Good Samaritans Still Exist Show 37
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A lady named Mercedes Boggs who lives Tennessee was recently on her way to work when her car suddenly hit a patch of ice. Her car flipped on its side and slid down an embankment.
At the bottom of the hill was an ice-cold creek. The collision knocked her unconscious. When she came back to consciousness moments later, she quickly realized she was trapped in her vehicle. Her windshield had broken and the frigid creek water was rushing into her car. Terror set in.
Well, a coal miner named John Burke was on his way home from work and saw the car on its side. When Mercedes saw John, she immediately became relieved that someone had cared enough to stop and help her. He went down the hill and freed the lady from her car. Moments later the car burst into flames. If he’d been a few minutes later, she may have perished.
John went on his way when paramedics arrived, but had trouble going to sleep that night, because was wondering how Mercedes was doing after her apparent injuries.
Mercedes had no way of contacting the good Samaritan, but later she posted on Facebook and asked for help identifying John. Within a few hours her post had been shared by 900 people.
In her post she said, “…Please please share this in hope to help me find the man that saved my life, I owe him deeply. I would just like to speak to him. Without him, this situation would’ve been much different.”
Somehow through Facebook the two were connected and she was ultimately able to to thank him. John downplayed his heroic role in the situation.
I read about this recently and wanted to summarize the story here. This one was taken from goodnewsnetwork.org.
On to our financial planning content.
Part of being prepared for retirement is being aware of what’s happening in the world. Everyone’s tolerance for how much they want to know varies, and I understand that.
But my goal is to distill an interesting topic down in an understandable way that can help you either prepare for retirement or maintain your retirement aspirations.
Today I’ll cover a current event that seemingly few people understand or are aware of that may eventually impact us all.
CNBC published an article last year titled, The Fed is buying some of the biggest companies’ bonds, raising questions over why. The points the article covered are:
- The Federal Reserve is continuing to buy corporate bonds, following up on a pledge it made in March.
- Corporate America titans such as Microsoft, Apple, Visa, and Home Depot have been among the beneficiaries.
- Questions have been raised over “moral hazard” as the Fed buys debt from companies that don’t seem to need the central bank’s help.
- Indirectly through exchange trade funds the government holds investments in companies like Apple and Goldman Sachs also.
- The government has even purchased bonds of speculative-grade.
So, what’s the government doing? The Federal Reserve seeks to stabilizes financial markets during periods of major economic volatility. This is commonly referred to as quantitative easing (QE), which is the technical name.
The definition of QE is “a monetary policy whereby a central bank purchases at scale government bonds or other financial assets in order to inject money into the economy to expand economic activity.”
America is currently in itself fourth installment of quantitative easing.
As you may recall, the government bought trillions of dollars of bonds after the Great Recession began from 2008 to 2014. During that time the Fed accumulated $4.5 trillion in assets.
In September 2019, the Federal Reserve began conducting quantitative easing. This was six months before Covid 19 came to the forefront of most of our minds. Donald Trump had called for it for several months prior to the roll out.
Then in March 2020 the government announced it would begin purchasing $700 billion in assets. And quantitative easing continues today. Some commentators are saying it will be permanent.
Kathy Jones, director of fixed income at Charles Schwab is quoted in the CNBC article saying. “The reasoning I guess makes sense. But when you look at the outcome, you scratch your head and wonder whether this is where we need the money to go.”
She continued, “I do think it’s moral hazard,” Jones said. “I think it’s something they’re going to have to deal with when things settle down. There will be accusations that they committed money in ways that didn’t make sense and didn’t help the average Joe.”
The author of the article stated, “So long as the Fed continues to steer the markets properly, the ideas of moral hazard and loss of independence will go away as conditions improve. On capital misallocation, brought up mostly in regard to the Fed buying junk debt, Goldman says market capital could have gone awry had the Fed not stepped in and stabilized the shakier parts of corporate debt.”
The fear is that the stock market which generally is pricing in future movement in advance may come to expect government intervention. Thereby the capital injections or bond buying would be less beneficial in the future.
I’ve outlined the facts and quoted other people thus far. Now I’ll give you my opinion.
The fact that the government needs to or has to interject itself into the economy is troubling. Quite frankly, I would have thought after the government ceased its injections in 2014, we would have seen major problems, but we did not. However, the Fed’s balance sheet remained $3 trillion higher than before the Great Recession.
The problem is we don’t balance our budget in America, we run deficits every year, and many of our jobs have been outsourced to other countries. Outsourcing jobs diminishes the tax base.
Nobody knows if QE is sustainable or how long it will last. No one is privy to knowing the future. But what I do know is that our philosophy in how we manage money is incredibly beneficial in times like these.
Active management of stock market investments combined with buckets of money that are safe from losses may be beneficial for a retiree.
If you’re interested in learning more about how we build financial plans, please Click Here to schedule a call with me or call 864.641.7955.
Until next week,
David C. Treece,
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