Category: Blog

How Likely Would a Second Coronavirus Wave Negatively Impact the Stock Market?

4 min read

Second Coronavirus Wave Negatively Impact the Stock MarketAs Johns Hopkins University of Medicine’s Coronavirus Resource Center revealed a recent increase of coronavirus cases in the Southern and Southwestern United States, the VIX ticked up. With fears of the outbreak curve not flattening, how will this impact markets?

The Volatility Index (VIX) was established by the Chicago Board Options Exchange in 1993 to gauge volatility in the financial markets. Referred to colloquially as the “fear index”, it measures the next 30 days of anticipated volatility for the U.S. Stock Market via S&P 500 options. For reference, during the peak of the 2008 financial crisis, it topped out at 89.53. During periods of relative calm, it’s not unheard of to trade below 10. On March 16 of this year, the VIX reached 82, thus demonstrating how volatile investors expected markets to be due to the uncertainty of the coronavirus.

On February 12, 2020, the Dow reached 29,551.42 and the S&P 500 rose to 3,379.45. But by the end of February, these major indices experienced their greatest fall since 2008, ushering in a market correction.

Coronavirus and its Impact on the Markets

Starting in early March, the COVID-19 pandemic began taking a negative toll on stock markets worldwide, the worst since 2008. On March 9, the Dow fell 2,158 points, or 8.2 percent, during the day’s lows. Other major U.S. markets were not spared – the S&P 500 fell 7.6 percent and the Nasdaq dropped 7.3 percent.

On March 12, the U.S. stock indices dropped more. The S&P 500 fell another 9.5 percent, along with the Dow falling 2,353 points, almost 10 percent lower. For the Dow, it was the worse one-day performance since Oct. 19, 1987’s drop, bringing it back to 2017 levels. While there was hope of a sustained rally beginning on March 13, it was dashed when the Dow Jones fell nearly 13 percent or 2,997.10 points, and the S&P 500 dropped nearly 12 percent on March 16.

Factors Contributing to the Crash

While the stock market crash in 2020 was directly attributable to the coronavirus outbreak worldwide, many experts, including the International Monetary Fund (IMF), view the coronavirus as speeding up a global slowdown that was already in the works.

Despite the St. Louis Fed’s data that showed the United States had an unemployment rate of 3.6 percent in late 2019, the nation’s industrial output peaked in 2017, and experts noticed a declining trend at the start of 2018. The IMF also believed the United States-China trade war made global growth more challenging going forward.

There were other concerning factors about economic growth domestically and internationally, causing fear a worldwide recession was beginning. March 2019 saw the U.S. yield curve inverting – which means longer-term debts yield less than shorter-term debts. The ISM Manufacturing Index fell below 50 percent in August 2019, dropping to 48.3 percent in October 2019, and remaining below 50 percent through 2019.

When it comes to rising COVID-19 cases, the state of California saw 4,515 new cases over 24 hours, as reported on June 21. Florida’s reports on June 20 and 21 saw the number of cases increase by 4,049 and 3,494, respectively. Other Southern and Western states, such as Nevada, Missouri, and Utah, reported one-day records in increases of coronavirus cases as well.

With Georgia, Alabama, Florida, and California, among others, showing concerning trends for increased coronavirus infection rates, analysts at Deutsche Bank expressed concern about how the virus may keep spreading. According to the same research, there’s some trepidation on how it may negatively impact economic growth. Depending on the overall hospital capacity to handle a resurgence in severe COVID-19 cases, how well the medical infrastructure responds will influence how the economy functions going forward.

With the number of increasing cases shifting from the Northeast to Southern and Western states, it’s feared that there will be another panic on Wall Street as reopening the economy is postponed, further stunting economic activity.

Research from Jefferies Financial Group found that even though coronavirus cases are increasing, it’s not the only or the biggest worry. Jefferies’ research found that for investors, the biggest concern is how well and how fast the economy bounces back.

Analysts believe that there needs to be more than just action by The Federal Reserve to inspire market confidence. The research found four main concerns, which included the effects of COVID-19:

  • 6.6 percent of respondents said the upcoming election is the most important factor
  • 12.1 percent of respondents said a second wave of COVID-19 is the most important factor
  • 31.1 percent of respondents said The Federal Reserve’s decision is the most important factor
  • 50.2 percent of respondents said the shape of the recovery is the most important factor

As the economy reopens and medical experts become more knowledgeable and better prepared to deal with COVID-19 through therapies and equipment for hospitalizations, it seems that investors will be taking a more holistic investing approach.

