Spam calls are epidemic these days. Not even being on a ‘do not call’ list helps any longer. So what are some of the common scams and what can you do about them?
Common spam calls include:
- You are entitled to a two week vacation with Marriott, in return for being a loyal customer
- Due to the pandemic, your credit card company is reducing your interest rate to 0%
- You forgot to extend your extended car warranty, but we can take care of that for you
How do you know you’re getting a spam call? Here are some tips:
- They start with a recording that then promises to hook you up with a ‘representative’
- The person you speak to has a heavy accent and is obviously in a room with a lot of other callers
- They claim to be with some vague company like ‘credit division of Visa/Mastercard’ and when you ask exactly what company they are with, they can’t answer
- If you ask for a website, you will find that they do have a website! So be wary of that one
- You ask to call back and they claim to have no phone number
- They impose urgency on the action they want you to take
- The call may be from your area code, but your phone will not identify the “business” on the other end
What to do about these annoying calls? Unfortunately, nothing will stop them as yet, which is a bit amazing to me. We can fly to the moon at will but we can’t stop this? First on the list should be a letter to your Congressional representative and your phone company complaining about the situation. Making yourself heard can’t hurt. This is something the phone companies could fix; they choose not to because it’s expensive.
After you mail your letters, you can employ several other tactics:
- You can use one of several apps to filter spam. I use HiYa which at least filters out some callers, but certainly not all
- Use your phone’s call blocking feature. This isn’t of much use since spammers typically change numbers constantly
- Restrict your phone so it will accept calls only from your contact list. However that’s going to prevent you from getting a call from the delivery guy who is trying to figure out which driveway is yours
- If you are with Verizon, here is some help: https://www.verizon.com/about/responsibility/robocalls
- If you are with AT&T, use Call Protect. Information is here: https://www.att.com/help/robocalling/
Then there are the non traditional ways of dealing with scammers. Remembering that none of these tactics will stop robocallers, perhaps you should have some fun. In one recent “two week vacation” call, I kept my robocaller on the line for a good 20 minutes while I was on my exercise walk. I claimed to dislike islands, then I didn’t like the sun at all, then I wasn’t sure I could be gone for two weeks, then I couldn’t remember what my location choices were, then I needed a two bedroom unit because my husband snores, then I wasn’t sure what he said about airfare again? then I asked if this was a timeshare, then I asked if I could take the vacation next year instead, then I asked him to repeat the terms again, and finally I asked him to send all the information through the mail because it was my husband who actually would make this decision. Of course that was a “no go”, and I hung up laughing.
Another fun tactic is to play deaf. “Ma’am, Marriott would like to offer you your choice of locations for a two week vacation!” “This is a great nation? Yes indeedy it is! Thank you, yes!” “No, ma’am, a two week VACATION!” “Oh so sorry I don’t hear so well, did you want to talk to me about the Haitians?” “NO! VACATION, VACATION!” “Oh yes, I had a nice vacation, thank you for asking! Now what is it you wanted?” Click.
The behavior of the stock market has been a great puzzle to most observers lately. Why is the market surging when the economy is still struggling, unemployment is still high, earnings have sunk, and the pandemic still rages?
Stock values are substantially pinned to forward prospects and interest rates, not what is happening today. (Note I say “substantially” – that’s because certain events, like the attack on the World Trade Center and the early shutdowns due to the pandemic cause the market’s viewpoint to shorten momentarily; that’s when you get that sinking feeling…. )
Interest rates are benign at the moment, boosting stock values. A simple way to think about this is in terms of dividend yields. The average dividend in the stock market today is somewhere close to 2%. But the long Treasury yields less than that. Some investors will prefer the higher cash flow, even with increased risk, on stocks. Dividends do go up over time, too. The more complicated answer is that a formula called the dividend discount model shows that stock values increase when bond yields decline.
Aside from the math, another reason stocks are rising is because companies are cutting expenses right and left. When people return to whatever purchasing becomes normal after the pandemic, new sales revenue will go nearly straight to the bottom line, generating much higher cash flows and profits in out years. Investors are looking forward to those improved earnings streams. And that is what’s causing today’s prices to ignore today’s economic fallout.
The coronavirus pandemic has caused a surge in borrowing, at governments, companies, and households. Of these three, the numbers at the government level are the most spectacular – generating giant deficits all over the world.
Most of us grew up with the notion that large budget deficits are bad. At first, we believed that budget deficits caused inflation. Then we believed that they caused slow growth. Either of these may be true; or both may be true, depending on how the rest of the economic landscape looks. Amid this uncertainty, there is one thing we CAN say: budget deficits are costing us less in this low interest rate environment. We looked at Treasury financings for every year from 2015 through the first four months of 2020. In the 2020 time frame, new borrowings are costing us less than 1% per year. Rates were low in 2015, but during later years, we typically paid twice as much on longer bonds, and slightly more than 1% on bills. Furthermore, every month, older bonds on which we paid high rates are maturing and being refinanced at much lower rates. The public is benefiting much like you might if you refinanced your home loan from 3.75% to 2.75%.
