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Second COVID-19 Stimulus Niceties and Notes

We have an agreement, which means we can begin to criticize it and plan for the investment and economic effects. The bill is a litany of half measures, no long term solutions, and likely sets up a couple of battles in the next congress. 

Congress punted on evictions, postponing medical payments until early next year, and there is still an ongoing debate regarding the amount it is issuing in direct payments. The looming liability concern for businesses is still being discussed.

Here is what got done: 

Individual payments for many

Easily the most asked about part of the legislation is the direct payment to individuals that begin going out today. The passed version included $600 going to individual adults with an adjusted gross income of up to $75,000 a year based on 2019 earnings.

An increased amount will be going to those that file as heads of households who earn up to $112,500 and couples (or someone whose spouse died in 2020) who make up to $150,000 a year would get twice that amount.

This continuing political battle to raise this number from $600 to $2000 is still going on today, passing with all democrat and some republican support in the house. The senate is questionable as a few Republicans have endorsed the idea, including the two high profile candidates in Georgia – Loeffler, and Purdue.

McConnell has blocked the bill as of 10:20 am as I am writing this article. 

Unemployment benefits

With almost 7% of Americans still unemployed and millions more under-employed, Congress acted to extend multiple programs to help those out of work, albeit at less generous levels than in the spring. Too much of the surprise of those tracking the issue, the final bill doesn’t include the expanded coffers many anticipated and is considered a skinny agreement. 

The agreement would include:

  • 11 weeks, providing a lifeline for hard-hit workers until March 14. 
  • Up to $300 per week (half the amount provided by the original stimulus bill in the spring)
  • Pandemic Unemployment Assistance — a program aimed at a broad set of freelancers and independent contractors — for the same period, providing an additional $100 per week

Better late than never, the expanded agreement is a second band-aid for those Americans that continue to seek employment as employers have halted hiring. The near term negative effect of unemployment cannot be understated. But as we look out to the intermediate (6 months) range seems to hold a fantastic capacity for consumers to unwind pent up spending in short order. The unemployment insurance isn’t expected to be much but will support many Americans who put more and more spending on credit cards in the second half of the year. 

Funds for Child Care, Schools, and Colleges

School budgets have been uniquely impacted by the pandemic and have left their outlook for the year to some impaired:

  • $82 billion for education and education service providers, 
  • That figure includes $54 billion for stabilizing K-12 schools
  • It also includes $23 billion for colleges and universities
  • $10 billion for the child care industry

K-12 schools saw more support than the initial package in dollar terms, and even more than the proposed package in November; however, the funds still fall short of what both sectors say they need to blunt the effect of the pandemic and to support operations in 2021. 

The majority of school districts transitioned to remote learning and as a result, we were asked to make expensive adjustments to accommodate while seeing enrollment drops upend budgets. Colleges and universities are also facing financial constraints amid rising expenses and falling revenue.

Child care centers that are struggling with reduced enrollment or closures will get help to stay open and continue paying their staff. The funds are also supposed to help families struggling with tuition payments for early childhood education. 

Funding for broadband infrastructure

The stress on national broadband has been higher than ever, remote work and education on top of the expanded requirements of technologies like Zoom, have put a major strain on national networks. The legislation includes $7 billion for expanding access to high-speed internet connections. Much of this spending was anticipated in an infrastructure bill, that has been brought forward as a result of the pandemic. Two major points in this part:

  • Half this stimulus is earmarked to cover the cost of monthly internet bills by providing up to $50 per month to low-income families.
  • $300 million for building out infrastructure in underserved rural areas and $1 billion in grants for tribal broadband programs. (Part of another infrastructure bills spending prior to the pandemic) 

Extension of aid for small businesses (PPP)

The bill puts forward $285 billion for additional loans to small businesses under the Paycheck Protection Program. This renews the program created under the initial stimulus legislation and is largely an extension of dollars that were repurposed.