How To Use Qualified Charitable Distributions For Charitable Giving

3 min read

How To Use Qualified Charitable Distributions For Charitable GivingEach year, millions of Americans make donations to charitable organizations and receive something in return – a tax break. However, the 2017 Tax Cuts and Jobs Act curbed this tax advantage because it reduced the number of people eligible to claim a charitable deduction by raising the standard deduction. For 2020, the standard deduction is $12,400 for individuals and $24,800 for married couples filing jointly. If your list of deductions is not greater than those amounts, there is no tax benefit to itemizing – which means you might not be able to claim your charitable donation.

Without the ability to claim a deduction, some retirees just take their normal required minimum distribution (RMD) and bank the money, pay taxes on it and then make charitable gifts or tithe to their church on a monthly basis. For example, say your RMD is $10,000 and you pay 15 percent in taxes on this distribution. If you want to donate the money as a charitable gift, you’ll have only $8,500 left to do so.

However, there is a way to do this that will give you a tax advantage. A Qualified Charitable Distribution from an IRA enables retirees to claim their standard deduction and receive a tax benefit for their gift. The key is to arrange for the distribution to be made directly from your account custodian to the qualified 501(c)(3) charitable organization so that you do not take possession of the assets.

IRA owners may gift up to $100,000 each year, or $200,000 for a couple that files a joint tax return. Note that this option is available only for IRA owners over age 70½; it is not allowed for 401(k)s, 403(b)s, thrift savings plans, or other qualified plans. The QCD will be reported to the IRS and should be claimed by you on Form 1040 as an IRA distribution, but it will not be taxable. Another perk of this strategy is that the QCD can satisfy your annual Required Minimum Distribution (RMD). Be aware that if your QCD does not meet the full distribution amount required, you will have to withdraw and pay taxes on the remaining balance.

Another benefit of using an RMD for a charitable donation instead of receiving it as income is that this could keep you in a lower tax bracket. Consequently, it can help minimize taxes on Social Security benefits and keep your Medicare premiums low.

Thanks to the Coronavirus Aid, Relief and Economic Security (CARES) Act, RMDs are not mandatory in 2020. That’s because the initial market losses triggered by the COVID-19 outbreak were substantial; by not requiring distributions this year, retirement accounts have more time to potentially recover those losses.

Since it isn’t necessary to take an RMD this year, you might want to just make charitable gifts in cash. The CARES Act also enables this option by increasing the adjusted gross income (AGI) limit for individuals who qualify to itemize on their tax return. In 2020, you may deduct up to 100 percent of donations (up from 60 percent) against your AGI. For example, if you earn $500,000 in income, you may donate $500,000 and the entire amount is tax-deductible. This strategy is available to people younger than age 70½ and offers a benefit similar to the QCD.

Even if you don’t qualify to itemize, you may claim up to a $300 charitable gift deduction on your 2020 tax return. As always, it’s best to seek the advice of a tax professional in order to figure out what is best for your situation.

Best Part-Time Jobs During Corona

4 min read

Best Part-Time Jobs During CoronaEven though unemployment is still relatively high, there are still some great part-time jobs you can do that will help cover basic expenses. Here’s a list of the industries that are hiring right now:

Paid Survey Participant

If you like to share your opinions (and who doesn’t), this job is perfect for you. Companies are always looking for consumer opinions on a variety of things such as products, services, etc. Best of all, it’s completely online, so you can work from anywhere. Here’s a list of companies that are looking for your feedback: Swagbucks, PrizeRebel, SurveyJunkie, SurveyPolice, Inbox Dollars, and Toluna. Grab your laptop, kick back, and start earning!

Freelance Writers

If you’re a writer of any kind, this industry is really taking off right now. All you need is impeccable grammar and the ability to put together clear sentences. While having prior experience is always good, some companies might require candidates to have a bachelor’s degree in journalism, creative writing, or a related field like communications. Here are some sites for freelance writers to check out: Fiverr, Upwork, Freelancer, and PeoplePerHour.

