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The dominant storyline of 1st quarter bank earnings was the massive build in Current Expected Credit Losses (CECL). Banks take these charges against net income to build reserves in anticipation of loans going sour in the future. This storyline persisted into 2nd quarter earnings as banks continued bolstering these reserves to a level in excess of analysts’ expectations. It should be noted that these are reserves, not actual charge offs, as delinquencies have only grown nominally.  The true cash impact to a bank will not be known until there are…

Where We Stand The novel coronavirus has upended our lives to such an extent that it feels as though we have crammed a decade’s worth of life into the last few months. The pandemic has caused widespread economic instability and fostered conditions leading to social unrest. All levels of government have responded with orders to slow the spread and mitigate the harm caused by mass joblessness. The securities’ markets have gyrated wildly, as investors reallocate their capital to preserve assets and grow where new opportunities arise. Given these developments, it…

What a ride these past six months have been!  Before reaching the mid-point of the calendar, equity investors endured the climb to all-time highs, a harrowing 34% bear market drop and a rapid 44% rebound. To put that experience in context, a typical market cycle plays out over three to five years.  Faced with this volatility, some investors resorted to various forms of market timing despite its proven lack of success. After a brief review of the temptations of market timing and its negative impact, we outline actions an investor…

Most high net worth individuals and families employ a collection of professionals to help them navigate their financial lives.  These individuals and families are typically served by investment advisors, tax accountants and estate planning attorneys.   Since the financial landscape is complicated, specialization is necessary to obtain the best ongoing advice.  Aside from the technical expertise of these professionals, it is very important that these advisors work harmoniously as a team to solve their clients’ problems. Following is a very brief description of the roles played by these financial professionals: Investment…

Economic Distancing From an investment perspective, the most important question is how quickly the economy will be able to restart after its suspension caused by shelter at home measures.  Social distancing is necessary to slow the spread of the virus since this practice allows the healthcare system more time to adjust to the strain from the epidemic.  While necessary to limit suffering from the health crisis, this strategy has dire economic consequences. Roughly 70% of economic activity in the United States is generated by consumption.   Economic activity for a portion…