Bill’s By The Number$

Posted by: Lisa Navarro | Posted on: May 11th, 2020 | 0 Comments

1. STOCKS – The S&P 500 is down 8.7% YTD (total return) through the close of trading last Friday 5/08/20. The index was down 30.4% YTD (total return) as of Monday 3/23/20 or 7 weeks ago today. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. SHORTFALL – The Congressional Budget Office (CBO) forecasted on 4/24/20 that our nation’s fiscal year 2020 budget deficit, i.e., the 12 months ending 9/30/20, will be a record $3.7 trillion, equal to 18.1% of our economy. That would be our largest “deficit-to-GDP” percentage since the USA hit 21.0% in 1945 (source: CBO).

3. HELP FOR BORROWERS – Pandemic-impacted homeowners who have mortgages that are owned by Fannie Mae have access to a “forbearance plan” that allows them to reduce or suspend their monthly mortgage payment for up to 12 months. Homeowners are allowed to establish a repayment plan to catch up gradually or modify the entire loan but are not required to make a lump-sum payment at the end of 12 months. Homeowners need to contact their mortgage servicer to determine if they qualify (source: Fannie Mae).

4. DISMANTLED AND IN STORAGE – The number of operating oil rigs in the United States (both on land and offshore) as of last Friday 5/08/20 was 374, down 54% from 805 operating rigs as of 12/31/19 and down 65% from 1,083 operating rigs as of 12/31/18 (source: Baker Hughes).

5. SO MANY WITHOUT WORK – As of the end of April 2020, the state of California was paying $1 billion a day in unemployment benefits (source: California Labor Secretary Julie Su).

6. WOW – As of 2/29/20, the USA had a jobless rate of 3.5% with 5.8 million out-of-work Americans. As of 4/30/20, our jobless rate was 14.7% with 23.1 million out-of-work Americans (source: Department of Labor).

7. LESS NEEDED – 26% of 305 chief financial officers surveyed in late April 2020 anticipate their firms will “reduce their real estate footprint” when work life resumes some level of normalcy (source: PricewaterhouseCoopers).

8. BRAD PITT – Dr. Anthony Fauci has been the Director of the National Institute of Allergy and Infectious Diseases since 1984. Fauci, 79 years old, has served 6 Presidents – Reagan, Bush 41, Clinton, Bush 43, Obama, Trump – and has managed the USA’s efforts to prevent, diagnose and treat HIV/AIDS, Ebola, Zika, SARS and COVID-19. His agency’s budget in the current 2020 fiscal year is $5.9 billion (source: NIAID).

9. JUST HERE FOR THE DAY – 48% of hospital revenue in 2018 came from outpatient procedures (source: Deloitte Center for Health Solutions).

10. HOW IRONIC – The US economy fell 4.8% in the first quarter, i.e., quarter-over-quarter change expressed as an annualized total. 47% of the 4.8% decline was from the nation’s “health care” sector, partially due to the requirement that hospitals temporarily stop all non-emergency surgeries (source: Commerce Department).

11. WHERE THE VIRUS HAS HIT – As of 5/04/20, 52% of the 3,142 counties in the United States (1,630 counties) had not recorded a single COVID-19 death. As of 5/04/20, 80% of the 3,142 counties in the United States (2,520 counties) had recorded 5 or less COVID-19 deaths (source: The COVID Tracking Project).

12. NEVER THIS CHEAP – The average interest rate on a 30-year fixed rate mortgage was 3.23% as of 4/30/20, a record low for a statistic that has been tracked since 1991 (source: Freddie Mac).

13. EXPENSIVE EDUCATION – Outstanding student loan debt in the USA was $1.54 trillion as of 3/31/20, up +103% from $760 billion as of 3/31/10 (source: Federal Reserve Bank of New York).

14. TAX PLANNING – Grantor retained annuity trusts (GRATs) are used to transfer appreciating assets to heirs. GRATs become more effective as interest rates drop because any appreciation in excess of the Section 7520 interest rate passes to heirs free of gift tax. A $10 million GRAT established in May 2019 earning 6% when the Section 7520 rate was 2.8% could pay $1 million per year to the grantor for 10 years, $4.7 million to the heirs after 10 years with only a $1.4 million taxable gift. A $10 million GRAT established in May 2020 earning 6% when the Section 7520 rate is 0.8% could pay $1 million per year to the grantor for 10 years, $4.7 million to the heirs after 10 years with only a $426,000 taxable gift. Please consult a tax expert for details (source: Journal of Accountancy).

15. CAN WE CHANGE OUR MIND? – The PGA announced a 9-year media agreement (2022-2030) with CBS, NBC and ESPN on Monday 3/09/20 worth an estimated $700 million per year, just 4 days before President Trump declared on Friday 3/13/20 a national emergency due to the COVID-19 pandemic (source: PGA, White House).

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