E-Commerce

This is easier to pull off than you might think. While you need an initial investment, the cost of opening an online store is low – and it’s perfect for the entrepreneur or artist. Are you a life coach? Can you help college seniors write resumes? Do you make hand-poured candles? Really, anything can become an online business and this sector will only continue to grow as the pandemic prevents in-store purchases. Some sites to help you get started include Big Commerce, Shopify, and LinkedIn Learning.

Web Designers/Developers

If you have design or development experience, then you can make money online with this part-time gig. In addition to design, other skills you need include knowing how to create layouts and how to code. Knowledge of graphic design software and consumer recognition is necessary, as well as understanding the users, aka “personas,” of the audience. If you don’t know how to code, there are online classes you can take at Coursera, Pluralsight, and FreeCodeMap. What better time to pick up a new skill that can help you earn a living?

Delivery Jobs

Since many people are still sheltering in place, supermarket fresh delivery jobs are booming. Two places to inquire are Walmart and Amazon Fresh. All you need is a driver’s license and an ID. Food industry drivers are also in high demand. Check out Postmates, Uber Eats, Grub Hub, and Door Dash. Customers pay for their meals online or over the phone. All you have to do is leave the food on the front porch; the same is true for supermarket fresh deliveries. This way, you won’t have to interact with people face-to-face. Both of these are great interim jobs until you return after a furlough and/or get full-time employment. Plus, getting out and about just might do you a world of good.

Translator

Do you speak a foreign language? If so, this industry is ripe with possibilities. Plus, you can work at home (or anywhere) online and create your own schedule. Here are a few sites to look into: Gengo, Language Line, and Verbalizelt.

With all these industries that have grown in the past few months (and will continue to grow), it seems as if there should be plenty of job opportunities to go around. However, the key to landing a part-time job is persistence. Keep on keeping on. Never give up! There’s something out waiting for you.

Sources

https://www.salary.com/passages/recommended-part-time-jobs-during-coronavirus-outbreak/2/

https://www.creativebloq.com/web-design/online-coding-courses-11513890

Fileless Malware Poses New Threat to Computer Users

4 min read

Fileless Malware Poses New Threat to Computer UsersWith increased cyber threats, there is great awareness of malware that comes attached in files.  Individuals and businesses invest in security solutions to protect against malware. In fact, there are often company policies regarding opening attachments on emails; yet there is an increase in a type of threat (though not new), known as the fileless malware.

What is Fileless Malware?

A fileless malware attack is a type of threat that doesn’t involve executable files. Instead, these attacks include scripts that run on browsers, command prompts, Windows PowerShell, Windows Management Instrumentation, VBScripts, or Linux (Python, PERL).

In other words, fileless malware is a form of cyberattack carried out through software that already exists on your device, in your authorized protocols and in applications that you have allowed on your device.

As such, fileless malware is becoming a favorite of cybercriminals because they don’t have to look for ways to install malicious files in your device – they only need to take advantage of built-in tools.

Reported examples of fileless malware include PowerGhost, which has been used in crypto-mining and DDoS attacks.

How It Works

First, note that these attacks are termed fileless because they are not file-based; instead, they hide in computer memory.

The malware launches an attack in various ways. For instance, a malicious code is injected in an application already installed or a user clicks on a legitimate-looking link that loads a remote script.

Another scenario exists within a legitimate-looking website that a user visits; the attackers exploit vulnerabilities in the Flash plugin; and a malicious code runs in the browser memory of the user’s computer.

While file-based malware uses executable files, the fileless type hides in areas where it can’t easily be detected, such as the memory. It is then written directly to the RAM (and not the disk), where it carries out a series of events.

Once in your system, the malware piggybacks on legitimate scripts and executes malicious activities while the legitimate program runs. At this point, it performs malicious activities such as payload delivery, escalating admin privileges, and reconnaissance, among others.

Since it works in-memory (RAM), its operations end when you reboot your system. This makes it more challenging to trace attacks. The fileless malware also may work in cohorts with other attack vectors, such as ransomware.

Detection and prevention

Various security vendors claim to have products that can detect fileless threats, as well as protect endpoint systems.