As of May 2020, the average interest rate on all US debt – new and outstanding – had broken below 2% for the first time ever, putting the brakes on overall interest expenditures.
So while budget deficits are alarming, low rates are not only a benefit for current borrowings, we are also saving money on old debt. Some of that can reverse if rates rise from here, but a portion of our debt is in fact financed longer term, where savings will last for years. So if there was ever a good time for the US government to borrow, now is it.
Bonus fact: while we may worry we owe a lot of debt to China, that country’s holdings of US debt are just 5% of total outstanding debt. Japan owns slightly more, and the UK sits at third place. By far the majority of US debt is owned by Americans or our government itself.
We interrupt our series on ESG to bring you perspectives on the virus overtaking our news, the markets and our lives. Following is a compendium of what we know:
- Scientists are working on vaccines and treatments feverishly, but there is much that is not yet known about this disease. For instance, we still don’t know how long the virus is viable on a surface and we still don’t know if people who have been infected become immune. While computer modeling can come up with likely treatment candidates relatively quickly, it’s the trials process that is slow, so we’re looking at a year anyway before a vaccine can be in use.
- Mortality numbers are varying dramatically by approach to containment, testing, medical facilities available, and demographics. While Italy’s numbers are scary, and so are Washington state’s, most deaths in both places by far have been in elderly populations and both populations are under-tested. The average age of mortality from the virus in Italy is around 81. Even in China, mortality in Wuhan was much higher than in the rest of the country. Widespread use of currently available tests will diminish the fatal case percentages; recently China has developed a blood test to see if citizens had the virus but were asymptomatic. Obviously if thousands of people contracted the virus but had no symptoms, that will also change the statistics.
- There are signs that China is getting back to work, which is good for the global economy, but there are also signs that it’s taking a long time for folks to normalize routines. While it’s dangerous to generalize too much, a “V” shaped recovery may not be in the cards, but there’s also no doubt that a near full stop of certain activities will probably result in pent up demand. People might be eager to go out to eat after quarantine, but not yet brave enough to buy a car or take a trip.
- The infection has come on so quickly that we have not seen enough data to gauge the impact of all the moves to quarantine, impose social distance, test, etc on the global economy. Too, government data is reported with a lag. Economic numbers due out in the next few days will not be meaningful in the context of what’s happened in late February and early March.
- The markets – both stocks and bonds – are struggling to adjust for the risk of a big downside to the economy. However, prices are also impacted significantly by selling that happens when fund managers have bets that don’t work out. For instance, if a hedge fund is short the long US Treasury which has skyrocketed in price, it has to cover that trade, which might mean selling some completely unrelated item in its portfolio, such as gold. This is why we have seen nonsensical moves lately, where despite tanking stock prices, bonds and gold also go down in value. Banks are using the Treasury market as collateral, and as risk rises, their trades cause prices to go haywire. These ancillary effects help explain why prices ‘waterfall’ downward during bad times. Apple moving from $325 to $250 is partly because fewer phones will be sold, but also because it is a liquid asset that can be sold by someone in trouble. Apple has not suddenly become a bad company.
- Signs of a market bottom include the following: The Dow doesn’t close at the lowest level of the day; we don’t close at the lowest level of the day on a Friday in particular (traders are afraid of weekend news in bad times, when they can’t trade); the news is still awful but stocks rally. These are signs of exhausted sellers, particularly the last one.
As always, give us a call with questions or concerns.
The latest trend in investing is ESG. ESG stands for Environmental, Social and Governance. About 25% of every investing dollar these days is going to ESG strategies. More than just a version of socially responsible investing, ESG is a broader look at capital allocation, with the aim of making investments to better the world. ESG is still evolving, but it has made a big impact on companies already. Most companies, especially larger ones, publish detailed sustainability reports now, making it simpler to evaluate their impact on the world. That said, because ESG is so popular, companies have an incentive to emphasize the positives and hide the negatives. Meanwhile, there are not yet any industry standards for evaluating ESG factors; instead multiple ranking firms have cropped up, publishing ESG ‘scores’ for hundreds of companies.
ESG has attracted hundreds of investment advisors who offer it as a product, partially because with the market so hot over the trend, fees can be significantly higher. Furthermore, to clients asking for ESG, performance is less important. They want to follow a set of values as a primary consideration. The perfect product is shaping up – fees can be high but demands for performance are soft.
Heretofore, ESG has relied heavily on technology companies, which are considered to be more green and diverse than, say, industrial companies. When the market is carried upward by tech stocks, as it has been for about ten years, ESG strategies perform well. However, the jury is out about whether ESG produces incremental performance over simply buying a low cost index fund. The trend is simply too new to evaluate – not enough data is available.
In our next installment, we’re going to take a look at a few specific companies and their ESG reports, using those as a springboard to talk about the philosophies behind ESG.