Making money
The bear market is back, said Mark
DeCambre in MarketWatch.com, and
its sudden re-emergence from hiberna-
tion has investors seriously spooked. It
took just 19 trading days for the Dow
Jones to drop 20 percent off its record
high on Feb. 12, representing “the blue-
chip index’s fastest move from a record
high to a bear market since 1931.” The
coronavirus-induced sell-off occurred
the week the bull market should have
been celebrating an 11-year anniversary.
Bear markets have not lasted nearly as
long: On average, a bear market for the
Dow lasts 206 trading days, or roughly
41 weeks. For the S&P 500, it averages
146 days of hurt. However, not all bear markets are created equal,
said Steve Goldstein, also in MarketWatch.com. Goldman Sachs
distinguishes between “structural, cyclical, and event driven” bear
markets. Those that are structural, such as the decline of 2008,
are “created by imbalances and financial bubbles” and are the
most painful—dropping, on average, 57 percent. Event-driven
bear markets, such as the Black Monday crash of 1987, end up
only half as bad, with an average total fall of 28 percent.It’s hard to compare this bear market to others, though, said
Nir Kaissar in Bloomberg.com. That’s because the magnitude of
this one “won’t be determined by how investors feel but by how
companies perform.” The bull run was propelled by earnings, andinvestors have grown accustomed
to seeing dazzling quarterly reports.
They will not see those for a while
if the epidemic continues “keeping
workers, customers, and revelers
at home for an extended period.”
In the last few days you’ve prob-
ably heard “the phrases ‘Stocks are
cheap’ and ‘This is a buying oppor-
tunity,’” said Bob Pisani in CNBC
.com. “Maybe, but this only has
meaning if we have some sense of
what earnings will be over the next
couple quarters. We don’t.” The typ-
ical target metrics simply don’t apply
in this unprecedented pandemic.The best way to handle this is to think about how to minimize
your regrets, said Jason Zweig in The Wall Street Journal. In
other words, gauge “how bad you will feel if your decisions
turn out to be wrong.” The two biggest regrets an investor faces
today are “the risk of losing massive amounts of money if the
epidemic worsens versus the risk of missing out on what could
be a robust rebound.” So if you feel you have to sell stocks to
calm your nerves, do it gradually. Conversely, if you’re feeling
daring enough to buy, nibble in equal amounts over the course
of weeks or months. “Taking small actions over time, rather
than a big drastic decision all at once, should help reduce your
future regrets regardless of what the markets do from here.”Markets: Dancing with the bear
BUSINESS 33
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What kind of bear market will this turn out to be?A $350,000 aid line for business
Business owners are rightly frightened about
the impact of the coronavirus on their cash
flow over the next few months, said Ami
Kassar in Inc.com. There are a few financial
options to consider beyond emergency loans
issued by the Small Business Administration,
which can come with a tedious application
process and a lot of unpredictability. On the
other hand, “the application process for regu-
lar SBA loans is simpler, if you are applying
for $350,000 or less and have the historical
cash flow to support the payment.” Such loans
can be spread over 10 years, with no lien on
a house, at an interest rate of 7 percent. But
keep in mind that while the federal govern-
ment is considering delaying the April 15 tax
deadline, filing your 2019 tax returns as soon
as possible “could make a difference in being
approved,” since 90 percent of such loans re-
quire tax documentation.Biden tax plan takes aim at inheritance
Joe Biden’s tax plan spotlights a decades-old
form of generational wealth transfer, said
Darla Mercado in CNBC.com. The “step-up
in basis” is among the provisions of the tax
code that “wealthy households hold most
dear.” The rules of step-up in basis mean thatheirs don’t pay capital gains taxes on an asset
that has risen in value over years before it gets
passed on. Biden’s $4 trillion tax plan would
hit heirs with a tax at the transfer. Wealthy
taxpayers have turned to complex instruments,
such as life insurance policies, to benefit from
the step-up in basis. It also encourages some
investors to hold on to shares until death so
that they can be transferred tax free.Financial advice via Instagram
“Financial influencers” on social media are
booming in popularity, said Dieter Holger in
The Wall Street Journal. Young investors eager
for advice are turning to Instagram accounts
such as @MrsDowJones, run by a 28-year-
old “self-taught investor who posts investing
memes, including one that humorously com-
pares actual earnings and adjusted earnings to
Khloe Kardashian before and after makeup.”
On YouTube, “monthly uploads of videos on
investing increased nearly ninefold between
2013 and 2019.” The Instagram influencers
are succeeding because “many Millennials view
traditional wealth managers as old- fashioned”
and look to apps as their investing platforms.
But some are paid by companies whose prod-
ucts they recommend, creating conflicts of
interest that aren’t always disclosed.What the experts say
For much
of the
world, a
serious
bone
fracture
can mean
perma-
nent crippling. Even a minor one often
means that a person in the Third World is
prevented from working and as a result
spirals into poverty. Sign Fracture Care
International (signfracturecare.org) steps
in to help provide orthopedic implants
for the poor, manufacturing innovative
surgical instruments that are suited for
low-resource hospitals that may not
have X-ray imaging or electricity. Its
high-quality implants give patients a fast
recovery, allowing them to walk in as soon
as a week’s time and go back to work in a
month. The charity also educates local sur-
geons on best patient practices. Since its
inception, Sign has distributed its implants
to 365 hospitals worldwide, and more
than 300,000 people have been healed.Charity of the week
Each charity we feature has earned a
four-star overall rating from Charity
Navigator, which rates not-for-profit
organizations on the strength of their
finances, their governance practices,
and the transparency of their operations.
Four stars is the group’s highest rating.