Successful security solutions need to be able to put in place technologies that enable them to inspect different kinds of operating systems storage, as well as analyze in real-time the execution of patterns of processes in a system.

But even so, one thing is certain: traditional anti-malware software will not detect fileless malware because they are not file-based and they do not they leave footprints. Here are some tips that will help mitigate against fileless attacks:

  • Regularly update the software on your devices (especially Microsoft applications) to protect against attacks propagated through PowerShell.
  • Apply an integrated approach that addresses the entire full threat lifecycle. This is possible when you use a multilayered defense mechanism.  
  • Use security solutions that can detect malicious attacks against command prompt (CMD), PowerShell, and whitelisted application scripts.
  • Use anti-malware tools that include machine learning, as this will limit scripts from creating new polymorphic malware within your environment.
  • Practice behavior monitoring to help lookout for unusual patterns.
  • Use memory scanning to help detect patterns of known threats.
  • Be on the lookout for high CPU usage by legitimate processes and suspicious error messages that appear for no clear reason.
  • Disable PowerShell and Windows Management Instrumentation (WMI) if you are not utilizing them.
  • Avoid using macros that have no digital signatures or turn off macros if not being used.
  • Use endpoint detection and response tools.

Final Thoughts

The cyber threat landscape keeps evolving. Every day, there are more sophisticated threats as criminals keep advancing to take on countermeasures that have been implemented.

Invest in security solutions that mitigate varying classes of threats, especially machine learning technologies. This will help protect against the latest and emerging threats. Also, keep your Windows OS and other installed software up-to-date to reduce the chances of fileless malware attacks.

Despite taking the mentioned measures, it’s important to stay informed of the latest threats and take necessary precautions.

How Businesses Can Help Protect Themselves Against Civil Unrest

3 min read

How Businesses Can Help Protect Themselves Against Civil UnrestIf the COVID-19 pandemic isn’t a big enough strain on businesses trying to engage in commerce, whether it’s retailers, restaurants, manufacturers, or those in the service sector, civil unrest puts another strain on surviving the downturn. Based on recommendations from the U.S. Department of Homeland Security and the U.S. Small Business Administration, businesses can prepare for civil unrest.

While the British firm Verisk Maplecroft predicts that 75 countries will see civil unrest in 2020, the United States has already seen its fair share recently. While the future intensity of civil unrest can’t be predicted, businesses can take steps to plan and mitigate such events.

For businesses, the first priority is to ensure employees and customers are not put in harm’s way. If a dangerous situation happens quickly and without warning, there are some steps business owners can take to mitigate the threat.

  • Plan ahead for travel disruptions by keeping an eye on local media reports and online/social media. This information can be helpful for informing employees and customers not to go to work or order online if a retail outlet or office location is subject to civil unrest.
  • Ensure that all workers are familiar with emergency and security plans. This might include having current contact information to reach employees before they go to work or giving them time to leave before the situation escalates.

Another recommendation is to take steps against arson, break-ins, and damage sustained to the property. Examples include maintaining employee vigilance against the out-of-the-ordinary activity. Review security and fire protection systems, how alarm companies will notify business owners, and what steps the monitoring companies will take to mitigate against burglary and/or fire. Reinforce locks and board up areas vulnerable to damage or provide easy points of access during civil riots (e.g., protect glass doors and windows).

If first responders take longer than normal to arrive, it’s important to take measures to reduce the chance of serious and unintended damages from the civil unrest. Be it water, gas, electrical or related systems, turning off all but necessary utilities (e.g., water for sprinklers; enough heat to prevent freezing pipes; power for an alarm system) could reduce the risk of additional damage.

Along with having a commercial insurance policy that includes looting as a covered peril, one other important part of a business continuity plan is how important documents are stored. Will they be stored on-premises in a safe? Will they be stored online, in the cloud and encrypted? Will they be stored offsite in a secure location?

Much like other disasters that often happen with little to no warning, businesses that prepare before civil unrest occurs can help reduce the amount of property damaged and help get their operations back to pre-crisis levels.

