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Gains and Losses

“When I was a boy and I would see scary things in the news, my mother would say to me, 'Look for the helpers. You will always find people who are helping.'” – Fred Rogers

I’d like to begin today’s note by expressing my heartfelt thanks to our clients, many of whom are regular readers of the blog. The kindness, understanding, and resolve that you’ve exhibited over the last few weeks have been inspirational. Most importantly, we value the continued trust that you’ve placed in us. Maintaining that trust, and building on it, is a responsibility that we take seriously no matter what the market is doing, but during times like these, we are especially grateful.

Since some of you have been nice enough to ask, let me go ahead and state that I have not been hunkered down under my desk feeling sorry for myself during this panic. The last couple of weeks have, of course, been busier than usual, but the bulk of my communication with clients has been positive, focused on timely planning strategies and keeping a long-term perspective.

All of which is to say that I am one of the lucky ones. I get to work with great people, and I have access to a remote workstation when I need it (e.g. right now). My personal investments have taken a hit, but I have a decades-long time horizon. My wife is able to stay at home with our children when school gets cancelled. Our family is healthy and safe.

For the supremely lucky ones, the recent crisis has actually opened up a number of advanced planning opportunities. From a wealth transfer standpoint, the market decline affords high-net worth investors the chance to transfer more shares of growth-oriented assets to their loved ones (whether outright or by trust) at a point in time when federal estate, GST, and lifetime gift tax exemptions are north of $11m per person. From an income tax standpoint, steep declines allow for tax-loss harvesting, whereby investors can realize losses to offset current and/or future gains while remaining invested in the market. From a lending standpoint, historically low interest rates allow creditworthy borrowers to access equity from their homes, and family members to loan money to each other, at a very low cost.

Basically, if you have significant wealth, sufficient liquidity, and a robust plan in place, there’s not as much to be concerned about when it comes to your personal finances. In fact, this might be an ideal opportunity to do some proactive planning.

But not everyone is so lucky, and plenty of people have plenty to be concerned about these days. For example:

  • At-risk populations whose health is in jeopardy, and their loved ones.
  • Hourly employees who don’t know when their next paycheck will arrive.
  • The 69% of Americans without so much as $1,000 in the bank, and the 45% of Americans with zero savings to tide them over.
  • Businesses – travel, hospitality, restaurants, etc. – whose revenues depend heavily on people being out and about. Especially those who don’t have enough capital in reserve.
  • The doctors, nurses, and hospital staff on the frontlines, and the stress they must be feeling.
  • People who are recently retired, or on the verge of retirement, who didn’t take the appropriate steps to plan for the possibility of a severe market decline.
  • World leaders who are being forced to make difficult decisions for entire populations.

For many people, the coronavirus pandemic will ultimately represent nothing but a short-term challenge – an inconvenience, perhaps. At some point, their lives will resume their normal pace and patterns. Markets and economic activity will recover. Communities of people will reconvene.

But for others, the viral outbreak will result in irreversible losses and extraordinarily painful outcomes. My hope is that we who will be okay will make an extra effort to lend a hand to those who might not. Remember, we’re all in this together.

And Now For Something Completely Different...

I quoted Fred Rogers at the outset of this article because I think his words are worth remembering at times like these. I urge you to not only look around for the helpers, but to look for opportunities to be a helper yourself. Speaking of Mr. Rogers, here's a moving profile of the man himself from 1998, which served as the inspiration for last year's film A Beautiful Day in the Neighborhood. Can you say...hero?