Friday, October 16, 2020

3rd Quarter Update – 2020 The Longest Year

What’s influencing markets:

  •  Market Update – Stocks up significantly in 3rd Quarter
  • Economic Rebound since March – Household net worth at a new record
  • Supportive Monetary and Fiscal Policy - Low interest rates, QE and lots of spending
  • Election risk diminished  
  • Planning Opportunities for 2020

It was the evening of March 12th and we were having what turned out to be the final soccer practice of the season. I have been coaching my daughter’s soccer team for years albeit with little knowledge of the intricacies of soccer. We missed the memo that the soccer league was cancelling activities, so we were the only team on the pitch that evening. 

Schools were closing and spring break was on the horizon so we thought maybe the kids would be home for a month before heading back to school to finish up the school year. I also thought soccer leagues might be suspended and then resume after the pandemic wrapped up in a month or so. That was a little naïve!  

Many adults continue to work remotely, and many kids are still homeschooling. And while there are still many people and businesses suffering right now, the overall economy has been able to recover much of what was lost early on in COVID. An upside-down world has evolved its everyday functions as a health crisis turned into an economic crisis. While government response cannot solve every problem, the policy responses to rescue the health and economy of citizens worldwide have been powerful and unprecedented. 

Market Update

During the third quarter of 2020, the equity markets continued to recover from the drawdown earlier in the year. Remarkably, and as the chart below indicates, large technology stocks did the heavy lifting for the markets, yet again, as indicated by the Nasdaq 100 outperformance during the quarter. While we do not expect the large cap U.S. growth stocks to outperform every quarter and every calendar year, the momentum and investment performance by that category has been striking.

The S&P 500 value of 3363 on September 30th is currently trading at 26 times estimated 2020 earnings of $130 and roughly 20 times projected earnings of $166 for 2021. Those valuations are a bit lofty, but not unreasonable when compared to a 10-year Treasury bond paying 0.68% annual interest. The returns generated by stocks and bonds might have exceeded expectations given the challenges faced by the economy this year.   



A robust economic rebound from the 2nd quarter when we saw a historic GDP drop is helping stocks continue to recover. The latest estimate from the Atlanta Fed is that GDP growth will increase 35% for the 3rd quarter 2020. This follows a 31.4% drop in real GDP during the second quarter. These are annualized figures so the actual change in economic activity is less than a 10% drop of roughly $2 trillion in economic activity for an economic base lever of $22 trillion. Depending on how the 4th quarter 2020 develops, the U.S. economy may only see a slight decrease on total economic output for the year of 2020. That would be an enormous success compared to what seemed possible in March and April of this year.

Of course, millions of workers remain without jobs. As the pandemic emerged and the shutdown began about 20 million jobs were lost, and at this point the economy has only recovered about 50% of those lost jobs. The unemployment rate, after spiking to 14.7%, declined to 7.9% in September.


An indication of American ingenuity and the resilience of the economy is the fact that new business applications and permits are rising faster than in recent years.  The stay at home economy is fundamentally changing the way we live our lives, so while some businesses may have difficulty sustaining, a whole new collection of business opportunities are presenting themselves. This is especially true in this unusual economy as new opportunities to serve a void are abundant as evidenced by the surge in new business permits.  



The improvement from the bottom instructs what is happening with asset prices like homes and stocks. Trillions already spent in government transfers are also helping families weather this economic storm and contribute to the rise in asset prices. Low mortgage rates and overall robust demand for homes has pushed housing prices higher by nearly 5% year over year. Household net worth reached a new high during the 3rd quarter of 2020, sustained by rising stock and home prices.  


Monetary and Fiscal Policy

While there are some positive economic trends that we have outlined above, there can be no questioning the role monetary and fiscal policy has had in supporting the economy as the country and the world continue to navigate this economy. The Federal Reserve extended several lending programs through the end of 2020 that were originally set to expire in September. The Fed is also likely to keep rates near zero for months or years to come until inflation exceeds its target of 2 percent. Below you can see the mind-boggling expansion of the Fed balance sheet increasing by $3 trillion this year.  


 Meanwhile, there seems to be agreement by the President, Senate and House that there should be some additional fiscal support as the virus cases persist. Federal Reserve Chairman Powell has also encouraged the President and Congress to move forward with additional fiscal spending programs, but they haven’t yet reached an agreement on the scope of an additional spending package and may not do so until after the election. In any case, the prospect of additional fiscal support either later this year or early next year is likely having a positive effect on asset prices – all of this despite booking what will be a record $3 trillion plus budget deficit for fiscal year 2020. We are watching to see signs that the increased liquidity around the world will finally lead to inflation.     

Election Risk

I suspect that for many of us, November 3rd cannot come soon enough. In some ways, it seems the election risk has receded in recent weeks. Perhaps the market sees a more decisive outcome at least referencing recent polling data and prediction markets. Or perhaps the market sees one scenario with lower taxes and the other with greater stimulus. With every Presidential Election comes questions about whether the investment strategy should be adjusted based on the various outcomes. It is generally advisable to keep politics out of your investment portfolio. For example, it would have been a mistake if you had sold investments or adjusted your investment strategy in the wake of a Trump or Obama victory. 

As investment advisors, it is our responsibility to position our client accounts appropriately based on a wide array of conditions affecting investments. There is a “consequential” election every two years, and that is likely too often to consider deviating from your long-term objectives by trying to guess which sectors or companies are positioned best for each candidate. Conventional wisdom would have argued that a Trump win in 2016 would likely have benefited energy and financial stocks, because of potential friendly regulations for those sectors. Tilting your portfolio overly aggressively towards the conventional wisdom in this case, solely because of politics, likely would have left your portfolio underperforming. 

Planning Opportunities for 2020

2020 has been a year like no other in history for many reasons, but it’s also providing some unique financial planning opportunities before the end of the year. The uneven economy this year has created a great disparity in personal economies. Some ideas are going to be appropriate if you’ve had a relatively positive economic experience, while some options would be more fitting if your economic situation has been more of a challenge.

1.  Consider a Roth Conversion – There are no required minimum distributions from IRA accounts this year, so a Roth Conversion might make good financial sense. In fact, if your income is artificially low or you think you will be paying higher tax rates in the future a Roth Conversion may be worth considering.

2.  Refinance your mortgage – Mortgage refinancing is about to get more expensive starting in December. Mortgage rates are at historic lows as many are getting loans well below 3%. We continue to advocate refinancing into shorter term lower cost loans.

3.  Fund your retirement accounts – Another anomaly of 2020 are the super high savings rates. If you have extra cash on hand and have not fully funded your employer sponsored retirement account (401k, 403b, etc.) you still have time to increase your contributions. And of course, everyone with taxable income can contribute to a tax advantaged IRA or Roth IRA.

4.  Consider extra charitable gifts – The CARES act allows a cash charitable contribution deduction of up to 100% of your AGI this year, rather than the standard 60% maximum deduction. Coupling the Roth conversion with charitable contributions is a worthy strategy to consider.  

5.   Take an IRA Distribution – The CARES act also allows up to $100,000 distributions from retirement accounts if with special provisions for paying the tax and returning funds if you have been affected by COVID 19. We don’t ever recommend raiding retirement accounts, but if there is an emergency there are special provisions which make early distributions from retirement accounts less punitive than normal.

These are a few of the issues we are watching into the end of the year. We remain encouraged about the future, especially witnessing how our resilient economy has evolved this year. As always please contact us if you would like to discuss your investments or review your financial plans. 

While 2020 has been a challenging year like no other, it’s thus far been a satisfying year from an investment perspective. We hope you all are staying safe, healthy, and calm as we close out 2020.

Best regards,

Edward J. Wilcox, CFA, CFP

Thursday, September 3, 2020

Happy Labor Day!

In observance of Labor Day, the offices of Rollins Financial and Rollins & Van Lear will be closed on Monday, September 7th. Please note that all major U.S. stock exchanges and banks will also be closed due to the Labor Day holiday.

Our offices will reopen for business on Tuesday, September 8th at 8:30 a.m. If you require immediate assistance on Monday, please do not hesitate to contact our staff via email:

Joe Rollins at
Robby Schultz at
Eddie Wilcox at

Please be safe, and have a great holiday weekend!