Sources

https://www.sba.gov/blog/seven-ways-start-your-business-continuity-plan

https://www.ready.gov/business-emergency-preparedness-social-media-toolkit

https://www.cnbc.com/2020/01/16/40percent-of-countries-will-witness-civil-unrest-in-2020-report-claims.html

Helping Small Business Owners, Seniors and U.S. Hostages, and Limiting Intrusive Domestic Surveillance

4 min read

HR 7010, HJ Res 76, HR 6172, S 712, S 149Paycheck Protection Program Flexibility Act of 2020 (HR 7010) – Rep. Dean Phillips (D-MN) introduced this legislation on May 26. This Act modifies provisions related to small business loans issued under the original Paycheck Protection Program. Specifically, the bill permits forgiveness of loans used to pay expenses incurred over a 24-week period, longer than the original eight-week limit, and extends the timeframe to pay off unforgiven loans from two to five years. This bill also increases the limit on non-payroll expenses up to 40 percent when used to pay for rent, utilities, mortgage interest, and similar fixed costs. Loan recipients have until the end of 2020 to rehire employees with full access to payroll tax deferment. The bill was signed into law by the President on June 5.

Providing for Congressional Disapproval Under Chapter 8 of Title 5, United States Code, of the Rule Submitted by the Department of Education Relating to “Borrower Defense Institutional Accountability” (HJ Res 76) – This bill was introduced on Sept. 26, 2019, by Rep. Susie Lee (D-NV). In response to a September 2019 rule issued by the Department of Education (ED), this resolution sought to reverse a process that no longer allows a borrower to be discharged from a student loan if an educational institution misrepresented material facts. The new rule also requires individual borrowers to apply to ED for a defense to repayment, whereas in the past an application could be submitted on behalf of an entire group (e.g. veterans). This resolution passed in both the House and Senate but was vetoed by the President on May 29. No attempt has been made to override the veto.

USA FREEDOM Reauthorization Act of 2020 (HR 6172) – This bill would reauthorize (through November 2023) provisions related to the Foreign Intelligence and Surveillance Act (FISA). Updated provisions mandate that the FBI may not seek detailed phone records on an ongoing basis, cellular or GPS location information, or any evidence in which there is a reasonable expectation of privacy. Other mandates include certifying that the Department of Justice (DOJ) has received any information that might raise doubts about the application, and imposes additional requirements for FISA authorizations that target a U.S. person, federal elected official or candidate. The bill would increase criminal penalties for unlawful violations of FISA electronic surveillance and expands the criteria for when a FISA court decision shall be declassified. The bill was introduced by Rep. Jerrold Nadler (D-NY) on March 10. It was passed in the House in March and in the Senate, with alterations, in May. The bill was recently put on hold during its second pass in the House.

Robert Levinson Hostage Recovery and Hostage-Taking Accountability Act (S 712) – This bill addresses the wrongful detainment of U.S. nationals abroad. It authorizes the President to appoint 1.) a Special Presidential Envoy for Hostage Affairs to engage in U.S. hostage policy recovery efforts; 2.) an interagency Hostage Recovery Fusion Cell to assess and track all cases and coordinate agency efforts to safely recover hostages; 3.) a Hostage Recovery Group to develop, implement and recommend hostage recovery policies. The bill also gives the President the authority to impose visa- and property-blocking sanctions against foreign nationals responsible for or complicit in the unlawful or wrongful detention of a U.S. national abroad. The bill was introduced by Sen. Robert Menendez (D-NJ) on March 7, 2019. It was passed by the Senate on June 15 and is currently with the House.

Stop Senior Scams Act (S 149) – Sponsored by Sen. Robert Casey Jr. (D-PA), this bill establishes a Senior Scams Prevention Advisory Group to develop educational materials to help employees of retailers, financial services companies and wire transfer companies identify and prevent scams that affect seniors. It was introduced on Jan. 16, 2019, and passed in the Senate on June 10. The legislation is currently under consideration in the House.

In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American History

3 min read

Paycheck Protection Program and Health Care Enhancement Act (HR 266) – This is a multilayered legislative bill divided into four distinct sections. Phase 1 authorized funding for coronavirus preparedness and response; specifically, for measures such as vaccine development and public health funding. Most of the money was allocated to the Department of Health and Human Services. Approximately 81 percent of funds were allocated domestically, with the other 19 percent allocated internationally.