Funding for vaccines and eldercare facilities

The source of concern early in the pandemic and the ongoing requirements to overhaul the elderly care facilities are addressed by this legislation as it sets aside nearly $70 billion for a range of public health measures targeted at elderly care facilities and the distribution of the vaccine. This breakdown includes: 

  • $20 billion for the purchase of vaccines 
  • $8 billion for vaccine distribution 
  • $20 billion to help states continue their test-and-trace program
  • Earmarked funds to cover emergency loans aimed at helping hard-hit eldercare centers.

A ban on surprise medical bills

The Bill supports efforts to help Americans avoid unexpected medical bills that can result from visits to hospitals. The legislation also makes it illegal for hospitals to charge patients for services like emergency treatment by out-of-network doctors or transport in air ambulances, which patients often have no say about. This measure has had some long time support from Democrats and was criticized for not including some provision in the Affordable Care Act. 

Rental protections

One more month of halting evictions is pushed out to the end of January. The Department of Housing and Urban Development separately issued a similar moratorium on Monday that protects homeowners against foreclosures on mortgages backed by the Federal Home Administration. It runs until Feb. 28. This has had several enforcement issues and while the legislation is a fantastic lipservice, the issues of evictions for individuals with a history of rental disqualification from before the pandemic are a continued source of evictions.

The bill DOES NOT include liability protection for business

A criticism by many that Democrats largely held out a provision for liability protection for companies trying to reopen. This element, opposed by labor unions and supported by the national Chamber of Commerce was a sticking point that went without inclusion. The discussion was important because it would allow businesses to follow their local recommendations to reopen to have legal insolation from lawsuits later on. This will continue to be a discussion in congress as a “reopen” is structured and the liabilities for business owners regarding COVID exposures are defined. 

Conclusion:

This gets us through the winter and hopefully the hump of COVID as the vaccine gets rolled out. It still leaves too much for the 2021 congress to cover and cover quickly. What the continued political, monetary, and fiscal landscape reactions look like is still up for debate. The curvature of risk in equities peaks in February (as I write this) so markets are pricing in a 2 month include equities and a political battle come early spring.

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Kevin Taylor

The Second Wave of Making Money from AI: How Companies Will Leverage AI to Create Product Stickiness