Best regards,
Rollins Financial, Inc.

Wednesday, August 12, 2020

The Economy Continues To Improve, Not Withstanding The Media's Attempt To Talk It Down

From the Desk of Joe Rollins

The month of July 2020 will clearly be one to look back on in financial history as an important month. After an avalanche of negative publicity regarding the economy and the prospects for the U.S. to pull out of the pandemic, the economy continued to strengthen and the stock market reflected that strength. It has been absolutely amazing that for all of the negative headlines we have read regarding the economy and the spread of the virus, that the stock market has dramatically improved over four straight months. July was an extremely strong month for all financial assets.

I have a lot I want to discuss in this posting and some of it is quite valuable information. I want to explain why the stock market is not likely to have a major downturn due to negative real rates of return. I also want to rebut the so-called “pundits” that argue that the rise in the stock market is a bias against the working class and mainstream. Obviously, they do not understand, as do I, the Wealth Effect which I will explain later in this posting.

Partner Eddie Wilcox and his wife, 
Jennifer, walking the beach
Most of the general public has completely missed the implication of Zero-Sum economics. They just do not understand that if one segment of the economy suffers, by the effect of Zero-Sum, some other segment of the market must be strong. That has proven so clearly true in these very difficult times. The most important real-world example I can give you is from the famous comedian, George Carlin, as he described why this country became so fixated on germs. Even though this famous comical dialogue was recorded 20 years ago, it is so very true in today’s economy. I will give you his thoughts.

Before I launch into those fairly interesting subjects, I need to cover the markets for July which were excellent. The Standard & Poor’s Index of 500 Stocks was up a sterling 5.6%, during the month of July. Year-to-date this index broke into the positive 2.4% and for the one-year then ended in July, it is up 12%. In the first couple trading days of August, this index is now less than 1% below its all-time high level. The NASDAQ Composite continues to be the forerunner in all the indexes, up 6.9% during July and year-to-date is up 20.4%. The one-year return on this index is an almost unbelievable 32.8%. This index has outperformed mainly because it is where so many of the young tech companies reside. If you think this is just a flash in the pan, the ten-year return on this index is an excellent 18.2% annually.

The Dow Jones Industrial Average was up 2.5% during July but continues to be down 6.1% for the year. The one-year return on these 30 largest stocks is, however, positive at 0.8%. Just for purposes of comparison, the Bloomberg Barclays Aggregate Bond Index was up 1.4% for the month of July, up 8% for the year 2020 and for the one-year period up 10.2% for the period ending July 2020. While this was an excellent year so far for the bond index, a couple things are truly interesting.

Ava and her mask social distancing

Most times the stock market and the bond market move in opposite directions. If stocks are up, bonds are down and if bonds are up, then stocks are down. However, this year those stocks and bonds have rallied significantly so far. That is not normally the case, in that the ten-year annual returns for all the stock market indexes are double digits. The ten-year return on the bond index is a meager 3.8%. I will explain later in this posting why one of the major reasons the stock market continues to go up in an otherwise negative economy has much to do with the real-world effect of negative normalized rates of returns.

Almost every day I am confronted by an investor asking with great anger and disbelief, “How can we continue to be invested in stocks when the valuation is absolutely crazy at the current time? As of the end of July, the 12-month trailing P/E for the S&P is 26.8 versus 18 at the end of March.” They give me this example with the conviction that this level of P/E earnings is unsustainable and is at a historic height. I am always confused why investors always look at the past and never the future, which is much more important.

There is absolutely no questions that based on the disappointing earnings for 2020, that stocks are historically high. However, history will always rate 2020 as an outlier. What good information do we have in valuing stocks at a 26 multiple when we know that earnings are depressed - but earnings are likely to improve. It is now the current projection of the S&P, that earnings over the next 12 months should improve by over 48%. If earnings are to improve, as suggested, at 48% should you evaluate the market based on the trailing price earnings or evaluate it on its prospects? Clearly, anyone who has been investing for any period of time knows that whatever has happened in the past is in the rearview mirror, but what we should all be considering is not the past, but the future. Based on future earnings, the market is more closely valued at its March levels than its July levels. Some segments will see greater than 48% – think airlines and hotels.

The Schultz family at Sea Island

The evidence that the economy is improving is virtually everywhere, but you just have a hard time evaluating it because the media is so negative on the economy. In reading the news over the last couple of weeks I picked out items that were clearly positive for the economy, yet seemed to be ignored by the public. The State of Georgia recently announced that their collections of income tax and sales tax for the month of July was 17% higher than the month of July 2019. Take into perspective that analysis. All of us will acknowledge that in July 2019 the economy was very strong and the population was almost fully employed. However, during the month of July 2020 unemployment was high and the economy sputtering. But the reason should be fairly clear.

Retail sales have taken a major move up since the lockdown. Part of this, of course, is pent-up demand, but yet retail sales have come back a lot quicker than anyone expected. I will explain this phenomenon later on based on Zero-Sum economics. Also, even though there were huge amounts of the population not working in July, that doesn’t mean that they weren’t being paid. Due to the massive Federal Reserve influx of money, most of these unemployed were making similar amounts of compensation unemployed as they were making employed. People forget that unemployment benefits are taxable and withholding is required. Once again, even though the media would like you to believe the economy is completely in a state of disaster, the facts belie such headlines.

There seems to be a general lack of knowledge of Zero-Sum Economics. I have clients come in all the time and complain to me that it is impossible for the market to go up because all we have to do is look at the restaurants, airlines, cruise industry and retail to know that the economy is in shambles. Yes, no question, those statements are true, but where did the dollars that would have been spent on those industries actually end up?

Harper Wilcox, age 10, getting
some fresh air at the beach

In a Zero-Sum Economy, if money is not spent on one item, but gets spent on another item, then the economy is at zero. If a family does not spend money on going out to restaurants, going on cruises, flying in airplanes or taking vacations, that is clearly a loss to those industries. If, however, that money is spent somewhere else, the economy does not suffer or, just as good, a family saved more. That is exactly what we are seeing today. Do you believe that there are not shortages in certain aspects of the economy? There clearly are, you see them every day, but you just do not realize it.

Why do you think the grocery stores cannot keep up with toilet paper and paper towels? Those industries are clearly booming as others fail. New car sales have been at historic highs recently. Does that not mean that the manufacturing industry of cars is working overtime to meet the demand? It is my understanding now that golf courses are overwhelmed with people wanting to play and golf equipment and golf clothes reached all-time highs during the month of July. Once again, those dollars are being shifted from one segment of the market to another. One client reported to me that they had ordered a brand-new golf cart for their vacation home but there is such a backlog of orders that delivery has been postponed. Everywhere in the economy you see a negative, you need to look at the other industries in the economy that show strength. While certainly restaurant sales are down, pizza deliveries are skyrocketing. It is everywhere, but due to the negative influence of the media you just cannot see it. What is so clear to me has been largely ignored by the media, is there a reason the media emphasizes the negative and not the positives?

As mentioned in previous postings, the Federal Reserve and Federal Government have dumped over $3 trillion of money into the economy. If anyone understands the velocity of money, then you understand what $3 trillion dumped into the economy over 90 days does. The acceleration of spending must occur or there would be a huge savings component. In real dollar terms, that means if you received this money you had two options. If you elected to spend it, the velocity of money being at 7, would generate $21 trillion of economic growth. However, in times of great uncertainty with the unknown future of your job and family security, the other possibly was that you just saved the money for a so-called “rainy day”.

It is now reported that the American economy has over $5 trillion in cash sitting in checking accounts in banks and other places. Given that this savings rate would be deteriorating daily with the level of inflation, it is a pretty good bet that this money will either be spent or invested over the next 12 months. If spent, then the economy will continue to grow and if saved the financial markets will continue to go up.