In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American HistoryPhase 2 allocated $104 billion for three specific objectives: 1) Require private health insurance plans and Medicare to cover COVID-19 testing; 2) Expand unemployment insurance by $1 billion and loosen up eligibility requirements; 3) Provide for paid sick leave at an employee’s full salary, up to $511 per day, and paid family leave at two-thirds of a worker’s usual salary.

Phase 3 provided stimulus checks to individuals and “grants” to small businesses meeting specific criteria, such as keeping employees on the payroll for two months. This phase of the bill represents by far the most expensive single spending bill ever enacted in American history, at about $2.2 trillion.

And finally, the last phase of the bill provided funding to replenish the Paycheck Protection Program (PPP) for small businesses and shore up public health measures, such as virus testing and hospital funding. The bill was signed into law by the president on April 24.

VA Tele-Hearing Modernization Act (HR 4771) – This bill amended previous guidelines to allow appellants to appear in cases before the Board of Veterans’ Appeals by picture and voice transmission from locations outside the Department of Veterans Affairs. The bill was introduced by Rep. Joe Cunningham (D-SC) on Oct. 21, 2019, and signed into law by the president on April 10.

Safeguarding America’s First Responders Act of 2020 (S 3607) – Sponsored by Sen. Chuck Grassley (R-IA), this bill was introduced on May 5 and passed in the Senate on May 14. The legislation is designed to extend death benefits to public safety officers whose deaths are caused by COVID-19, and for other purposes. The bill is currently under consideration in the House.

Law Enforcement Suicide Data Collection Act (S 2746) – Sen. Catherine Cortez Masto (D-NV) introduced this legislation on Oct. 30, 2019. The act would require the director of the FBI to provide information on suicide rates in law enforcement, and for other purposes. It was passed in the Senate on May 14 and is currently being considered by the House.

HEROES Act (HR 6800) – This bill was introduced on May 12 by Rep. Nita Lowey (D-NY). In response to the COVID-19 outbreak, this bill is designed to provide emergency supplemental appropriations for a variety of applications, including assistance to state, local, tribal and territorial governments; further, expand paid sick days, family and medical leave; unemployment compensation; nutrition and food assistance programs; housing assistance; payments to farmers; and the Paycheck Protection Program. It also outlines several potential tax credits and deductions and requires employers to develop and implement infectious disease exposure control plans. The House passed this bill on May 15; it is currently in the Senate for consideration.

IRS Questions and Answers on COVID-19 IRA and 401(k) Loans & Distributions

3 min read

IRS Questions and Answers on COVID-19 IRA and 401(k) Loans & DistributionsThe CARES Act stimulus package substantially relaxed the rules around certain retirement account loan and distribution requirements, but with much confusion. As a result, the IRS recently put out a FAQ document to address the COVID-19 rule relaxation around IRA and 401(k) loans and distributions. This important information should come as welcome news for the nearly one percent of all retirement plan holders who have already taken a distribution under the new rules, according to Fidelity Investments.

Who’s eligible?

If you, a spouse or dependent tested positive for COVID-19, you automatically qualify. You also may qualify under less direct circumstances, such as experiencing economic hardship due to being quarantined, laid off, receiving a reduction in work hours, or missing work because you don’t have childcare. Business owners who are forced to close or reduce operating hours also qualify.

How Much Can I Take Out?

COVID-19 impacted individuals can take up to $100k in distributions without paying the 10 percent penalty imposed on early withdrawals by people under 59 1/2 years old. The $100,000 limit is the total for all the plans you have. For example, if you take $70k out of your 401(k), you can take only up to $30k out of your IRA under these rules. You will still owe taxes on the distributions as ordinary income; however, you are able to pay the taxes owed over a three-year period.

Can I Pay Myself Back?

The law also allows you to pay yourself back. Taxpayers can replace their distributions if they do so within a three-year timeframe. This means that if you take out a distribution in 2020, start to pay the taxes owed over the three-year rule and then pay back the distribution in 2022, you’ll be able to amend your 2020 and 2021 returns to get a refund, as well as not pay the tax you would have owed in 2022.

How Do Loans Work?

The maximum amount you can borrow increases from $50,000 to $100,000. You also can borrow the entire amount of your plan balance up to this limit (net of any outstanding loans). Moreover, for any loans you already have within the plan, the due date for payments due through the end of 2020 can be postponed for up to one year.

