Portfolio Issues - Scams
Recently, a friend was nearly the victim of a scam. We want to share the details, not so you can look out for this particular scam, but so you can be aware of common elements to look for.
She was working on her computer when a message popped up on her screen saying that her computer was frozen and that she should call a particular number.
She called that number and was told that her accounts had been hacked by terrorists, but that this government agency that she had called would help her solve the problem. She should not talk to anyone else because she would be committing a federal crime if she did so.
They seemed to have some information on her already, but she gave them more information, including where she had various financial accounts.
This all seemed a bit strange to her, but she wanted to be a good citizen and not assist terrorists. She became more suspicious when they asked her to take thousands of dollars out of her accounts.
At that point she contacted us, and we confirmed what she had already started to suspect, that she was nearly the victim of a scam.
You might think this could never happen to you, but these people are very good at manipulation. They try to isolate you, so you won’t ask for help, and to create a sense of urgency, so you feel the need to act quickly.
Unfortunately, scammers will always be with us. They’ll keep devising new ways to trick us. So be vigilant, and contact us if you’re ever in doubt.

“How come you always get to be the Federal Reserve?”
Market View - Good and Bad
The Fed cut it’s interest rate by .5%. Although inflation hasn’t reached their 2% target yet, Powell and company agreed it was time to ease the brakes. The economy is considered strong by most measures, despite higher borrowing costs. They are determined to avoid recession, which has been lurking in the background since inflation first spiked. Other central banks are on the same page. Several, including the UK and China, already started cutting rates in response to economic issues that are much clearer than any currently seen in the US.
Money market rates are coming down. The immediate consequence of the rate cut is lower interest on cash held in money markets and similar products. An approximate return of 5% on cash balances has been an easy option for investors. The estimated balance in these types of investments is between $6-7 trillion dollars. We have seen several articles predicting that the stock and bond markets will receive a huge boost once interest rates fall enough because investors will be forced to move their money to achieve better returns. We think it’s likely that some of that cash pile will move to stocks and bonds, but it’s unlikely there will be a massive shift. Falling interest rates do not eliminate liquidity needs.
Mortgage rates are on the decline too. The average rate on a 30 year fixed-rate mortgage is down from a high of 8% to around 6%. That is welcome news to prospective home buyers, but prices remain stubbornly high. Current home owners with rates in the 3-4% range are unwilling to move and take on a higher rate. Since the 2008 crisis, the US hasn’t built enough to keep up with population growth either. Real estate varies between local markets, but supply nationwide is low, keeping prices elevated. Both presidential candidates are addressing housing affordability in their campaigns, indicating there is considerable frustration with the current state of the real estate market across the country.
It seems market reaction to economic news is back to normal. During the Fed rate hikes, we were stuck in a counterintuitive cycle where strong economic data led to negative market movements. Good news was bad news. Inflation was the primary concern, so positive signs in our economy increased the likelihood of further rate hikes. The thinking was, as rates go higher, the probability of recession increases. It appears we are back to the conventional relationship between the two, for now.
Dock workers on the east coast briefly went on strike last week. Although wage negotiations are a large part of the reason, workers are also looking for protection against automation. There are similarities to last summer’s strikes when workers demanded safeguards against AI technology in multiple industries. A key difference with this strike was the threat of halting or reversing progress made on inflation. The strike shut down 6 of the 10 busiest ports in North America for 3 days. Supply chain issues were a major contributor to the last bout of inflation and no one wants to see a repeat episode. There won’t be a prolonged work stoppage, but it is a timely reminder that the Fed has no control over events that can lead to inflation.
There will likely be more noise than normal for the rest of the year. We are heading into a contentious election in the US and wars continue throughout the world. Disagreement and division are unlikely to subside any time soon. We think the current environment lends itself to large market movements and overreactions. Although it may be tough to stomach at times, maintaining your long-term investing allocation leads to success. Especially when it feels like chaos is becoming the standard.
Sources: Economist, Wall Street Journal, Value Line, Vanguard, Applied Finance Group, Schwab
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