As artificial intelligence (AI) continues to transform industries, some of the world’s largest and most successful enterprise software companies—Microsoft, Adobe, and Salesforce—are taking a particularly effective approach to AI integration. Rather than launching entirely new products built around AI, these firms are embedding AI within their existing software suites. This subtle but far-reaching strategy promises to increase customer reliance on their platforms while gradually allowing for price increases without risking customer attrition. AI as a Value-Add, Not a Standalone Product Microsoft, Adobe, and Salesforce are positioning themselves well by embedding AI into their platforms as a value-add rather than as a separate product. For example, Microsoft has woven AI deeply into its Office 365 suite, using tools like Copilot to assist users with tasks in Word, Excel, and PowerPoint. Rather than presenting AI as a separate offering, Microsoft’s approach subtly builds AI functionality directly into the tools that users already know and rely on. This “value-add” method means that companies adopting these tools get AI functionality seamlessly integrated into their daily workflows, making it a natural part of the user experience. Similarly, Adobe has integrated AI into its Creative Cloud platform with Adobe Sensei, offering intelligent features such as content-aware fill in Photoshop and predictive analytics in Adobe Analytics. Salesforce has taken a similar path with its AI-driven Einstein, enhancing CRM workflows with predictive modeling and automation within the familiar Salesforce ecosystem. By positioning AI in this way, these companies are making it an invisible but indispensable part of their products. The AI-enhanced versions of these tools are not marketed as new products but as the next evolution of the platforms that businesses already depend on. This approach allows them to raise prices in the future with minimal resistance. Customers won’t be paying for AI as a novelty—they’ll be paying for a more efficient version of the products they’ve already been using. The Closer Integration with AI, the Harder It Is to Leave The gradual integration of AI into existing platforms serves another purpose: it increases customer dependency. As AI capabilities become part of a user’s everyday workflow, they make it difficult for businesses to switch to competitors or revert to older processes. The more ingrained AI becomes in daily tasks, the more difficult it is for users to live without it—creating a level of stickiness that is difficult to match. For example, as Microsoft’s Copilot becomes smarter and more embedded in Office workflows, users become less capable of working without AI. The same is true for Adobe and Salesforce. The introduction of AI that automates design tasks or customer relationship management processes effectively rewires the way work is done. Over time, workers will become incapable—or simply unwilling—to return to doing things manually or in “the old way.” A Subtle but Transformative Shift This transformation will be far more clandestine than many might realize. Rather than AI becoming a new category of product, it will quietly become a core part of existing tools. This evolution will happen long before businesses offer AI as their own distinct solution. Instead, AI will be the foundation for enhanced versions of software that users already rely on. The shift will feel less like a disruptive innovation and more like a natural evolution. In essence, the future of enterprise AI is not about selling AI as a separate product—it’s about making AI indispensable within current offerings. The subtlety of this transformation will make it more palatable for businesses and easier to absorb into existing budgets. As AI gradually replaces more manual tasks, workers will become dependent on these enhancements, making it almost impossible to go back. The Future of Work: AI Dependency The key to this strategy’s success lies in how seamlessly AI is integrated into existing workflows. As documents, spreadsheets, and presentations become infused with AI-driven features, users will adapt to this new normal. Just as most workers can no longer imagine creating a report without Excel or a presentation without PowerPoint, the workforce of the future will be unable to operate without AI-driven enhancements. This increasing reliance on AI will extend beyond individual workers. Entire businesses will reshape their processes around AI-driven efficiency. From forecasting financial models in spreadsheets to automating customer outreach in CRM systems, AI will become a key component in maintaining competitiveness. As this transformation deepens, customers will be reluctant to abandon these AI-powered tools, which further solidifies the position of companies like Microsoft, Adobe, and Salesforce. AI as the Future Backbone of Enterprise Software In the long term, enterprise companies like Microsoft, Adobe, and Salesforce are perfectly positioned to lead in AI. Their strategy of embedding AI into existing platforms allows them to lock customers into their ecosystems while providing increasingly indispensable tools. By making AI an integrated, invisible part of their offerings, these companies ensure that customers won’t just pay more for AI—they’ll need it to function in their day-to-day operations. In the end, this isn’t about selling AI as a new product. It’s about creating a dependency that makes replacing these tools not just unappealing but impractical. And much like the workers who can no longer imagine a world before spreadsheets and presentations, tomorrow’s workforce will be equally incapable of functioning without the AI that quietly powers their work.

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September 16, 2024 No Comments
Articles
Kevin Taylor