As stability occurs in the economy, a greater percentage of this money will be spent creating a higher economy. Rather, if invested it will create a higher stock market going forward. One of the reasons that the stock market held up in this recent crazy time is the argument that there is really just nowhere else to put the money. Already the 10-year Treasury Bond is trading at 0.5% and is at a negative real interest rate. If you calculate the cost of inflation, the rate of return on that bond is likely negative at 1% per year. That means that every day that you hold that bond, you lose money after the cost of inflation. It is the same if you hold money with cash. You are losing money every day against inflation.

Lucy Wilcox, age 8, playing in the sand

Cash may give you a warm and cuddly feeling by having it on hand but the fact that every day you hold that cash you are losing the value of purchasing assets since the rate of return is now negative. So, the argument must be that I will hold bonds because I believe they will appreciate it the future because I know that they do not pay any rate of return. Remember that a $100,000 bond generates roughly $500 a year in income and every year that income is less than the cost of inflation.

But now we have come to the point where bonds have actually run out of basis points to decline. The ten-year treasury is at 0.5%, it does not have much further it could fall. Couple that with the fact that the Federal Reserve is in an all-out war to create inflation. By virtue of the Federal Reserve, flooding the economy with money is a clear reason to try to increase inflation to increase the economy. Nothing could be clearer than recently the price of the U.S. dollar has fallen as the price of gold has gone up. Gold moves inversely to the U.S. dollar since most of the gold is held outside of the United States. But these are clear signs that the Federal Reserve’s effort to increase inflation is working. With a very low return on bonds and a very real possibility of increased inflation, you are locking in real-value losses by holding either cash or bonds. This is one of the reasons why the market continues to be held up, notwithstanding the avalanche of negative publicity.

Three or four times a day, I am approached by investors saying “What if the Democrats were to win the election in November. Won’t the stock market suffer a major decline?” While certainly no one knows how the election will turn out, you must be prepared on all fronts. If the Democrats do win the election, and certainly if they win the Presidency and both bodies of Congress, I expect the market would decline, but not appreciably. The reason why it will not decline appreciably is for the reasons above - what are your alternatives? You may be in cash temporarily, but you will eventually migrate back to stocks. Will that period be a week, a month? Certainly, no one knows. However, it will not be long-term and certainly the period of time when the correction occurs would certainly not be worth the effort to trade around it.

I get so very tired of hearing the pundits criticizing the stock market as being only for the wealthy. Their argument is that the average person’s life is not improved by the value of the stock market and, therefore, any attempt to make it go higher is only focused for the rich and not the middle class. Obviously, those people are not very well educated in economics or the wealth effect.

First off, the general public is very much invested in the stock market. It is believed now that $2 billion per day flows into 401(k), 403(b) and 457 Plans which flow directly into the stock market. Fidelity Investments, the largest holder of 401(k) money, reported that during the March 2020 selloff, the 401(k) investors made little or no changes to their asset mix. This is the way it should be. Long-term investors should never react to short-term market fluctuations. It seems that 401(k) investors are becoming better educated on how to deal with huge market fluctuations that are principally controlled by market manipulators.

However, these pundits do not really understand the wealth effect. The wealth effect happens when the market goes up and money is withdrawn from those profits and spent on other things. Almost every day we have a client withdrawing money from their account to buy or construct something. It may be to buy a new car, it may be to go on vacation, but more times than not it relates to improving their home.

Reid and Caroline Schultz watching 
the sunset on the water - ages 4 and 6

When money is withdrawn from the stock market and used to add an addition to your house, suddenly that money employs people. It employs people from the Main Street economy for both the construction workers and the people who build the materials. If a client takes money out of the stock market to buy a car, does that not put money in the pockets of the people who manufactured that car? There are so many examples of money coming out of the market to create liquidity to Main Street, for those pundits to argue that it is immoral to advocate stock market performance have, by the definition of the wealth effect, been proven incorrect.

Every day we see the effect of low interest rates improving the economy. Housing sales are booming, and construction workers are working at maximum levels. As clients take money out of the stock market and benefit from lower interest rates to refinance their mortgage or add additions to their house, they create wealth, as almost assuredly inflation will positively impact the value of their home ownership. Every day we see the wealth effect taking place as the market moves up.

The exact opposite happens as the market moves down. What you see are people who are invested that are less likely to take profits since the profits are lower and, therefore, there is negative wealth effect. It is not that investors use their excess cash to invest, but it is rather that they do not withdraw from their investments in a period of a down stock market. Over the last four months we have seen extraordinary gains in the stock market, and we are seeing extraordinary withdrawals to buy consumer goods. I do not understand how you could argue that this is anything but good for the economy.

Since there is virtually nothing to watch on T.V. nowadays except for Major League Baseball, in my case, I often drift into old YouTube comedy routines. During my era, one of the most famous was the comedian George Carlin. I ran across a couple of his concerts over the last few weeks and enjoyed his complete “off the wall” look at his neighbors and the American economy. One that I found terribly interesting was his analysis of the fear of germs. In his way of thinking, this country has become completely neurotic, with the population in the U.S. obsessed with security, safety, crime, drugs, cleanliness, hygiene, and germs. His words, not mine. But clearly, he has a point since we have, in my opinion, so grossly overreacted to this pandemic that it warrants further discussion. My favorite example is how we have become so neurotic with germs that even in prisons they swab the prisoner’s arm with alcohol before giving him a lethal injection! Think about that for just a second. For a person that they are clearly trying to put to death, they are concerned that he might get an infection. Overreaction – no question.

Each time I read the statistics of the pandemic, I wonder whether it is political in nature. Why are some states more restrictive than others when it comes to allowing the population to go back to work? In New York, as an example, they have still not even reopened their indoor dining rooms, yet they have announced that schools will be open in the fall. So, how does that even break down in economic terms?

The famous comedian George Carlin

If you analyze the various states for joblessness claims and those that are receiving benefits, it should be clear which states are abusing those rights and those that are not. In the most recent employment report dated July 18, 2020, 18.1% of all workers in the state of California are receiving unemployment benefits. In New York, that ratio is 16.3% and in Connecticut it is 15.2%. If, however, you compare it to other states, 3.6% of the workers in Iowa are receiving benefits, 4.5% in Utah, and 4.9% in Alabama. You do not have to be a mathematical wizard to see the contrast between those states that would prefer a change in administration as compared to those states that are likely not to want a change. Political – who knows?

The evidence is everywhere that the economy is improving, notwithstanding the horrific headlines you read daily. It is also fairly clear that earnings next year will rebound to normalized levels and, therefore, the value of the stock market is not overvalued, but is at a reasonable level. I do not expect a major downturn, but if there is, it will quickly recover and your long-term investment goals should be reached. This virus is a terrible plague on the economy, but it is time that all of us recognize what the risks are and move forward. We turned loose the American spirit and put Americans back to work at home, now we need to turn loose the American spirit and have the public eat in restaurants, fly on planes, stay in hotels, and move on with the rest of their lives.

The month of July also brought another recognition for Rollins Financial, Inc. It is a very humbling thought that for three years in a row we have been selected as one of the Top 300 Registered Investment Firms in the United States. That is really hard to contemplate given the scope of that recognition. To put it into perspective, there are probably 300 companies in the Greater Atlanta area alone that classify themselves as Registered Investment Advisors and we were in those that were selected out of all of the firms in the United States. I guess you can always say that it wasn’t an overnight success, since it took us 30 years to get here. When we received the recognition back in 2015 by CNBC TV as being the 20th best Registered Investment Advisors in the United States, we had $272 million under management. Today we manage for clients’ roughly ¾ of a billion in assets. Obviously much of our success is from the willingness of our clients to let us help them in planning for their retirement, but all of us should acknowledge the fact that we continue to grow and get referrals when clients make money. No other attribute is more important in the growth of a firm like ours. If we have not said so recently, we certainly appreciate all our clients that we help to reach their goals.

On that note, come visit with us and discuss your goals and financial plans. If you are interested in discussing your specific financial situation, please feel free to call or email.

As always, the foregoing includes my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Rollins Financial, Inc.

