by Allen Ostrofe | Originally published in The Union | Download the PDF
Patty and Tim called from Nevada City, and shared that one of their favorite classic stories to read with their children was The Little Engine that Could (written in 1930). This story motivated and inspired generations to achieve the unimaginable. They recalled our own Nevada County Narrow Gauge Railroad (NCNGRR), nicknamed “Never Come, Never Go”, and how it faced extreme challenges head-on and successfully contributed to building our community. Against all odds, Nevada County built the highest railroad trestle (at the time) in northern California. Those times were tough. These times are tough, and for many, may get even tougher.
Sheltering at home gave Patty and Tim plenty of time to think about how our country is doing, what this post-pandemic world will look like. What changes should they make to adapt?
As far as U.S. performance, the short answer is “we are not doing as well as we are capable.” We have some of the best medical resources in the world, but our system, according to many, is flawed. Too few “leaders” at all levels (federal, state, community) had planned for such a crisis.
On the other hand, we are the United States! Ultimately, we will pull together and get through this pandemic having learned a thing or two. U.S. corporations will consolidate and slowly recover. Daily operations will utilize enhanced technologies. Many business trips will be virtual.
Education
Education will be challenged in finding a balance between matching students with teachers who are good at presenting material online and providing an ever-necessary social environment. Imagine taking the SAT in the comfort of your own home!
Real Estate
Real Estate may soften in value, and change from those who want to sell, to those who have to sell. Sixty percent of real estate activity is already online, providing a great opportunity for steady recovery. Mortgage lenders may require higher FICA scores and higher down payments for borrowers to qualify.
Food, Entertainment, and Hospitality
Twenty to thirty percent of California restaurants could be forced to close forever. The food service, entertainment, and hospitality industries might continue to be hit. Restaurants might reduce tables to six feet apart, and servers might be wearing masks, handing out disposable menus, while bringing you an electronic check. Forget cash for payment!
Small Business
Unemployment will be a significant issue as employers grapple with the new dynamic of having learned to perform with fewer employees with many working off-site. Sustainable government assistance programs will be needed to help the unemployed and those facing bankruptcy. Small business—which represent 70% of our economy—will face the challenge of maintaining a “brick and mortar” presence. Like the grocery store on the corner, small local entrepreneurial businesses, with our support, will adapt to compete with larger corporations.
Investing
Investing will change, including a consolidation of products with more efficient pricing over various securities classes. The government is making it easier to fund, and take distributions from, retirement plans, as they search for further ways to make our retirement a “public/private” partnership. Investors may hesitate to lock in long-term obligations, potentially challenging mortgage and real estate securities. There may be an enhanced interest in liquidity, or securities with interest or high dividends.
What could Patricia and Tim be considering now?
Liquidity
First, determine the amount of liquidity you need to hold you over for at least six months.
Cash flow
Second, develop a detailed cash flow analysis, which can be regularly updated with your Certified Financial Planner.
Reallocation
Third, consider a tactical reallocation of your investments to reflect sectors of our economy which will lead our recovery, and perform better in an increasing inflationary environment.
Estate planning and insurance
Fourth, take this time to intentionally read and reflect on the estate planning and insurances you have established, and consider a teleconference (Google Hangout, Zoom, Skype, Facetime, Whatsapp, etc.) with your family and professionals, to clarify what would actually happen should a “qualifying event” occur. Make necessary changes now.
Finally, and importantly, be optimistic. Support your local businesses and the arts. Support the hospital and thank frontline workers. And remember: “I think I can… I think I can…,” and you may be well rewarded!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Allen Ostrofe, MBA, CFP®, is President Emeritus of Ostrofe Financial Consultants, Inc., with clients in 32 states and is a registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial. For questions or suggestions, visit ostrofefinancial.com. Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.