Ways to Identify Financial Abuse in order to Protect Yourself and Family

For many, financial abuse comes long before other forms of domestic violence. It is a sly and gentle form of control that can exist from the very outset of a relationship, over develop as a form of manipulation over time. Helping a person “budget”, managing all the b ills, making all of the investments, are initial forms of control that  might seem innocuous, but can develop the dependency required for financial victimhood. (“How Money Traps Victims of Domestic Violence”) Financial Abuse is really the most damaging form of domestic abuse, but it might be the most enabling for other forms of violence. It usually takes a back seat to physical, verbal, and emotional abuses when being discussed by therapists and counselors. But it is as much a tool of abuse and oppression in a bad relationship as any. The use of financial controls often keeps people in relationships where they are further subject to other forms of abuse. What’s more, financial abuse is often the first sign of dating violence and domestic abuse. Consequently, knowing how to identify financial abuse is critical to your safety and security. Additionally, knowing about the resources available and the professionals who can support your efforts is an early defensive measure available to victims. “Money is among the most powerful weapons of control in a relationship, but little attention is being paid to the financial aspects of domestic abuse.” (Smith) First, let’s Define Financial Abuse In 98% of abusive relationships, the number one reason the victim sites that they stay in the relationship is financial. Yet 78% of rank and file Americans don’t note financial abuse as a form of domestic violence. (“Financial Abuse – PCADV”) At its root, financial abuse involves controlling a victim’s ability to acquire, access, use, and maintain financial resources on their terms. (“How to Identify Financial Abuse in a Relationship”) Those who are victimized financially may be prevented from working outright, forced to take lesser paying jobs that keep them home more, and in many cases aren’t allowed to have their own, “independent” money and accounts. These are all forms of Finacial Abuse. This collection of measures often results in limiting the individual’s ability to generate income in the present and likely in the future. As a result, it limits the inflow portion of the equation in financial abuse. The second layer in financial abuse is limiting any current access to money. A victim may also have their own money restricted or stolen by the abuser. Rarely do victims report having complete access to money and other financial resources (“NNEDV”). When they do have money, they often have to account for their spending. This manifests in a few ways including allowances, reviewing transaction histories on debit and credit cards, and the ever-looming presence of monitoring and controlling the outflow of money. Some of this behavior runs along the lines of proper financial stewardship, which can be the source of the gaslighting. But ultimately, if the power balance in this reviewing of the financial records is not done for planning purposes but rather for control, then the “good” of planning is replaced by the “bad” of financial control and abuse. The results of Financial Abuse Financial Abuse often comes long before other forms of abuse. An early and less identifiable tool of control, financial abuse often prevents victims from seeking help with other forms of abuse later on. Admittedly, financial abuse is less commonly understood and harder to identify than other forms of abuse. Financial abuse is one of the most powerful methods of keeping a victim trapped in an abusive relationship causing further restrictions and harm.  Research shows that victims often become concerned with their ability to provide for themselves financially (“NNEDV”). The presence of children only furthers that concern. Financial insecurity then becomes one of the top reasons victims fail to leave, and/or return to their abusive partners. The continued effects of financial abuse are often devastating. Victims feel inadequate and unsure of themselves due to the emotional abuse that accompanies financial abuse.  Victims often report that their “worth” in the relationship became tied to their financial worth, which was often beyond their control. This forges a vicious cycle of negative self-worth and reinforcement by the inability to provide for themselves. Victims also have to go without food and other necessities because they have no money and limited access to financial support. Financial abuse often delays or makes escape plans impossible, which opens the door to further and more severe forms of domestic abuse. Financial abuse exposes victims to additional forms of abuse and further violence. Without access to money, credit cards, and other financial assets, it’s extremely difficult to do any type of safety planning and escape planning. (OHCHR) For many, the immediate safety plan requires distancing themselves with a discrete location where they can rebuild their lives. When an abuser is particularly violent and the victim needs to leave to stay safe, this is difficult without money or a credit card. This is all according to plan for the abuser. (“How Money Traps Victims of Domestic Violence”) For those who do escape in the short term, financial abuse creates a knock-on effect in the long term. The lack of credit history, permanent place to live, and capacity to earn have been diminished for years. This means the subsequent legal battle becomes harder and tentpoles for developing a financial plan may be non-existent. Upon escape, they often find themselves in a new extreme and find it difficult to obtain long-term housing, safety, and security. Victims often have spotty employment records, ruined credit histories, and mounting legal issues caused by years of financial abuse. Consequently, it’s very difficult for them to establish independence and confidence in their long-term security.  Many victims stay with or return to their abusers due to concerns about financial stability. Tactics Used Isolation is a core tactic of all abusers. So, financial abuse is the goal of isolating victims from money, resources, and people

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March 10, 2022 No Comments
Articles
Kevin Taylor

The Wizard of OZs: What you should know about opportunity zones.

