Quote of the Week
“Deeds, not words, matter.” Emmeline Pankhurst
Technical Corner
Market Madness in the Pandemic
What in the world is going on here? The markets are in full-blown FOMO (fear of missing out) in its march upward. The fundamentals are horrible. The virus looks like it is coming back. That doesn’t seem to matter anymore. The Fed just announced that they are going to start buying Corporate Bonds. That in itself is a sign that things are scary. The Fed in its history has never done that before until now.
Just to show you how crazy things are getting, a company that is deeply in debt and has seen its business shrink drastically in part due to the pandemic, recently filed for chapter 11 protection. This is a form of bankruptcy that keeps a company operating by restructuring its debts. So, the company’s stock is more or less worthless. The company’s price fell drastically over the course of a few months. Then all of a sudden, day traders started buying the company stock, and it had a brief spike, but a week later, it was back near its low. Insane.
This is just an example of a broader phenomenon of investors piling into crappy stocks and driving the prices up. What is behind this craziness? When will it end if it ever does? Is it FOMO? Is this 2000 all over again? Is this a repeat of the “tech bubble”? More strange events have happened in the first half of 2020 than in the preceding decade, so in retrospect, this doesn’t surprise me.
Many are speculating that this market madness is partially due to the new landscape of commission-free trading costs that all the trading platforms such as Schwab, T.D. Ameritrade, Fidelity, Vanguard, Robinhood, etc. are now offering. The free trading platforms have given a new group of investors a no-cost way to speculate.
There has been a surge of small investors in the market day trading their accounts. With the pandemic forcing social spacing and people required to stay at home, the environment was ripe for bored people to start gambling in the stock market. Plus, with the loss of sports to gamble on, gamblers have gravitated to the stock market. With commission-free trading it is a natural move. Why pay the casinos or bookies the “vig” when the trading platforms don’t charge anything? It sure makes sense to me. Maybe the stock market is the new Las Vegas. No plane tickets, no hotel rooms, and you can do it in your pajamas.
Obviously, in these crazy times, I don’t know how it will end. The markets could go to the moon, stay in a trading range, or crash just like they did in 2000-2002. If the pandemic comes roaring back now or in the fall, as the epidemiologists predict, a crash will probably happen. If we find a vaccine soon, who knows. I just know that we are in a deep hole, and a lot of the jobs lost will never come back.
(“Vig” (also known as vigorish or ‘juice’) refers to the fee a bookmaker or sportsbook charges a bettor for placing their wager. The vig allows the bookmaker or sportsbook to make money on every betting line, regardless of the actual outcome of the event. Jul 11, 2018)
Lisa’s Thoughts
Advice for Clients With Parents in the ‘Gray Zone’
Has the time come for someone else to take over decision-making? Emily Martin | Feb 20, 2020
For those clients who have aging parents, it can be difficult to tell if there’s a problem or if a parent is developing dementia. One day, the client’s mom may be fine, but the next day, your client finds her keys in the freezer. Is she really losing it, or is the mom just naturally forgetful?
The “gray zone” is the difficult place between being able to make decisions and being unable to manage one’s own affairs. Many times, when seniors start to experience cognitive decline, it’s often gradual. Someone who’s diagnosed with dementia, especially Alzheimer’s disease, may not immediately lose the capacity to make financial and legal decisions. However, it’s often hard to tell when the time has come for someone else to take over these decisions for them.
With an Alzheimer’s disease diagnosis, the judgment needed to make good financial decisions can be impaired even at the beginning of the disease. Even if your client’s parent looks and feels fine and acts normally, the truth is that those who suffer from dementia are less able to tell when something isn’t quite right about a financial offer or business proposal. This can create a multitude of issues, including arguments among family members and from the senior himself. Some family members may argue that Dad has always been in charge of the bills and has always made the investment decisions. They may be afraid of stepping on Dad’s toes when Dad is still able to understand that his decision-making capabilities are being taken away. On the other hand, Dad himself might object to no longer being able to handle his finances. He may become paranoid and begin to accuse family members of trying to “take his money.”
Financial Abuse
Another potential issue is that those with cognitive impairment are vulnerable to financial abuse—whether it be from family members, scam artists or caregivers. When individuals are in the early stages of dementia, it can be easy to overlook this type of problem, especially if the impairment isn’t immediately obvious from speaking with the individual. The fact is that dementia can cause the brain to undergo changes without any outward physical signs of a problem.
So, what’s the solution for these problems? Even in the early stages of dementia, it’s vitally important that your client’s parent appoint someone else to take over the handling of financial matters through a financial power of attorney. If your client waits until his parent has completely lost the ability to make financial decisions, he may have to pursue a conservatorship instead—a months-long process that can cost thousands of dollars in attorneys’ fees and filing fees.
Third-Party Assessment
Another useful solution is for the family to have a neutral third party determine that the parent is unable to make decisions. Your client can have a qualified neuropsychologist conduct testing that will determine what Mom’s condition is and how it will impact her decision-making ability in the future. This way, if Mom argues that nothing is wrong with her, the information about her illness will be coming from someone other than her children or family members.
Family Meetings
Finally, hold regular family meetings with a neutral person such as a mediator to help prevent arguments among family members from interfering with what’s the best decision for the parent. This can be especially helpful, if one child doesn’t think it’s necessary for someone to take over the parent’s finances or if the parent is arguing that she’s not incapacitated.
Martin, Emily. “Advice for Clients With Parents in the ‘Gray Zone.’” Wealth Management, https://www.wealthmanagement.com/high-net-worth/advice-clients-parents-gray-zone