Friday, August 7, 2020

The Number One Lesson (Re)learned from the COVID Correction/Recession

Discipline might be the most important and most difficult principle for investors to follow. While the coronavirus pandemic progressed, financial markets experienced unparalleled volatility as the world faced economic shutdowns designed to keep the virus from spreading. A natural and justified human reaction to the uncertainty is to protect and preserve the resources you have. While this might be the right strategy in some respects, staying disciplined and invested is consistently the most productive solution for long-term savings like retirement accounts which are designed to provide decades long retirement income stream.

The S&P 500 experienced the best 50 trading days in history as markets recovered from the March 2020 swoon. The S&P 500 increased by a historic 37% from late March into June. This was immediately preceded by the sharpest correction ever, falling 35% late February into March. Missing out on those 50 best days ever, or even a few of the really powerfully positive days, could have put your long-term retirement plans in jeopardy.

The chart below illustrates the intra-year declines experienced during each of the past 20 full calendar years. In 11 out of 20 years, the markets fell by at least 10% at some point during the year.

Source: Morningstar Direct, as of 12/31/2019. Indexes are unmanaged, do not incur management fees, costs, or expenses, and cannot be invested in directly. Past performance does not guarantee future results

Financial markets are nearly impossible to time exactly right because investor psychology is unpredictable. Additionally, the financial markets typically recover from a shock or economic setback before the data suggests the worst is over. For instance, stock markets bottomed in March of 2009 in the wake of the housing crisis before recovering over 60% by the end of 2009 – even as job losses continued, foreclosures accelerated, and real estate prices continued lower.

During a severe correction or crisis, it’s not uncommon for us to receive client requests to sell investments and then wait for the situation to stabilize and reinvest. There are a few problems with this strategy: First, when we get this request, the markets have almost assuredly already reflected at least some of the uncertainty, so we are selling after some or most of the decline has already been suffered. Second, if you are lucky enough to not be selling at the bottom, there is little chance investors are going to be courageous enough to reinvest as markets continue falling. There is, however, a good chance that by the time the environment has stabilized, stock prices will be higher – possibly significantly higher. We often ask our clients, “Do you think market prices will be higher or lower when you feel comfortable investing again?”

The data below illustrates the unpredictable duration of past corrections. In some ways, the stock market recovery this year also feels premature as the virus persists and layoffs continue. So, to those who wonder if there’s a playbook that works for all corrections, we would say probably not; the irregular durations of prior corrections and the difficulty timing them reflect otherwise.

In the wake of the pandemic there was a remarkably swift policy response, which served to reduce the magnitude and shorten the duration of the stock market correction. No question, markets have benefited from government stimulus in the form of loans to companies, extra unemployment payments, stimulus checks and the like. These government transfers helped bridge the economy through the economic shutdown much of the country experienced the past several months.

The fiscal actions of Congress and money policy responses by the Federal Reserve and how markets react to these policy responses are also challenging to forecast ahead of time. Financial markets have reacted incredibly favorably to the government financed response to the economic damage across the globe since March. While we don’t know exactly how the pandemic will progress over the following weeks and months, we believe focusing on a disciplined investment strategy while taking advantage of some of the evolving investible themes is likely to produce a winning result.

On that note, come visit with us and discuss your goals and financial plans. If you are interested in discussing your specific financial situation, please feel free to call or email.

Best Regards,
Edward J. Wilcox, CFA, CFP
Rollins Financial, Inc.

Wednesday, August 5, 2020

Rollins Financial, Inc. Named to 2020 Financial Times 300 Top Registered Investment Advisers

Rollins Financial, Inc. is pleased to announce it has been named to the 2020 edition of the Financial Times 300 Top Registered Investment Advisers. This represents the third year in a row Rollins Financial, Inc. has been included in this exclusive list, which recognizes top independent registered investment adviser (RIA) firms from across the U.S.

This is the seventh annual FT 300 list, produced independently by Ignites Research, a division of Money-Media, Inc., on behalf of the Financial Times. Ignites Research provides business intelligence on investment management.

Registered investment adviser (RIA) firms applied for consideration, having met a minimum set of criteria. Applicants were then graded on six factors: assets under management (AUM), assets under management (AUM) growth rate, years in existence, advanced industry credentials of the firm’s advisers, online accessibility, and compliance records. There are no fees or other considerations required of registered investment advisers (RIAs) that apply for the FT 300.

The final FT 300 represents an impressive cohort of elite registered investment adviser (RIA) firms, as the median assets under management of this year’s group is $1.9 billion. The FT 300 Top Registered Investment Advisers represent 39 different states and Washington, D.C.

The FT 300 is one in a series of rankings of top advisers by the Financial Times, including the FT 401 (DC retirement plan advisers) and the FT 400 (broker-dealer advisers).

Joe Rollins, the firm’s founder, said, “Since founding my CPA practice, Rollins & Van Lear, P.C., in 1980 and my registered investment adviser (RIA) firm in 1990, I have always worked diligently to ensure the members of our team place our clients' interests above our interests. This philosophy has served our clients well and now, 30 years later, we are both excited and honored to announce that we have, once again, been named to the Financial Times 300 Top Registered Investment Advisers – making the list in 2018, 2019 and 2020.”

FT 300 Report -

Official Press Release

Best Regards,
Rollins Financial, Inc.

Monday, July 27, 2020

Rollins Financial, Inc. Named to the 2020 Top Firms in Georgia List

During the last several months, many Americans have faced financial uncertainty. However, for those looking for financial guidance, how do they know who they can trust with their hard-earned money?

That’s where comes in.

A consumer advocacy project with the mission of serving Americans as a trusted resource for researching and comparing financial advisors, analyzes 28 million data points from 690,000 financial professionals and 16,000 firms across the country on a monthly basis to determine which firms can be trusted and which ones have red flags consumers should know about.

“Our goal at is to make it easy for Americans to find a firm and advisor they can trust,” said Blain Reinkensmeyer,’s co-founder. “My grandparents spent over $100,000 on excessive fees alone, working with a financial advisor they thought they could trust, and I don’t want to see that happen to anyone else. In fact, Americans lose billions of dollars to excessive fees and overly expensive financial products each year, so we truly want to highlight fiduciaries—those who have a legal obligation to be unbiased and to put the interests of their clients first.”

Today, is making it easier for residents to find an advisor they can trust, with the release of its 2020 Top Firms in Georgia list, which includes Rollins Financial, Inc., a Registered Investment Advisor (RIA) headquartered in Atlanta.

Joe Rollins, the firm’s founder said, “Deciding whom to entrust with your finances can be a daunting task. The last thing you want from your financial advisor is investment advice driven by paid sales commissions. Fee-only advisors act according to the fiduciary standard, a responsibility to act in their clients’ best interests. Therefore, fee-only advisors have fewer inherent conflicts of interest, and can provide more comprehensive, unbiased advice. I founded the firm 30 years ago on this premise and we continue to work diligently to deliver comprehensive, unbiased advice to each client.”’s Trust Algorithm combines both publicly accessible data from the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) as well as proprietary information such as the security of a firm’s website.

Joe Rollins has said, “When I started Rollins Financial in 1990, my goal was to serve the investment needs of the clients of my CPA firm. We continue to serve many of those clients, as well as many who come to us seeking only investment services. We are honored to be included in the 2020 Top Firms in Georgia list.”

Best Regards,
Rollins Financial, Inc.

Tuesday, July 14, 2020

Worst Stock Market / Best Stock Market In The Last Two Decades, All In The First Six Months of 2020 - Bye Bye Recession

From the Desk of Joe Rollins

I would be lying to you if I did not emphasize how difficult the first six months were on the Stock Market. We have been overwhelmed with bad information and exclamations of concern regarding the pandemic and there seems to be a real shortage of people who look at the real numbers. In the midst of March, many were forecasting, not recession in the United States, but downright depression. Looking back over my notes it is hard to fathom that so many people have been so wrong about this economy.

As we sit here today, it is fairly clear to see the U.S. is not going to shut down again and almost all of the developed countries in the world have passed through the pandemic and are now gearing their economies back up. There is so much I need to discuss with you and go over in this posting. It is fortunate that my prediction regarding the economy was correct and that those that sold out in March were clearly incorrect. It never pays to go against the Federal Reserve and their enormous printing presses that can make money out of thin air. So many investors forgot that most important axiom in investing and sold out in March, leaving them uninvested in one of the best quarters for Stock Market investing in the last two decades.