Is There Anything Else I Should Know?

Yes. First, there is more guidance coming from the IRS. Second, if you are eager to know what this formal guidance will look like, you can turn to the Hurricane Katrina relief rules from 2005 as this is what is expected will apply for the COVID-19 measures as well. Lastly, the IRS will generate a new form 8915E where taxpayers will report the repayment of COVID-19 covered distributions.

Understanding the Federal Government’s Proposal for Opening Up Again

4 min read

Understanding the Federal Government’s Proposal for Opening Up AgainAfter seeing a peak and then a sustained decline in coronavirus cases, hospitalizations, and deaths resulting from COVID-19, the White House and the Centers for Disease Control and Prevention has rolled out a three-tier approach to get the nation back to its pre-coronavirus economic activities.

While this program is led by the Federal Government, it is ultimately up to governors how they will reopen states and localities. However, there are some universal criteria that states must follow to gradually reopen the economy.

Before transitioning from the stay-at-home orders to the three phases, certain criteria must be met. In order to move to less restrictive phases, there must be a dropping trend of documented cases over 14 continuous days or a downward trajectory of positive tests as a percent of total tests over 14 continuous days, according to guidelines set out by the White House and the CDC. Once the initial gating criteria are met, the local government can move into phase one.

Phase One

This stage will permit establishments such as places of worship, movie theaters, restaurants, and sporting arenas to reopen if they abide by strict social distancing guidelines. Along with recommending stringent sanitation guidelines for permitted establishments to reopen, this phase also suggests telework for employees and minimizing nonessential travel.

Phase Two

Schools, daycare centers, and camps (and similar events) could resume, along with nonessential travel. Establishments permitted to reopen in phase one can remain open and are now permitted to relax their physical distancing to a moderate level. Bars can start reopening, with diminished standing-room occupancy, and gyms can stay open with strict distancing and sanitation protocols.

Phase Three

This phase would come into force when the state and/or locality has no evidence of a relapse. Worksites would see normal staff protocols without restrictions. Large establishments will be able to function under limited social distancing protocols; gyms will operate with standard sanitation protocols, and bars would be able to run with increased standing room occupancy.

As states across the country are reopening, there are many preparations that businesses can implement to stay compliant with government mandates, including re-integrating their workforce and encouraging customers to return to establishments.

Sanitation

Along with social distancing, maintaining sanitation is equally important. Encouraging workers to wash their hands at every available opportunity, including upon arriving at work; before and after eating; after touching doors, desks, keyboards, and other materials; using the restrooms, etc.

Cleaning

Whether it’s an office environment or a retail/restaurant establishment, cleaning surfaces at least once a day is recommended, but more often for surfaces that are touched or used during the course of business. Examples of items to sanitize regularly throughout the day include handles, tables, elevator buttons, sinks, registers, and point of sale terminals.

Signage

Reminding employees and visitors to go home if they have symptoms or have been exposed to the coronavirus through signage is recommended. A protocol to contact the front office based on these circumstances should be implemented.

Encouraging Telework

Identifying tasks suitable for telecommuting versus in-office is helpful for task completion, as well as promoting social distancing. Look at the perspective of work from two buckets – solitary or collaborative – and telecommuting and office time can be split accordingly. If an employee is tasked with writing reports, performing research, or calling experts, he or she could easily work from home. While collaborative work can be done remotely, it is better to be done at the office.

Other Considerations

Along with face masks, there are other ways to reduce the potential for coronavirus transmission. Offices and other establishments can have fewer seats in common rooms, using tape to mark 6 feet or more of distance. When it comes to hallways, one way to stop face-to-face exposure is to have one-way corridors. While it might create longer days, staggering shifts to reduce the number of people in the office and rearranging breaks would also reduce unnecessary employee-to-employee interactions.

Ditching cash as an accepted form of payment is another way to reduce the likelihood of coming into contact with the coronavirus on currency, along with encouraging social distancing since cash doesn’t need to be exchanged. Using online/digital payments or credit cards only is one way to accomplish this. Using designated entrances for workers (or customers), coupled with designated entrances and exits can help reduce opposing traffic and people meeting face-to-face.

While research continues to create a vaccine and render the coronavirus harmless, until that happens, businesses have many tools to reopen their businesses for the foreseeable future.