What is a Qualified Opportunity Zone Property? The 2017 Tax Cuts and Jobs Act created special tax incentives for those willing to risk their own capital to improve and develop the real estate in traditionally underinvested sections of the country called opportunity zones. The goal was to raise long term capital by incentivizing investors that historically wouldn’t invest in these types of opportunities due to the inherent risk. They’re designed with the purpose to benefit the denizens of those locations and investors looking for sizable tax incentives to commit capital. The Qualified Opportunity Zone program is the solution that provides that tax incentive for private, long-term investment in economically distressed communities. What makes it a Qualified Opportunity Zone (QOZ)? The definition for this type of zone is “economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment.” The process for designation of the OZ is pretty straight forward. All 50 states are allowed to submit a list of blocks of low-income tracts across their state based on census data. The Treasury then approves their inclusion in the program or not (most were approved). Plans are now in place with municipal and state governments to commit to projects that bring new construction projects into these areas. What are some unique risks you should be familiar with before you invest in an OZ? Market Liquidity – the markets for these investments are immature. There is a sizable pool of available capital for investment, but most of it is from long view institutional investors. The long term, committed and disciplined capital on the ask side, and the insurability for most investors in this space supplying the bid likely means that the spreads widen and limit overall liquidity for investors. Vehicle Liquidity – The types of vehicles offering exposure to this space are limited, largely non traded REITs. These agreements have a very long view of the investments and capital and few offer the liquidation windows and frequency temperamental investors might be used to. Asking yourself what kind of liquidity and income requirements do you have in your investment plan is more important than ever. Investors seeking income starting day 1 may need to find investments that reflect that and will see their upside limited as a result. Those seeking to “time the market” through this development will be frustrated by the duration of these investments.  Investment Risk – investment in “economically-distressed communities” carries a very unique risk that the investment will not perform on par with other parts of a city or market. Their unique performance risk with these investments will never go away, simply put you are buying into a major turnaround story in some parts of the country that may never come. This is mitigated by a few factors, the managers selecting and overseeing the projects are more important than ever. Picking the right project, with the right builder, in the right neighborhood is more important than ever.  Intent – why are you committing capital to these projects? Is it only for income? Are there parts of the country that have an emotional connection to their success? Is this a good attribute or a negative? I think it’s important to have a real honest sense of purpose in these investments. Not only to help understand and mitigate the risks involved but to help you price in the purpose of this investment. More and more people want to know that the dollars they are investing are being used for societal benefit, but make sure you are handicapping that expectation appropriately. Tax – The tax benefit for OZ’s has a pretty long ark, and the year over year benefit changes over time. Before you enjoy the tax benefits afforded here you should confirm a couple of assumptions. First, that your tax liability is ample enough to enjoy the full benefit, second, that your tax strategy for the next decade marries well with the long term requirement of this investment and third, there are no alternative strategies for a similar tax benefit with less inherent risk. Confirming these three elements of taxation and its accompanying strategy is an essential step for your CFP and CPA before you should consider the upside of this program.  Statutory Risk – the Tax Cuts and Jobs Act (TCJA) is current law, and planning for current law is not the issue. Tracking and making sure this new tax strategy stays intact going forward should be on an investor’s mind and having a plan of action if and when conditions change is part of the monitoring process for both your entire plan and this specific investment. Laws change and this opportunity is set to expire 12/31/2026.  Regulatory Risk – as I said before, the inclusion of a region in an opportunity zone is pretty straight forward, but the regulatory requirement for maintaining that acceptance by the U.S. Treasury is still important. Making sure that the project, builder, and fund all stays focused on the regulations that keep it inside the tax purview is eminently important. Selecting a manager that is versed in the regulations and will do the property due diligence to stay in the lane is important. The risk is the loss of the tax benefits you have likely priced into your expectations.  Opportunity Zones have the ability to be truly transformative for communities and investors. A fantastic marriage of social benefit, long term capital investment, and tax benefit make for an appealing place to see a reasonable return. But taking advantage of this program for non-institutional investors is going to have a few parties you should consult to confirm the investment is right for you: a CFP to confirm that this investment works in your personal financial plan a CPA that understands the full tax benefits of this investment an estate plan that can accommodate the long duration of this type of an investment an investment manager that understands and mitigates the risks as best as possible an investment advisor that helps

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October 16, 2020 No Comments

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