COVID-19 pandemic — which has now reached every state in the U.S. Many people are creating wills or updating existing ones. Others are working on other aspects of estate planning. What are some tips to adhere to if you’re in the same boat? Jamison Taylor, managing attorney at RISM LLC in Washington, D.C., recommends that you have these basics in place: a will, a power of attorney, and a medical directive. This will ensure that your assets will be distributed in the correct manner, as well as medical directions for the appropriate parties. These factors can help avoid unnecessary court visits and peripheral costs. For more advice on life insurance, IRAs, and other estate advice — this article should help.


Salesforce Sued for 401(k) Fiduciary Breach After Their Existing Plan Lost Millions of Dollars

Several plaintiffs filed against San Francisco-based Salesforce and claimed the company pushed higher-priced mutual funds when cheaper instruments were available. Along with naming the giant corporation itself, the defendants include the board of directors, the advisory committee, and the CEO Marc Benioff. “There is no good-faith explanation for utilizing high-cost share classes when lower-cost share classes are available for the exact same investment,” the lawsuit said. The suit alleges almost half of the plan’s core investments were “much more expensive than comparable investments found in similarly-sized plans. The expense ratios for these funds were in some cases up to 135% above the median expense ratios in the same category.” To read more about the timeline of the case, go here.