The concept of all things being connected is on my mind. Every glance I take at the news of the day makes it obvious why. And, every day that brings us closer to the colder months makes it more consequential.

In the narrow world of financial markets, the concept of connectedness is clear.

When the Federal Reserve makes cash trash, the flow of investment dollars moves elsewhere. As if moving outward in concentric circles, money moves out the risk spectrum in search of better returns.

After this drives up the price of one investment type after another – inevitably squeezing future returns down – the search moves into even riskier areas. The difficulty lies not in determining the final destination of this journey, but in the timing of the end game. It always ends, of course.

As Chuck Prince, ex-CEO of Citigroup, said just before the mortgage mess exploded, “As long as the music is playing, you’ve got to get up and dance.” Similarly, Warren Buffett wisely wrote just before the tech-bubble popped, “[People] hate to miss a single minute of what is one helluva party. They are dancing in a room in which the clocks have no hands.”

In the broader, real world, the concept of connectedness is equally clear.

As we move into the fall months and move indoors, the virus begins to gain a major advantage. Our next moves will matter.

After six months of sacrifice, the next test of our collective commitment to stop the spread is approaching. I’m afraid we’re in the process of failing.

In Grand Traverse County, our average positive test rate for Covid-19 moved from a summer low of around 1% in early August to over 5% in early September. Epidemiologists want positivity rates below 3%. We have seen about 225 positive cases in Grand Traverse County over the past month. That was with only half of the recommended number of tests given. So, you should probably double it.

With almost all of our area’s schools resuming face-to-face instruction, my focus on our area’s connectedness is heightened. The safety of our 20,000+ kids and our 2,000+ school employees is intimately linked to the safety of our entire community, including our area’s businesses and the livelihoods of thousands of their employees.

The virus thrives on our connectedness. The resumption of typical face-to-face schooling fails the safety test for our community on nearly every level. The daily process of crowding thousands of kids and adults indoors, combined with inadequate testing and a palpable sense of virus fatigue, is a perfect recipe for accelerated spread.

The sad irony is that our desperation to hear the music and ignore the clock on the wall is the very thing that will hold back our return toward normalcy. Remember, we’re all in this together, right?

“We survive here in dependence on others. Whether we like it or not, there is hardly a moment of our lives when we do not benefit from others’ activities.” – Dalai Lama

Since the start of the year, Apple’s share price has vaulted over 70%. Amazon’s has jumped more than 80%. Both Facebook and Microsoft are up over 40%. And, Google’s stock price is up over 20%. Remarkably, this super-charged performance is happening in the midst of a pandemic.

As things stand now, the top 10 largest companies in the much-watched S&P 500 make up just under 30% of the total market value of the index. This level of concentration in the stock market now sits at a modern day record. It deserves investors’ attention and some level of caution.

For the uninitiated, the S&P 500 is simply a published list of the 500 largest publicly traded companies in the US. It was created to represent a fair sampling of the overall stock market. The S&P 500 is the most popular index around and it captures about 80% of the total market value of all US stocks. Literally tens of trillions of dollars are passively invested to just match the returns of the S&P 500 index.

When you buy the entire S&P 500 in your portfolio, it’s important to note that you don’t actually get 500 equally-weighted stocks. In fact, the 500th stock on the list is far, far less important than the 1st stock listed. Rather, it’s a market value-weighted index with the top stock, Apple, representing over 6% and the last stock on the long list makes up just a tiny sliver of your holdings.

Over recent decades, the top 10 largest companies in the S&P 500 represented around 20% of the total market value. Today, the top stocks are pulling ahead like never before. As a result of this imbalance, today’s level of stock market concentration exceeds the tech-bubble era of the late ‘90s.

The froth we’re all seeing in today’s stock market is baffling to many professionals. Politicians have distributed trillions of borrowed dollars into household and corporate bank accounts in recent months. At the same time, the Federal Reserve has shoveled trillions in printed money into our financial markets and set interest rates at zero. They’ve even promised markets that they aren’t even thinking about thinking about raising rates anytime soon!

