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Meet Guy Cohen… Your Financial Secret Weapon

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The Guy you Need for Sound Financial Advice

There are many of reasons why a lot people need financial advisers. People need someone who knows all the ropes when it comes to investments, budget and future planning. Let’s meet Guy Cohen, the guy to seek for sound and  effective financial advice.

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Being in charge of someone else’s money is a huge responsibility. There are only a handful of professionals that do a tremendous job and Guy Cohen is one of them.

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Economy

The U.S. Was Already Deep in Debt. This Year’s Deficit will be ‘Mind-Boggling’

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The U.S. was already deep in debt. This year's deficit will be 'mind-boggling'

Over the years, the federal government has spent trillions of dollars more than it brings in, wracking up big deficits even in good times, when it ought to be paring debt down.

Now, as it struggles to repair the damage from the coronavirus epidemic, it’s getting ready to spend trillions more, pushing up this year’s deficit above $3 trillion.

“It’s mind-boggling. I never contemplated this,” says Douglas Holtz-Eakin, president of the American Action Forum, who headed the Congressional Budget Office under President George W. Bush.

“I can remember the quaint days when I was being yelled at because we had a $400 billion deficit and I was the CBO director. It doesn’t look so bad right now,” he says.

The economic rescue package approved by Congress and signed into law by President Trump contains $2 trillion in tax breaks and loan guarantees, throwing much-needed lifelines to troubled airlines, small businesses, hospitals, medical supply companies and municipal governments.

And more money will almost certainly be needed in the weeks to come, as the pandemic progresses.

“We are talking about massive amounts of money compared to anything we’ve ever done in this amount of time before,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

At one time, such huge levels of deficit spending set off alarm bells in Washington, where politicians such as Senate Majority Leader Mitch McConnell routinely bemoaned the lack of fiscal discipline in government.

In 2013, when the country was still recovering from the Great Recession, McConnell told CBS News: “We now have a debt of $16.4 trillion. That’s as big as our economy. That alone makes us look a lot like Greece. We have an incredible spending addiction.”

Today, the total amount owed by the federal government is about to top $25 trillion, and McConnell barely talks about it. Neither does President Trump, who has presided over a rapid increase in debt, thanks to the massive 2017 tax cuts and a big increase in defense spending.

Part of this is just raw politics, says Dean Baker, co-founder of the Center for Economic and Policy Research. Politicians tend to focus more on deficits when the other party controls the White House.

But Baker says the past few years have also brought a transformation in the way economists think about deficits.

Once, conventional wisdom said that too much federal borrowing would drive up interest rates, leading to higher inflation and reduced productivity, Baker says. But debt has soared in recent years, and interest rates are lower than ever, he notes.

“The classic story of why deficits are bad just hasn’t panned out,” Baker says.

He is among many economists now arguing that the quick collapse of the economy and the surge in layoffs is so serious that deficit concerns should be set aside.

“The amount of employment in the economy is going through the floor. And the deficit in that context … it’s almost a non sequitur. That’s not the sort of thing you should worry about,” Baker says.

Even MacGuineas, who’s something of a deficit hawk, agrees, saying times like these are precisely when the government needs to run deficits. But she says the government is that much less prepared to deal with the crisis because of deficits run up in good times, when it should have been paying off what it owed.

“It makes sense to borrow from the future today. We have a real emergency. But it also makes it harder for us to get our economy back on track once we get through this emergency,” MacGuineas says.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

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Business

Bank of America Warns: ‘Deepest Recession on Record’ Headed Our Way

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stock market graph representing negative economic outlook

Bank of America released its latest economic outlook, and it’s absolutely frightening.

The bank predicts that the US economy stands at the beginning of three straight quarterly declines. It expects Q1 to shrink by 7%, followed by a 30% decline in Q2 and a 1% drop in Q3.

The bank says Q4 will see the return of a growing economy. They, however, said that this will only come after overcoming unimaginable pain. “We forecast the cumulative decline in GDP to be 10.4% and this will be the deepest recession on record, nearly five times more severe than the post-war average,” the bank’s analysts wrote. The report goes on to say that although they expect consumer spending to perk up in Q3, the effects of the coronavirus outbreak will linger as consumers “face job cuts and a significant negative wealth shock.”

Unfortunately for many of us hoping for a quick recovery, Bank of America isn’t alone in their pessimism.

Lowering Expectations

The Congressional Budget Office also lowered its expectations for economic growth through the end of the year. Revised figures now show second-quarter GDP declining 7% with a 10% unemployment rate compared to our current 3.5% unemployment rate.