Sources

https://www.whitehouse.gov/openingamerica/

Are Dividends Becoming a Luxury During the Coronavirus Pandemic?

5 min read

drop of 27 percent in dividendsAccording to the futures market, Chicago Mercantile Exchange contracts are forecasting a drop of 27 percent in dividends over 24 months for the S&P 500 index. Dividends are projected to fall to $42.05 in 2021, a drop from 2020’s dividend of $47.55 and 2019’s high of $58.24. Looking forward to 2026, according to CME’s futures contract, the dividend is expected to recover to $56.65. While the latter years are not as likely as what’s up next, it’s worth taking note.

Although these dividend levels have already been announced, the future doesn’t look much brighter. According to Goldman Sachs, Q2 economic growth is expected to drop by 34 percent. Even though the COVID-19 economic crisis is expected to be worse, we can get an idea of how bad by comparing it to the financial crisis of 2008. From 2007 to 2009, the S&P 500 dividend dropped by 25 percent; it took 48 months to recover from this drop. Based on this historical look-back, chances are it’ll take longer to get back to par this time around.

It’s noteworthy to highlight companies that suspended their dividends in April 2020, and when they last suspended their dividends, historically speaking. Dine Brands Global (DIN) initially paused its stock-buyback program. This was followed up with a suspension of its quarterly dividend of 76 cents. Royal Dutch Shell lowered its dividend by two-thirds to 16 cents per share, the first time since 1945. These examples illustrate just how dire the economic situation is for companies around the world.    

Cash Dividends Explained

A cash dividend is money distributed to stockholders according to a corporation’s present earnings or amassed profits. Dividends are declared and issued by a board of directors that determines whether they’ll remain the same, increase or decrease. 

Understanding the Need to Reduce or Cut Dividends

A dividend cut often results in a drop in a company’s stock price since it indicates a weakened financial position. Oftentimes, dividends are cut because earnings are dropping or there’s less money available to pay the dividend, which can be due to increasing debt levels.

The point here is that dividend cuts are a poor sign for a company that is facing financial difficulties due to reduced revenue, with the same overhead still needed to be paid (rent, wages, insurance, debt servicing). While dividends can be cut for short- or long-term reasons, such as buying their own stock back or buying out another company, with the ongoing coronavirus situation the majority of businesses aren’t doing it for positive reasons.

While reducing or removing a dividend from a company’s stock can divert cash for ongoing operations or debt servicing, it also can tell the markets things aren’t going well financially. This is illustrated by looking at AT&T. In December 2000, the company reduced its dividends by 83 percent, lowering it to 3.75 cents, versus the expected 22 cents by shareholders.

One of the first signals that a company can’t pay dividends, or won’t be able to in the near future, is to look at the company’s earnings trend and its payout ratio.

Looking at a Historical Example

During the second half of the 1990s, AT&T’s stock faced more and more competitors as deregulation went into effect. According to the company’s income statements from 1998 to 2000, annual earnings per share dropped by 50 percent.  

This data is according to AT&T’s 10-K, which shows that its yearly earnings dropped from $1.96 in 1998; to $1.74 in 1999; and finally to $0.88 in 2000. With this precipitous decline in earnings and the financial pressure it put on AT&T, a reduction in dividends came next. Based on this data and some analysis, we can explain how the Dividend Payout Ratio works.

Understanding the Dividend Payout Ratio

Using this ratio can help investors gauge how likely a company’s dividend will be cut or removed altogether.

Dividend Payout Ratio = Dividend Payment per Share / Earnings per Share

Looking at AT&T’s 10-Q report for Q3 of 2000, AT&T earned 35 cents per share and gave shareholders a dividend of 22 cents a share. Based on the dividend payout ratio formula, the resulting ratio was 0.63. This ratio means that 63 percent of AT&T’s earnings were given to shareholders via dividends. When companies have challenging earnings seasons, the payout ratio gets closer to 1 because whatever the company earns is eaten up by the dividend. Therefore, the closer the ratio gets to 1, the more likely the dividend will be lowered or suspended.

While there’s no predicting what the economy will do in the future, looking at past trends can give investors insight into what companies will do with their dividends when the economy faces new headwinds.