Interest rates have hit rock-bottom and savers are starved for safe income like never before. Money market funds now yield next-to-nothing, CD rates are downright tiny and high-quality, short-term bonds yield less than inflation. The search for a reasonable, low risk return feels futile.

Investors and speculators have responded by purchasing the safest, largest stocks they can find. Among them are massive, cash-rich and debt-free technology companies and a smattering of companies that are currently benefiting from the shifting demands created by this pandemic. At the same time, investors eschew most companies involved in traditional retail, banking, travel and energy, among other sectors. The gap between the haves and have-nots is widening. This troubling trend is happening on both Wall Street and on Main Street.

Things are getting more than a little bit funny. Seriously.

Congress and the White House are in heated negotiations on the nature of the next round of financial support needed for our economy. A deal will soon be struck, of that I am quite certain. What I am growing uncertain about is our lost sense of empathy as a nation. It’s high time we find it.

In a few days, we will reach the end of the second week of zero supplemental unemployment benefits coming from the federal government. As of last week, about 30 million people without work depended on this financial lifeline. For the average unemployed person in Michigan, what’s been left behind is a meager $300 per week. For just a moment, let that figure sink in as you reflect on your own personal budget.

Between my own flurries of frustration and hostile criticisms of our nation’s abject failures to effectively respond to this ongoing crisis, I’ve also tried to acknowledge a sense of gratitude. It’s an internal battle; some won, some lost. I’m sure many of us who still have our jobs and still feel a sense of economic stability have felt similarly. For too many of us, including me, criticism comes much more easily than does empathy.

As we watch the negotiations in Washington unfold, let me summarize the main sticking point of unemployment benefits through the lens of empathy.

Republicans have proposed cutting the special federal unemployment benefits from $600 per week and replacing it with a lower benefit of just $200 per week. Democrats want to keep the higher benefit in place for the next five months. The difference roughly equates to a mortgage or rent payment for tens of millions of households. Note that already one in 12 households with a mortgage are in forbearance programs.

Republicans’ primary criticism of the now-expired benefit is the majority of jobless workers were collecting more from unemployment than they earned in their former jobs. Many Republicans have adopted the view that this encourages people not to work. Their underlying assumption is that the millions who have experienced the misfortune of losing their job during a global pandemic are inherently lazy.

My personal reminder of the importance of empathy – the act of understanding the experiences of another person – recently came to me through an essay written back in 2017 by former CBS anchorman Dan Rather. His recollections of his Depression-era upbringing offers a stark contrast to the situation we find ourselves in today. The following passage highlights a viewpoint that I think we could all benefit from, especially those of us who, today, can be counted among the fortunate.

“There was no judgment or disdain on the part of those offering assistance. No one wondered why those neighbors weren’t working, and no one passed moral judgments on their inability to fend for themselves. We understood that in life, some are dealt aces, some tens, and some deuces…We understood that those who were suffering weren’t lazy or lacking the desire to do better. Fate had the potential to slap any of us.”

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Here we go again! Congress is back in session and crafting yet another pandemic financial aid bill. The negotiations, by all indications, will be brutal as the fate of the finances of millions of households, businesses, schools, cities and states hang on every twist and turn.

Based on the early reports, I would characterize the pending legislation as likely to be undersized for the economic challenges we still face. That may surprise some readers. It really shouldn’t.

While the trillions already allocated is truly staggering, it’s arguable that our dismal failure to contain the virus was largely wasted. The earlier shutdown was designed to buy us time to squash the first wave and to build our contact tracing capacity to manage later outbreaks. Our failure is the cost of poor leadership and our poisoned politics.

Taking center stage in the current negotiations is how to deal with the extra $600 weekly benefit provided through the Federal Pandemic Unemployment Compensation (FPUC) program. This economic lifeline for about 30 million people is set to expire in just a few days. The deadline has been known for many months, of course.