 Dakota, Carter, Josh, Ava and Joe at Josh and Carter’s wedding

Before I launch into all that very interesting information, I must report on the month of June which was actually a very good month for investing. During the month of June, the Standard & Poor’s Index of 500 Stocks was up 2% yet remains down 3.1% for the year 2020. The other important consideration is for the three months ending June 30th, that index was up 20.5% and for the one-year period it is up 7.5%. Once again to emphasize, if you had stayed invested in this index during the last one-year period, you still would have had a return greater than three times the rate of inflation in the U.S. today.

What was interesting about this first six months is that the major market indexes, for the most part, well underperformed the actively traded mutual funds. While the NASDAQ Composite was up the most, the other indexes were either down or flat. The well-run stock picking actively traded mutual funds for the most part enjoyed double digit gains through the first six months of 2020. It has been a long time since the actively managed mutual funds have significantly outperformed the indexes, but it just illustrates again that passive investing is not the answer but picking the right investments is.

The NASDAQ Composite had a great month up 6.1% for the month of June and was up 30.9% for the three months ending June 30th. The one-year performance on this index was 26.9%. The Dow Jones Industrial Average was up 1.8% during June, but continues to be down 8.4% through June 30th. The one-year return on this index is -0.5%. The one asset class that cannot get any type of traction has been the Russell 2000 Small Cap Index. While it was up 3.5% in June, it is down year-to-date 13% for the year 2020. The one-year return on the Small Caps is at -6.6%. Just for purposes of illustration, the Bloomberg Barclays Aggregate Bond Index was up 0.7% in the month of June and is up 6.5% for the year-to-date. The one-year return on this index is a 9% return.

 Carter and Josh sharing their vows

   So those of you who are observant will note that the bond index for the one-year period was actually higher than most of the market indexes. However, if you compare the 10-year returns on each of the indexes, you will see the dramatic difference between investing in equities and investing in bonds. The S&P 500 Index 10-year return is 14% annually, the NASDAQ Composite is 18.3%, The Dow Jones Industrials is 13% and the Russell 2000 is 10.5%. As you can see, all these indexes were up double digits while the Bloomberg Barclays Aggregate Bond Index for the 10-year period was a meager 3.8%. Also, with interest rates at almost historic lows, you have to think that the investment in bonds will either be flat or negative over the next one-year period. In most cases, bond indexes being flat would be a positive sign. Yet a 10-year Treasury Bond today is yielding less than 0.7%, which to quantify, on a $10,000 bond is $70 income to you per year. Holding a 10-year bond with such low potential for returns hardly raises a discussion in the area of investing. It is not likely to get better for years.

Almost every day I am confronted by a current client or prospective client in how I square the economic world around me today with my comments to stay fully invested. They wonder what I saw in March that they did not see and what I see in early July that they cannot believe. The common exclamation by prospective clients is that I look around and I see pain and destruction everywhere around me. How could you and the Stock Market forecast better things to come given the dire economic conditions that surround me? My answer to that exclamation is that they are not actually seeing the real economy. They are only seeing what is around them and not examining the underlying figures. It reminds me of Groucho Marx in Duck Soup saying, “Who you gonna believe, me or your lying eyes?” You should have believed me.

One of the things that is most misunderstood by the investing public is that the Stock Market does not reflect the past or the present, it reflects the future. To properly evaluate where stocks will be, you do not worry about where we are, but rather where we will be. Anyone invested in the Stock Market should not be particularly concerned about the economy today but should be more concerned about the economy a year from now. Do you really think that this panic regarding COVID will be around a year from now or do you think that by that time it will have passed?

You do not have to go back very far to understand how great the economy was in February. We were at a 3.4% unemployment in February and today we have an unemployment rate of 11.1%. A huge turnaround in only a four-month period, but those numbers are so truly misunderstood that I thought I would take a second to explain.

Ava, Josh and Carter enjoying the wedding festivities

A large percentage of those people reported as unemployed are actually still being paid. As the Department of Labor pointed out, if you are still on payroll but not employed, you are considered to be unemployed. Even those on unemployment will receive an extraordinary benefit of $600 a week funded by the federal government in addition to the state benefits. While certainly it was true that close to 20 million people, at its height, were unemployed, it is also true that the vast majority of those unemployed were being compensated while not working.

The market was stunned in May when it was announced that 2.7 million new jobs were created. Imagine their total outrage when they realized that another 4.8 million new jobs were created in June. Therefore, over a relatively short period of time, 7.5 million jobs were created in the economy. You do not need to be a rocket scientist to understand this phenomenon. During the 90-day period in the second quarter, the Federal Reserve system in the United States dumped $3.5 trillion into the economy. By most definitions, $3.5 trillion is a substantial sum of stimulus. Not only were there the famous Payroll Protection Plan payments, but also unemployment stimulus and direct loans by the SBA, Small Business Administration. Those investors that were forecasting the demise of the economy just could not understand the benefits of this economic stimulus. Unlike 2008 when the Federal Reserve refused to give money directly to taxpayers, this Federal Reserve bent over backwards to keep the economy stable. The Fed’s work saved the U.S. economy.

As we go into July and the end of the Federal subsidy of unemployment, you will see more jobs created. These jobs will not necessarily be new jobs, but rather the unemployed will be called back to work. With the change in the PPP Loan Program, there was no reason to call these employees back to work quickly. The Congress accommodated them by extending the forgiveness period and allowing employers to bring back their employees as their business returned.

Josh stealing a look at his bride, Carter

I have consistently said that the second quarter will be a disaster from an economic standpoint. I stand by that projection since we have not received the numbers yet, but they will be bad. I forecast the third quarter GDP as being virtually break even and the fourth quarter as positive. All of that is very interesting information but does not account for the huge run up in the Stock Market over the last quarter. Yes, it is true that the market fell 35% during the first quarter but gained 41% since late March; huge swings by anyone’s definition. The winners of the investment game of the first six months were not the investors that tried to time the market by selling and getting back in, but rather were those that maintained their investment philosophy during the six months and did not panic. I read every day about those traders that made millions by buying bankrupt companies, such as airlines, cruise ship lines and retail. That is not investing, that is speculation. Even if you had been in the poor performing market indexes, such as the S&P 500, your loss would have been quite marginal. Market timing has never worked, yet many keep trying!

Over the next month we will see earnings for the second quarter and they will be terrible. Volatility on the market will reach new levels as each company reports their earnings and projections. You will see the active traders move the market dramatically, percentagewise, over this 30-day period. While I am warning you that this is going to occur, I also recommend no changes to our portfolios. At the end of the day, the value of stocks is driven by their future earnings not their past earnings. It is very clear that the vast majority of companies are actually operating at near full capacity and certain segments of the market are not operating at all.

Why the S&P 500 is not performing well in 2020 is relatively simple. This index represents a large block of stocks that represent different segments of the economy. Some are doing extraordinarily well, such as technology, health care and biotechnology, but then others are doing very bad, such as oil, banks, hospitality, airlines and cruise ships. I do not think I have ever seen a quarter with a bifurcation between the growth and value of stocks that has been so great. Growth stocks are up double digits, while value stocks are down double digits. The swing in the composition of stocks has been dramatic. The key is to be in growth stocks, not value stocks at this time. Those that have not looked at their investments lately, need to evaluate where they sit as compared as to where actively managed mutual funds have performed this year.

Every day I read the national headlines on my iPad and shake my head in bewilderment. I really do not clearly understand exactly where we are in this country as it relates to the pandemic. There is no question that there is a huge group of Americans behind the “COVID-shame” mentality. In reading these extraordinary articles, I am just trying to understand their position rather than to argue with them. I guess it could be said that the “COVID-shame” advocates basically do not want America to ever go back to work. In reading the harsh comments regarding Disney World reopening, I find it hard to fathom that people have this much hate. If you are so concerned about the health of the people going to Disney World, the answer is clear. Do not go.

