Fiscal Relief, Coastal City Exodus, and GameStop stock
Bipartisanship was tested in the discussions this week between a group of 10 Republican Senators and President Biden to discuss their proposal for fiscal relief. The difference between the proposals is substantial. In fact, the Republican Senators’ proposal is one-third of the administration’s proposal in length.
From news reports, one area of potential compromise is the issuance of Economic Impact checks to individuals and families. The Senators propose lowering the payment amount as well as lowering the qualifying income limit for the aid. The administration is determined to make this package big, likely so that in hindsight, the criticism and effects on the economy will not receive the same scrutiny as the 2009 fiscal relief has received. Last week, the SAS newsletter went into more of the details and background of the 2009 fiscal relief in the context of today’s pandemic fiscal relief.
Discussions of Biden’s relief bill and specifically the dollar amount of economic impact checks to be sent to Americans cite the correlation between the last distribution of $1,200 and the percentage of those 2020 economic impact checks saved by Americans. Therefore, the funds were not spent so the distributions did not achieve the goal of adding spent dollars into the economy. One fact that is left out is that in April 2020, it was harder to spend money because travel ended, restaurants and retail locations were closed, and Americans were staying home. For these reasons, Americans’ savings rates went higher.
What will large coastal cities that thrived for the past 10 years look like going forward? How will these bustling metropolises be made-over? San Francisco, a once destined densely inhabited beacon, is experiencing a dramatic shift in the ebb and flow of the workforce present in our high rises as well as a severe retraction away from overpriced rentals, some seeing prices drop as low as historic 2010 trends. Single family home prices are holding steady. Single family real estate in the suburbs of the Bay Area and California’s central valley are hot markets as a result of buyers seeking out that Covid-19-era refuge of yard space and avoidance of higher costs of living, communal living spaces, and traffic.
Following the same trend, real estate markets are booming in cities such as Austin, Atlanta, Denver, and Phoenix. Remote working is allowing Americans to continue working for companies located in coastal cities while living beyond the confines of pricey coastal real estate. Work at home movements emerged as commuting became more difficult, costly and time consuming. It did not catch on nearly as quickly as it did in 2020! The new normal.
Different from earlier remote work initiatives and trends, the pandemic made the necessity of working at home a necessity for almost everyone except front line and healthcare workers. This shared necessity united the efforts to conduct work 100% online, increasingly doable with online meeting operators such as Zoom.com and other predecessors like gotomeeting.com and hangouts.google.com.
For some the move to 100% remote work has been seamless for others, a tolerated operating method. After enough months, “Zooming” has proven for many to be not bad enough to take the risk of working in person. It remains to be seen what will ultimately happen to coastal cities, the nexuses for young technology workers with high rents and high exposure densities? Rents have fallen because workers have moved out of coastal cities and some companies have gone so far as to relocate their headquarters but kept their local workforce intact. Will there be a permanent adjustment toward longer term affordability and lower densities in the coastal cities? What are the municipal implications if tax paying companies and individuals are net leaving coastal cities? These are the challenges for coastal city politicians; adapting quickly will be the key to successfully adjusting going forward.
GameStop - a company known for it's in person video game purchasing and rentals from mall retail locations around the country, now known for it's company stock's climb from nearly $3.30 per share up to $347 per share. The power of the crowd has been demonstrated by the actions of retail stock buyers organized in tandem on social media forums. This will not end well for many of these buyers, and this week GME was down 35%. It's analogous to the game of hot potato; no one wants to the last person holding the stock. Hedge funds that sell short in stocks like GameStop and others as well as precious metals such as silver were targeted. Short sellers make money when the shorted stock declines in value. Although I believe the “efficient market theory” overall works as demonstrated by our use of diversified index ETFs, I would never claim the stock market actually always behaves in a rational manner. The main problem is that it is extremely difficult to profit by finding inefficiencies consistently. It’s possible, but not as probable as the latest GME phenomenon made it seem.
3rd Newsletter Reminder - Tax Timelines
Forms 1099-R and 1099-Q for tax year 2020 are now both available for your accounts on TD Ameritrade Institutional online at www.advisorclient.com.
- Form 1099-R reports distributions from IRAs and Qualified Retirement Plans (401(k)s for most).
- Form 1099-Q reports distributions from Coverdell Education Savings Accounts (ESAs)
- Form 5498 which reports any funds returned to the IRA or QRP account in the form of a rollover will be issued in May, 2021
To access your 2020 tax documents:
- Login to your account at www.advisorclient.com
- Go to the “Documents” tab
- From the left hand menu, choose “Tax Documents”
- Download your 2020 Forms 1099-R and 1099-Q for your records
- Please pass along these forms to your tax advisor for your filing
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