This generous benefit has been highly controversial. Some believe it has created a perverse incentive for people to remain unemployed, rather than work. As infections rise to fresh records, it’s an open question if employers are ready to fill the void. Republicans and Democrats would answer the question quite differently.

Another contentious proposal that’s being openly debated is to provide a temporary payroll tax holiday for every employee and employer. It may quickly find itself on the cutting room floor, but the White House is lobbying hard for it. However, even Republicans are wary of this idea as it is a very untargeted approach. It’ll be interesting to watch, especially with an election that’s only 104 days away. Getting a government-provided raise just before mail-in ballots arrive has a nice ring to it.

Speaking of government payments, a real consensus is forming quickly around providing another round of economic impact payments directly to households. From the looks of it, the eligibility for this round of checks and direct deposits may be narrower as millions of households received money they didn’t need.

Finally, in the face of severe budget shortfalls with far-reaching implications, one can hope the normal political lines will be wiped away as Congress considers providing more financial aid to schools, cities and states. If too little financial aid is granted, it will be a real reminder of how our national politics can have tangible downstream impacts on our own local public institutions.

Back in late May, at the height of the economy’s re-opening euphoria, majority leader Mitch McConnell over-confidently declared that the next coronavirus bill will be the “last.” If Congress opts to undersize this next bill – as I suspect they might – I’m afraid I’ll be forced to begin a future column with the same exasperated words, Here We Go Again!

My grandma – yia-yia – used to pay me cold hard cash to learn a tiny bit of Greek. Beyond remembering just one swear word, the lasting impact of her lessons is my self-identification as being “half-Greek.” As a result, I rarely pass up the chance to quote Greek philosophers.

According to Heraclitus of Ephesus, change is the only constant. Case in point, this year’s waiver of your IRA’s required minimum distributions or RMD.

First, a little bit of background. Once you reach age 72, the government forces you to take money out of your IRA every year. The reason is simple; after you’ve enjoyed decades of untaxed gains, the government wants you to pay up, finally.

On March 27, tucked inside the massive piece of legislation known as the CARES Act, Congress suspended RMDs for just this year. This distribution hiatus applies to regular IRAs, 401(k)s, and inherited IRAs, too.

While it is unusual for Congress to waive RMDs, one was also granted in 2009 during the Great Financial Crisis. Notably, during that saga, the waiver was granted very late in 2008. This allowed for plenty of time to plan for the year ahead. We weren’t as lucky this time!

This year’s rule change created some interesting technical challenges for retirees. What could be done if you had already taken your RMDs before March 27th? What if you didn’t really need the money you took out? How do you actually undo it?

There’s a little known rule, referred to as the 60-day rollover rule, that allows people who took money out of their IRA to simply redeposit it. You are only allowed to use this tool once every 12 months. Using that rule seemed like a simple solution to undo an RMD done before March 27. Unfortunately, it really wasn’t.

Apparently unbeknownst to Congress, this 60-day rollover tool isn’t actually allowed for RMD distributions. It only applies to regular, non-RMD distributions. To further complicate matters, since the CARES Act became law on March 27, even incorrectly using the 60-day rollover rule still didn’t help those Johnny-on-the-spot retirees who took their RMD before January 27.

This confusing state of limbo is how things stood for about three months since the CARES Act had passed; until about a week ago.

Finally, on June 23, the IRS published a notice that says any RMDs can be returned to your IRA by August 31. And, the new guidance covers any distributions taken all the way back to the start of 2020.

Actually, it turns out that Heraclitus’ wisdom was not completely true. Change really isn’t the only constant. He forgot about the certainty of both death and taxes.

With this new get-out-of-jail-free card – which expires by August 31 – you may want to consider returning any unwanted RMDs. Deferring taxes for another year is a deal that’s likely too good to pass up. I’ll keep you posted on my work finding a way to defy death. Hint: Don’t hold your breath for too long!

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com