Carter and Ava having fun at the reception

There are many in the media that say the negative comments from the “COVID-shame” people are totally political. While maybe that is the case and their desire is to shut down the economy so that economically we can elect a different president. However, that really defies common sense. Would anyone be so vain and self-centered that they would want all Americans to suffer to meet their political goals? I try to think positively about most people, but I cannot believe that anyone would be so naïve to desire that the country fail economically just so they could change their political agenda. Maybe I am wrong?

COVID-19 is a very serious illness and should not be taken lightly. Everyone should do everything within their power to stay healthy and avoid the virus. However, the situation is far from as dire as the news would like you to believe. In recent weeks there has been a large increase in cases in certain states, however, those cases almost universally are with the young. No one ever actually reports how many of those cases are asymptomatic and how many are actually serious. From day one the reason for the lockdown was so that we did not overwhelm the hospital system. While I read every day of the terrible plight of certain hospital workers, I am less convinced.

As we sit here today, there are 2,200 cases of COVID in the hospitals in the state of Georgia. Certainly, a personal tragedy for those people, but in a state of 10,200,000, it’s hardly a meaningful percentage. No one ever actually reports the active cases versus the cases where people got well. You pick up every newspaper and it says that 3.3 million cases in the United States. However, no one reports the actual active cases. As I write this article, there are 1.7 million active cases in America with a population of 332 million. As you can see, 1% would be 3.3 million, so there are ½ of 1% active cases in America today. So, the critics (or the less informed) would say we only diagnose 1 out of 10 cases, therefore potentially 17 million active cases or roughly 5% of the population. Percentage wise – still very low.

Joe and Ava sharing a coat for the night

Do you remember only four or five weeks ago when the press was proclaiming Europe, and especially Italy, were destined for complete shutdown due to the virus. Has anyone reported lately that Italy today only has 13,300 active cases in the entire country (a country of 60.5 million)? Germany has only 6,194 cases in the entire country (a country of 84 million). In both of those cases almost none of those cases are serious. As it relates to the hospitals, the number of people hospitalized for COVID in the U.S. has never exceeded 60,000. Today the number of hospitalizations for COVID is around 45,000 and, more importantly, the number of people in ICU related to COVID is less than 6,000 nationwide. I need to remind you that in the United States, there are 790,000 hospital beds and over 100,000 ICU beds. As mentioned above, there are less than 6,000 COVID patients with ICU issues. When you look at the numbers, it is hard to fathom just exactly what the media is telling you and why. Do they have the facts?

You read almost nowhere that the number of deaths from COVID are falling and are averaging less than 1,000 per day. To put it in perspective, the fact that almost 8,000 people die every single day in the United States from natural causes, doesn’t seem to be a meaningful number. Due to the U.S. government’s infusion of capital into biotechnology, there is a strong likelihood a vaccine will be available before the end of 2020. Almost assuredly a vaccine will be widely available early 2021, as the government is funding the process.

The drugs needed to help patients have dramatically improved and the period of time people need to stay in the hospital has been significantly reduced. None of this seems to make it to the headlines, only the states, cities and counties that have an increased percentage. I am not suggesting that everyone should not be as careful as possible as to not get sick. What I am saying is that there is a lot of people that will get sick, but will get well. The young people, being younger and stronger, will weather the disease quickly and will return to their normal life. In the meantime, America needs to quit figuring out a way to avoid commerce and quit making everything political and needs to get back to work.

I wrote a few months ago about the unbelievable American spirit that would overtake the economy and bring it quickly back. We see it every day around us, people working from home and not driving to work. The building in which I am in is almost totally abandoned from workers, but I suspect all are paying their rent. Many of the so-called “economic forecasters” gave us the explanation that there would be huge home foreclosures during the pandemic. In fact, the opposite is true. There is an economic explosion of house buying from people that want to get out of the cities and move to rural areas. Homeowners’ interest rates are at all-time lows and homebuyers are everywhere. Yes, it is true that certain industries are not coming back as quickly, but as I drive home every day, it is kind of funny to see the cars lined up and down Peachtree Street to enter Lenox Mall.

DeNay of Rollins Financial taking a horseback ride through the trails  

What I know is that the American spirit is certainly working and as we start the third quarter, it will be up and down but progressively higher. Because unemployment benefits are running out in July, people will go back to work because they have to. But have you checked the vacancies at beach towns lately? Hotels and rental units are reporting maximum utilization even during this pandemic. Does anyone really think that the vast majority of Americans would be going on vacation if we were in a recession and not being paid?

Every day I read some “so-called” expert, who exclaims in almost hysteria, that the market is so grossly overvalued that we should see a 25% reduction almost any given day. I am not exactly sure how they define overvaluation, but if you assume my prediction is correct then the market is a long way from being overvalued. If we assume that earnings come back in 2021 and 2022 as they were in January of 2020, the market is not overvalued but in fact trades at a reasonable valuation. If we assume that the American population will be either exempt from COVID by herd immunity soon or because a vaccine has been made available to the general population, the economy will come back in a rewarding fashion. With the amount of governmental stimulus and historically low interest rates, we are already seeing the first leg of the market up.

It is not unheard of that the traders will try to push the markets around and try to force you out of your position in the third quarter. It is believed that currently $5 trillion in cash is sitting in investment accounts waiting to be invested. While a pullback in the market over the short term seems tragic to your finances, it actually may be the very catalyst that pulls this cash back into the market. At some point the people that sold out in March will feel an obligation to reinvest and will come roaring back. It will happen.

Dakota, Joe and Ava following the ceremony

My current projection from an investment standpoint is that the third quarter will be either flat or marginally negative and the fourth quarter will be up significantly. I see by the fourth quarter of 2020 that the economy will begin again to expand, and employment will be once again in short supply. We will not reach full employment by the end of 2020, but should once again be fully employed by the summer of 2021.

None of the current living economists have ever witnessed a stimulus package like we have seen over the last six months (mainly since it has never happened before). $3.5 trillion of government money has been poured back into the economy and to think that that stimulus would not bring commerce was naïve. I reflect now on those terrible days during March when one professional after another forecasted a period of time worse than the Great Depression. However, we have already come back to a market that is essentially even for the year and this great recession, as forecasted by these “so-called” experts, may only have lasted one calendar quarter; the last one, not the future ones.

As we go forward, I expect the market will fluctuate wildly on days, but the trend is most assuredly up. I forecasted at the beginning of the year that the markets would enjoy a 10% gain in 2020. While we have seen movement all around that projection, I still think it is reasonably possible we could have a return as good as 10% in 2020.

On that note, come visit with us and discuss your goals and financial plans. If you are interested in discussing your specific financial situation, please feel free to call or email.

As always, the foregoing includes my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins

Wednesday, July 1, 2020

Happy 4th of July!

In observance of Independence Day, the offices of Rollins Financial and Rollins & Van Lear will be closed on Friday, July 3rd. We will re-open for business on Monday, July 6th at 8:30 a.m.

Image result for 4th of july

If you have any pressing matters that require immediate attention, please do not hesitate to contact any of our staff.

Please be safe, and enjoy the holiday! 

Best Regards,
Rollins Financial, Inc.

Tuesday, June 9, 2020

I Learned Early On, "Don't Fight the Fed"; 2020 Is A Perfect Example

From the Desk of Joe Rollins

The whole world seems to be shocked that the stock market has made such a quick recovery. In the middle of March, the broader indexes were down 37% and the media forecasted that things would only get worse as the year progressed. How could we possibly put 25 million workers in America back to work and what would the economic ramifications of the COVID-19 pandemic be on business? Surely those forecasts that things would only progressively get worse meant we were facing another Great Depression.

Ava at her 9th birthday party

As I forecasted, their concerns were completely overhyped. In fact, in early June the Standard & Poor’s Index has made it back to breakeven, gaining more than 40% since its March lows. Further, there has been rapid and significant progress in the economy, which is putting Americans back to work and surprising even the experts. The May unemployment report was a huge surprise to these so-called “experts” but reflected exactly what you see with your own eyes. Americans are returning to work because they want to work, they need to work, and the economy will return to its normal self after this self-imposed lockdown.

