Happiness in 2020

I don’t know about you, but I am mentally exhausted! Part of the exhaustion has to do with setting poor expectations. For example, our mayor had guided us for two weeks that places such as the zoo would open next Monday. I was ready to take my boy next Tuesday because I told him I would. Now, due to an uptick in positive corona tests to 103, the opening has been delayed indefinitely. My boy is going to think his old man is a liar. Anybody have a baby koala they want to lend me? This example made me think about how we can achieve happiness, no matter the circumstance.  

Happiness is keeping expectations low. In an extreme scenario, if you never expect anything positive to happen, you’ve only got upside! Instead of giving my boy hope to go to the zoo, I should have just told him all the animals went on vacation until Christmas 2021.  

Happiness is appreciating the people you love. When I reflect on the previous financial crisis, the memories that stand out most vividly are not losing lots of money or waking up fearful every morning I’d be laid off next. Instead, the only thing that stands out is our little wedding ceremony on the beach in Oahu. Focus on nurturing your closest relationships.

 Happiness is forgiving yourself. We’re too hard on ourselves, always putting so much pressure to perform or outperform. As we head into the fourth month of sheltering-in-place, we should cut ourselves some slack. For parents out there who have to juggle work and kids, downshifting is particularly important for your mental health.  

Happiness is making progress. “If the direction is correct, sooner or later you will get there.” – Chinese proverb. As long as you are making progress in your endeavor, no matter how small the progress is, you are doing a good job. Juggling too many things will inevitably lead to failure. Focus on doing one or two things well.  

Happiness is helping other people. Small acts of kindness can provide a tremendous boost to your happiness. For example, the simple act of cleaning the kitchen and washing the dishes before your partner wakes up can boost your happiness all morning. For me, writing makes me happy because I know there’s someone out there who has a problem that needs addressing.  

Happiness is being happy with what you have. Desire is the cause of suffering. Write out a list of all the things you already have and marvel at how fortunate you really are.  

The Downshift Is Here The stock market has finally cooled off, declining by roughly 8% since its early June highs. Further, I’m seeing more real estate price cuts for higher priced homes. At the same time, I’m seeing more real estate transactions occur, partially due to these price cuts.  I don’t think we are going to re-test the lows in the stock market. Instead, I think the S&P 500 will be rangebound. I’m guessing there’s a 70% chance we stay between 2,700 – 3,250 on the S&P 500 through year-end.  Given my expectation for a rangebound market, there’s no need to rush to buy any investment. There’s nothing wrong with stacking lots of cash until there’s a better entry point. If you haven’t added up all your sources of cash, please do so  now. Consider coming up with a cash goal by year-end.  In July, we should expect more government support to be announced in the form of more stimulus checks, extended enhanced unemployment benefits, easing of PPP forgiveness rules, and an announcement of a large government works initiative to put Americans back to work. These support initiatives should keep the market afloat. If only one or none of these initiatives are announced before July 15, expect stocks to head lower. We really need the Fed and the government to continue being all-in.  And don’t worry about inflation. It’s not coming. With so many Americans unemployed, inflation should be the last of our worries over the next 12 months.  Charts Of The Week The first chart highlights how much farther the $600/week enhanced unemployment benefit goes by state. Notice how $600 is worth between $645 – $700 in states such as ND, SD, NE, KS, OK, MI, AK, MO, IN, AL, OH, KT, and WV.  Even though it would be easy to do, there’s never going to be a federal tax or federal stimulus package that takes into account the various cost of living levels by state. Therefore, you might as well play along instead of fight the government. 

Delinquency Rate Going Up This second chart highlights how we should expect the delinquency rate on consumer loans to rise by another ~75% to over 3.5%.   Last Thursday, the Fed ordered the country’s 33 biggest banks, including JPMorgan Chase, Wells Fargo, Citibank, and Bank of America, to suspend their stock buyback programs and limit dividend payments to shareholders in the third quarter. The banks must also submit new plans for maintaining enough capital reserves to survive a downturn. So far, the financial system is healthy, unlike in 2008-2009, when banks and consumers were overextended. However, due to the latest Fed orders, expect lending standards to continue remaining tight.

Home Price Predictions Finally, bellow is Zillow’s home price forecast for the nation. Its base case scenario is that home prices will fall by 2%-3% and get back to all-time highs sometime in mid-2021.  If we are to believe Zillow’s assumptions, which seem reasonable, then we’ve got another six months to hunt for real estate deals. There were deals to be had in April and early May, but deals are now getting harder to find. To find deals, you may need to look at homes priced more than 50% higher than your city’s median home price. 

I hope everyone had a reasonably good June. For me, the month has really dragged on. I’m looking for a lot more better news in July!

Thinking about what you entered……..
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