“CBO expects that the economy will contract sharply during the second quarter of 2020 as a result of the continued disruption of commerce stemming from the spread of the novel coronavirus,” CBO Director Phil Swagel said in a post on the agency’s site.

Fitch Ratings also has a troubling economic outlook for the rest of the year. In its latest research report, the company states “A deep global recession in 2020 is now Fitch Ratings’ baseline forecast according to its latest update of its Global Economic Outlook (GEO) forecasts.”

In just 10 days since its last report, the company has revised its global GDP estimates for the year. It went from a modest 1.3% growth to a 1.9% decline. “The speed with which the coronavirus pandemic is evolving has necessitated another round of huge cuts to our [gross domestic product] forecasts,” the company added.

Here in the US, Fitch says the shutting down of the economy to slow the spread of the coronavirus will result in an “unprecedented peacetime” GDP decline of 7% to 8% in Q2. Alternatively, it may also result in a 28% to 30% decline on an annualized basis.

Negative Economic Outlook

Investors should also prepare for another drop in the market, says a hedge-fund manager. He correctly predicted the impact the coronavirus would have on the stock market and the economy in the US.

“If you go back and look at history, there are nine times that the market has sold off about 30% or so since the 1920s,” said Dan Niles, who runs the Satori Fund. “You get one of these every 10 years or so and if you look at every one of them, you always get these bear market rallies.”

Niles says that he sees another major drop headed our way. He says that valuations are still well above historical norms, even after the recent pullback.

“Just to get to average, you would have to have the market go down 30%,” he said. “It is very easy to figure out the market probably goes down 30% before we’re even near fair valuation.”

And he says don’t expect a quick recovery, either.

“I sort of laugh when I hear people talking about a V-shaped recovery because we are going to have at least 10% unemployment, my guess is closer to 20% before all of this is said and done.”

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Economy

Stocks Plunge Again, Jobless Claims Surge to New Record

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Stocks Plunge Again, Jobless Claims Surge to New Record

The stock market started the second quarter the same way the first quarter ended, with significant losses across the board.

The Dow Jones Industrial Average, S&P 500 and Nasdaq all slid 4.4% yesterday as investors braced for more bad news about the spread of the coronavirus and historical jobless claims due to the outbreak.

President Donald Trump warned that a “very, very painful” two weeks lie ahead for the country as it faces a rapidly spreading COVID-19 outbreak that is approaching 200,000 cases here in the US.

With uncertainty over how long the country will be shut down in an attempt to slow the spread of the virus, it’s becoming virtually impossible to predict how the market will perform going forward.

“Everything hinges on how long we are in this shutdown,” said Anwiti Bahuguna, head of multi-asset strategy at Columbia Threadneedle Investments, in an interview. “We don’t know how long the shutdown may last, so it’s hard to predict what U.S. growth will look like.”

Adding to the misery on Wall Street, this morning’s initial jobless claims report showed that a record 6.6 million Americans filed for unemployment insurance last week.

That dwarfs the then-record 3.3 million new filings reported two weeks ago, and brings the total claims to nearly 10 million in the last two weeks due to the coronavirus outbreak.

For comparison, today’s numbers were almost 10 times higher than any previous report prior to the coronavirus outbreak.

Excluding the last two weekly reports, the highest week for claims was 695,000 in 1982. And as miserable as the job market was during the Great Recession, the highest number of jobless claims during that period was 665,000 in March 2009.

“We’ve lived through the recession and 9/11. What we’re seeing with this decline is actually worse than both of those events,” said Irina Novoselsky, CEO of online jobs marketplace CareerBuilder.

The lone bright spot in the markets is oil, as the price surged 10% after President Trump mentioned the possibility of a truce in the price war between Saudi Arabia and Russia.

West Texas Intermediate (WTI) futures jumped $2.11/barrel to $22.42 on the seemingly good news.

“Worldwide, the oil industry has been ravaged,” Trump said during a media conference on Wednesday. “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.”

Trump added he expects both countries to end their price war within a “few days” meaning they will slow production and bring prices back up.

The president also invited the heads of US oil companies like Exxon Mobil and Chevron to meet with him at the White House to potentially discuss how Washington can help the companies get through the current crisis as they face bankruptcies and massive layoffs.

“I’m going to meet with the oil producers on Friday. I’m going to meet with independent oil producers also on Friday or Saturday. Maybe Sunday. We’re going to have a lot of meetings on it,” he added.

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