In this posting I want to discuss all of the matters above including the remarkable rebound in the markets, the remarkable rebound in employment, but I cannot do so without discussing the grave and fatal mistake we made in forecasting the potential risk of the COVID-19 pandemic. I was lucky enough to run across a publication by Alex Berenson titled “Unreported Truths About COVD-19 and Lockdowns”. This is posted in essay form on It contains a lot of useful information regarding how badly the media has handled reporting this pandemic. I would like to give you, below, some of those facts and figures.

However, before I launch into all the interesting and useful information, I have to report again on the financial markets during the month of May. The month of May was an excellent month again following the excellent month of April. Over April and May, the S&P 500 has gained 17.6%; quite a rebound from the March 23rd lows. For the month of May, the Standard and Poor’s Index of 500 Stocks was up 4.8%. At the end of May that index was down 5%, but still had a one-year return of 12.8%. For the month of May the NASDAQ Composite was up 6.9% and is ahead year-to-date by 6.2%. That index has a one-year total return of 28.6%.

Carter, Josh, Ava and Dakota enjoying an outdoor meal
at Ava's birthday

The Dow Jones Industrial Average was up 4.7% in May but down year-to-date in 2020 10.1%. That index has a one-year total return of 4.8%. Just so that you can compare stocks and bonds, Bloomberg Barclays Aggregate Bond Index was up .4% in the month of May, up 5.8% for the year 2020 and the one-year total return on that index is 9.6%. I always believe that a 10-year average is much more informative than a one-month average. The S&P 500 has an average return over ten years of 13.2%. The NASDAQ Composite has a 10-year average 16.8%, the Dow Jones Industrial Average is 12.4% annually. The Barclays Aggregate Bond Index has a 10-year average of 3.9% and as you can see many multiples less than any of the stock indexes.

As I mentioned two months ago in this posting, you should never sell America short. As I indicated, if you turn loose the American worker, the “American spirit” will rise up. We have seen it every day since the lockdown. We have seen a host of new companies create interactive technology so their employees could work at home. I was shocked to see how well some of the technology companies did during the lockdown with almost no interruption of their business. Clearly, hospitality, airlines and other industries were significantly impacted, but technology was not. American ingenuity allowed those companies to continue to work even during the lockdown. Unemployment is still over 20 million Americans but is improving every day. So, the rebound in the stock market is not based on flawed philosophy, but on the realization that America is going back to work and when Americans go back to work the economy will recover.

It was quite a shock last Friday when the Bureau of Labor Statistics presented the employment report. The so-called “experts” had forecasted that during the month of May that 7.5 million additional people would be put out of work. Much to their surprise, not only were there no net decreases, there were actually 2.5 million new jobs created during the month. Of course, these are not new jobs, these are just people returning to their former jobs. As indicated, 1.4 million of this group was in the hospitality and restaurant industry. During May, only a few restaurants and hotels had opened, but in June more will open. In New York City, restaurants are not likely to open until July. So many more job gains are in the offering. We already see the signs of recovery. Hotel occupancy is up (40% compared to the 60% in January), airline flying capacity is up and homebuying is at record levels. How did we get from the level of despair that we were in in March of 2020 to the almost euphoria in June 2020?

Ava's 6th birthday with Liz Mercure, 
35-year client, at the Georgia Aquarium

There is no magic wand; what happened is clearly due to the effort of the Federal Reserve. Almost immediately when the crisis occurred, the Federal Reserve slashed interest rates twice to near zero between regular policy meetings. Not only did they agree to buy securities, if necessary, they never really got around to it, but the securities benefitted from the backstop of the Federal government. And oh yes, you cannot forget about the $3 trillion that the Federal Reserve has injected into the economy over a relatively short two-month period. Last month I explained about the velocity of money and that money is thought to be spent seven times prior to being saved. $3 trillion creates $21 trillion in potential GDP, which is almost 100% of the GDP in the United States in 2019.

So, when the unemployment report was reported, all the so-called “critics” came out of the woodwork to find fault. I must have heard from dozens of clients who wanted my input as to the inconsistencies in the report. I read the report in full and I guess I am less concerned regarding their inconsistencies. The Labor Department reported that many employee’s response to the survey was “employed, but absent from work”. The Labor Department can consider those people with that response as employed since they were being paid. The critics suggest that those people are not employed even though they are being paid and, therefore, the unemployment report is much worse. I have to agree with the Labor Department; it seems to me that if the employee is being paid, whether he is home or at work, to me the distinction means nothing. If he is being paid, he is employed, in my way of thinking. By the way, the 2.5 million new jobs were in a different survey altogether and was not corrected.

So, the unemployment rate fell to 13.3% in May, which, while terrible, was a huge improvement over he predictions. Yes, there continues to be 21 million Americans not working, but do not be surprised if the June employment report reflects 8-10 million new employees during the month of June. In early June, all of the automobile workers went back to work and are near full capacity. The combination of those workers and the suppliers to those workers alone constitutes close to 3 million employees. Throughout most of the United States restaurants are reopening and hotels are relaunching. I know 3 or 4 million jobs will be restarted and employees reemployed. There is no question about it that most of these jobs could not have been created, nor the companies reopened without the PPP loan program from the government. Essentially, the Federal government gave private industry grants to reopen their businesses and pay their employees. It is believed by many that this program saved 5 million jobs in America.

Old friend Craig Sager and his family with 
baseball player, Michael Jordan, in July, 1994

It is kind of interesting how the President has criticized the Federal Reserve for its lack of action in reducing interest rates. However, there can be no criticism that when the pandemic was announced the Federal Reserve jumped in with both feet and saved a very weak economy over the short term. There is an old saying in the legal business that you never want to fight with someone who is not paying his own attorneys. In the case of stock market investing, you should never bet against a country who can, on a whim, print $3 trillion of new money.

Make sure you make no mistake in understanding where this $3 trillion came from. Due to the speed in which they needed to distribute the money, there is no way they could have had time to issue bonds. This is classic printing of money and distributing that money to employers so they could keep employees working. Will it work? That remains to be seen. Over the short term, it has certainly been encouraging. There are many other encouraging signs that you can see if you actually look.

During this entire time of the lockdown, the 10-year Treasury has traded at unprecedented prices. Most recently that bond was trading at 0.6% over a 10-year period. If you put that in perspective, you could buy a bond for $10,000 that paid you a dividend every year of $60 and it had no potential to go up over the next decade. Just exactly who would make that conscious investment decision? However, that is beginning to change. Recently, the 10-year bond has moved up to 0.9%, which is still historically low, but a 50% increase over the most current rates.

You could never say anything regarding the U.S. economy without reflecting on the effect that COVID-19 has had on the economy and what its potential really is. I guess I have never been able to quite understand why the media is so terribly focused on this virus which has proven to be almost harmless to most Americans. There seems to be nothing but negative reporting on the subject, to the point of where it almost has become laughable. This morning I woke up to a Yahoo report that indicated in huge bold print “Texas Sees Record Spike in Coronavirus Cases After Reopening.” Of course, these same publications have been uniformly critical of the states for reopening their businesses, and therefore this record spike could reinforce their argument that the country should not reopen for business. However, if you read the article a little closer, it is much more informative.

In Dallas County, they reported an uptick in cases of 298 for the day. Remember, Dallas County has roughly 2.6 million residents and close to 6 million in the metropolitan area. Houston reported 180 new cases that day with metropolitan Houston having 7 million residents. Obviously, these numbers are totally insignificant as a percentage of the population. I have struggled to understand why the media is focused on this entire subject and why it is so important to them that they continue to report the negative but do not give you the real facts. Yes, a lot of people would like to dismiss it as truly political of the infamous liberal media, however there must be a more logical reason for their preoccupation with the subject.

In trying to reconstruct exactly what took place, I went back and reviewed the information in Alex Berenson’s book, “Unreported Truths about COVID-19 and Lockdowns.” The very first report of the virus was on March 16, when the Imperial College predicted 500,000 Britain’s and two million Americans would surely die if the governments did not act immediately to close schools and businesses. This was written by a scientist not a physician but was supported by the World Health Organization. I guess that would, by any definition, scare most politicians to death. However, what was clear at that time is that it had not happened in China. The pandemic had not moved to Beijing and no overall financial catastrophe actually occurred. Why was it at that point the media was so focused on reporting this potential huge loss of life around the world based upon the Chinese experience? In fact, in many cases China got back to work within 30 days and now their country is almost fully operational.

Ava's first swimming lesson at 6 months old

What we now know is that the Imperial College report professor, Neil Ferguson, has a long record of exaggerating his predictions. His prior predictions, which are legend, and in some cases, comical, have become largely forgotten. What is interesting about this matter is only two weeks later the very same scientist changed his projection. In less than a two-week period, he projected that in Britain, 20,000 Britain’s would die rather than 500,000. And more shockingly, he reported that of the 20,000 people expected to die due to the COVID-19 pandemic in Britain, at least half of those would have died anyway due to other causes.

So, in a period of just three weeks, his projection went from 500,00 to 20,000. I am just wondering as of right now why the media never bothered to report this major reduction in the estimated deaths from the pandemic. Would it have changed our thoughts? Probably, but now we will never know. For the record, as of this morning there are 40,548 reported deaths in Britain. As I will point out later, these death statistics are wildly unreliable.

Come to the United States, we all vividly recall Governor Andrew Cuomo proclaiming that the state of New York would need 140,000 hospital beds for COVID-19 patients. Almost hysterically, he demanded that the U.S. government provide 40,000 ventilators for their use. You will recall by Presidential decree, companies such as General Motors were mandated to make ventilators because the need was going to be so great. However, what we saw was that the field hospitals built and a huge expense to the state and federal government were never used and were dismantled, and in often cases, without serving a single patient. At the end of the day, New York never had more than 4,000 people on ventilators. You have to wonder how valid the information was when the estimate was wrong by a 90% difference. Needless to say, we have a lot of unused ventilators for sale.

What is not fully understood about COVID-19 is that it really only seriously impacts older people. It is now believed that 43% of all the people who have died from COVID-19 were in nursing homes. It is almost unscrupulous to now understand exactly how the death figures are calculated. I think a good example of this is a quote from the Director of the Illinois Department of Public Health explained in April, “If you were in hospice and had already been given a few weeks to live, and then you also were found to have COVID, that would be counted as a COVID death. It means technically even if you died of a clear alternate cause, but you had COVID at the same time, it's still listed as a COVID death.”

As mentioned before, there is a huge difference between dying of COVID and dying with COVID. However, many of our problems associated with COVID were of our own self-making. It has now been learned that the state of New York so much feared the overflowing potential hospital situation that in their haste to free up beds, they sent COVID patients to nursing homes. What we now know is that this was a fatal error. Once the patients were at the nursing homes, they spread the virus to not only the other people at that home, but also the staff. What is ironic about this matter is that these individuals were likely to die shortly anyway.

CiCi enjoying the beach buggy

In New York, it is estimated that the average stay for a nursing home patient is approximately five months. So, as it clearly could be demonstrated, in all likelihood these patients were going to die shortly anyway and the contracting of the coronavirus was meaningless to their death. However, in order to reinforce their position, each of these deaths are considered to be a COVID death. Remember, the reason for the lockdowns had nothing to do with stopping the spread but had everything to do with slowing the spread and not overrunning the hospitals. Now what we actually know is that the hospitals were never overrun, and it was never truly an issue. As of today, there are roughly 30,000 hospital cases of COVID in the entire United States and at its maximum, it was only 58,000 hospital cases.

In many cases, the hospitals were not only not overcrowded, they were empty. People were so scared by the media that they refused to go to the doctor even for normal health checkups. So basically, doctors, dentists and other healthcare professionals did not work for two months due to the fear placed in the American worker of the potential loss of life in COVID. As a good example of the progress that is being made, the increase in hospitalizations for COVID has been declining remarkably. Over the last six weeks reporting period, 33 days there have been net reductions in hospitalizations and only up eight actual days. The reporting on this issue has gotten so bad that even Washington state has in their records of COVID deaths two people that died of gunshot wounds.

But the real news that is coming out of this matter is that there is almost no risk to younger people. For example, in Italy 32,000 Italians died by COVID-19 and the median age was 81. That means that half of the people were above 81 and half were below 81. In this number, 13,000 were over the age of 80 and another 5,400 were over the age of 90. That has been the case throughout the world.

In New York City, 40% of the 23,700 deaths were people over the age of 80. And even to the point that under the age of 15 across the United States, there have been only 19 cases of death from COVID-19, while 180 deaths from flu were reported. This statistic bears out the facts that under the age of 30, your risk of death is almost insignificant. To give you an example quoted by my friend, Marc O’Connor, “If you are under the age of 24, your odds of getting struck by lightning is 1 in 700,000. If you are under the age of 24, your odds of dying from COVID is 1 in 1 million. That does not mean you will not get sick, but you will not likely die.

You may remember the very famous case of where the Lake of the Ozarks had a huge pool party over Memorial Day. It was reported in every major outlet as a huge abuse of social distancing. The pool was shown crowded and the decks around the pool were also overflowing. The national media was outraged at this clear abuse of the lockdown. Just as a follow-up to that case. There have been zero cases of reported Coronavirus related to that party.

When I was president of Brown Steel, 
November 1979 - still writing newsletters

So, the question always beckons us, what does the future hold. Clearly, none of us know if we will have a second wave of Coronavirus. What we do know is that medicine is ready. There has been an explosion of Federal money supporting antibody therapy. This therapy does not prevent the disease but makes those early in recognition recover quicker. There are numerous companies making antibody medicines at the current time and many are expected to be available in the fall. The Manhattan Project of the Federal government relayed a vaccine is moving forward. There are numerous vaccines already in testing around the world and China now said that they would roll theirs out in a couple of months. I think it is more than reasonable that a vaccine will be available before the end of 2020.

So, there is no way to criticize what has already happened because we have already gone through the lockdown. But there is absolutely no emphatic evidence that the lockdown should continue. There was probably never any reason to close the schools and all the schools will reopen in the fall, except maybe in California. For reasons not known to most people, they have elected to ignore empirical evidence on the subject.

We can expect that the camps, sports leagues and schools will all open in the fall. Millions of workers will go back to work in June, and more importantly, in August. As previously mentioned, the extraordinarily lucrative unemployment benefits will run out in July 2020. This will make many employees go back to work by default. Employers around America are reporting that it is hard to get employees back to work since they are currently making more in unemployment than they made while working. All of that will end in July. In addition, with schools starting back and normal childcare opening back up in August, another 5-6 million Americans will be back on the payroll.

So, as we sit here today, we are at a crossroads of the investment year. It has certainly been a strange period thus far. The months of January and half of February was great. Half of February and most of March was horrible. The month of April was fabulous, and the month of May was very satisfactory. But it once again shows that you cannot try to time the market. At the height of dismay in March with the media pronouncing America in Depression, if you sold your stocks you made a mistake. Almost always, you are better off to ride out these markets when volatile. But as we approach breakeven on the major market indexes, I anticipate the rest of the year will be extraordinarily volatile. There will be periods of large gains and large losses, but at the end of the year we should still see gains.

As the economy picks up over the months of June, July and August, we will get back to normalized unemployment. My projection for the end of 2020 unemployment will only be 8%. While much higher than the beginning of the year, it is certainly within normalized range. Corporate earnings will be depressed in the second and third quarters but will rebound strongly in the fourth quarter. I know all of this sounds like we are talking about a tremendous period of time, but as I write this we are only three weeks away from the third quarter and only three and a half months away from the fourth quarter. It is going to happen faster than you ever expect it. But do not expect it to be straight up because the media is just refusing to let the COVID fears recede. However, as the correct information is dissimilated, eventually even the media will have to concede their mistakes. As to a question regarding his projection for the future, on May 25, Governor Cuomo said “I'm out of that business (forecasting cases of COVID-19) because we all failed at that business. Right? All the early national experts. Here's my projection model. Here's my projection model. They were all wrong. They were all wrong.” Truer words have rarely been spoken in America since February 2020.

On that note, come visit with us and discuss your goals and financial plans. If you are interested in discussing your specific financial situation, please feel free to call or email.

As always, the foregoing includes my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins