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Category: Investment Planning

How the Banking Failures Unfolded

Written by Wes Johnson on . Posted in blog, Investment Planning, News.

Note: This market review was published on March 24th, 2023 and may not be reflective of current market or investing issues.

I am sure you, like me, have been watching the unfolding events in the banks over the last couple of weeks with a level of apprehension.  At the heart of the issue is the banking system’s exposure to rising interest rates.  There are larger problems than rate exposure at the banks, however it is unclear if these problems would have been exposed without higher rates.  By and large, the banking system is well capitalized and lending standards have been high at most banks.  This is not a situation like 2008 where banks were stuffed full of bad loans and had a credit quality problem.  The quality of the loans at the banks are government securities and are of the highest quality.  The problem is that they are holding long duration assets that are sensitive to changes in interest rates. 

Take a look at the losses investors experienced in bond portfolios last year. The banks have similar losses in the bonds they are holding.  Because of accounting rules, banks don’t have to acknowledge these losses in the held-to-maturity (HTM) portion of their balance sheet.  The problem occurs when deposits are removed from banks and those bonds have to be sold at a loss to cover those deposits.  A new facility that was enacted by the Treasury will provide help to these banks by allowing them to place these underwater bonds at the Federal Reserve at full price.  This is a collateralized loan for a year; it has to be paid back with minor interest. 

The bigger issue is that this has become more complicated by Janet Yellen segmenting the small and regional banks.  Janet Yellen told senators that uninsured deposits (deposits over the FDIC limit) will only be refunded at banks that pose a systemic risk to the financial system.  In essence, she has reinforced a two-tiered banking system that harkens back to the “too big to fail” days of 2008.  If your bank is big enough to be deemed systemically important then you will continue to receive government assistance when things get tough.  If you are a smaller bank then you must fend for yourself and good luck.  As you would expect, this will mean that deposits will be moved from smaller regional banks and move to larger money center banks. This adds a lot of potential uncertainty around banks that operate in rural parts of the country that are not serviced by larger banks.

 If you do not have deposits over the FDIC limit, then you don’t have to worry about the security of the deposits even if something were to happen to your bank.  Another alternative over the last year that has gained popularity is money market funds.  You can buy a government money market fund that is yielding higher than deposit interest rates.  While these do not have a guarantee from the FDIC, they are holding US government securities, and therefore, are backed by the same entity that is guaranteeing the deposits through FDIC.  At Fidelity, we utilize two separate money market funds and they are both of the government security variety. 

I want to provide some insight into how Silicon Valley Bank (SVB) found itself in this situation. If you are not interested in these details, please feel free to stop reading here.

First, it is worth asking how SVB got into this situation. SVB was the banker of choice for numerous Venture Capital and start-up companies. They attracted a number of these businesses with “innovative” (risky) practices. These new companies came in with lots of deposits well over the FDIC limits resulting in the bank having the majority of deposits uninsured.  When they took in the deposits from these new businesses, they bought a lot of treasuries and mortgage-backed securities (MBS) while interest rates were low. They held these in a part of the balance sheet called held-to-maturity (HTM).  Because these treasuries and MBSs were intended to be held until the bonds matured at par, they did not have to report losses on the bonds when the Federal Reserve started raising rates.  

SVB is not alone in this situation, and many banks have seen the value of their HTM bonds decrease in value. SVB was also not one of the 15 largest banks that require stress testing. As a part of that testing, the 15 largest banks are required to disclose how much interest rate risk they have.

When venture-backed companies became concerned, they began withdrawing their deposits quickly, resulting in around $42 billion dollars leaving the bank in a single day. This was a classic run on the bank.  Because of who these depositors are, they were able to move a massive amount of money in a short period of time.  SVB attempted to find additional capital, but was unsuccessful, leading to the FDIC closing and taking over the bank the following day.       

It is unclear how the next events will play out.  Government officials have stated the necessity of having a robust small banking system.  I expect we will see changes over the coming months that will try and bolster the banking system.  It is also unclear if this will change the Federal Reserves interest policy and quantitative tightening policy.  I am writing this ahead of the next rate decision, but I suspect that Jerome Powell will have something to say about recent events.   This added turmoil does highlight the importance of being diversified and having a plan. As always having a long-term approach, staying diversified, and remaining calm lets you take advantage of uncertainty, not held captive by it.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

SECURE Act 2.0: An Overview

Written by Erik Buatte on . Posted in blog, Charitable Planning, Education Planning, Estate Planning, Investment Planning, News, Philanthropic Planning, Retirement Planning, Tax Planning.

“Change is the only constant in life.” This phrase – attributed to Greek philosopher Heraclitus – is particularly relevant when it comes the recent changes to retirement savings in the United States. The Federal Government funding bill (which is over 4,000 pages long!) includes provisions from the prior proposed Setting Every Community Up for Retirement Enchantment (SECURE) Act 2.0 that will significantly change the way Americans save from retirement.

With that, let’s review some of those changes – specifically the “So What” that comes along with these changes. As we can expect in a law that is less than a week old, there are still a lot of unanswered questions on the HOW some of these changes will be implemented as well as the nuances as to WHEN each of these new laws are supposed to be put in effect (very few are scheduled to take effect right away in 2023).

To start, we will divide the changes based on who they are targeted at, based on life and career stage. Here is a quick summary of those main changes:

For those in retirement:

  • The Required Minimum Distribution (RMD) starting age will be increased to 73 starting in 2023 and 75 in 2033.
  • The penalty for missed RMDs will be decreased from 50% to 25% in 2023.
  • Employer sponsored retirement plans with a Roth account will no longer be subject to RMDs starting in 2024.
  • A one-time Qualified Charitable Distribution (QCD) will be allowed for Charitable Remainder Unitrusts (CRUTs) and Charitable Remainder Annuity Trusts (CRATs)starting in 2023.

For those nearing retirement:

  • The IRA catch-up contribution will be indexed to inflation starting in 2024.
  • A new “super catch-up” contribution will be available for those ages 60-63 in employer-sponsored retirement plans starting in 2025.
  • Catch-up contributions must be made to Roth accounts for those who made over $145,000 in the previous year starting in 2025.

For those in the early- to mid-career stages:

  • Automatic enrollment in new employer-sponsored plans will be mandatory starting in 2025.
  • Automatic rollovers between employer-sponsored plans will be allowed starting in 2025.
  • Employers will be able to offer Emergency Savings Accounts of up to $2,500 per year starting in 2024.
  • Employers will be able to make matching contributions to retirement plans to match student loan payments starting in 2024.

For education savers and beneficiaries:

  • A portion of overfunded 529 plans can be rolled over to Roth IRAs in the name of the 529 beneficiary starting in 2024.

—————

The details:

For those in retirement: More changes to Required Minimum Distributions

RMD Age Increased

Starting in 2023, Required Minimum Distributions (RMDs) are required in the year you turn 73 (previously 72 in 2022). In 2033, the starting age for RMDs will be increased to 75. This means that if you turn 72 on or after January 1, 2023 and 73 before January 1, 2033, your applicable age to start RMDs is 73. If you turn 75 on or after January 1, 2033, your applicable age to start is 75. This delay in RMDs allows for more years to control your income based on your needs and not mandated withdrawals, as well as increased years for proactive tax planning.

RMD Penalties Decreased

The new law also reduces the 50% penalty for missed RMDs to a less severe 25% penalty in the event that any portion of an RMD is missed in the year it is required to be distributed. It also reduces the penalty further to 10% in the event of prompt payment and acknowledgement of the missed RMD. This reduced penalty goes into effect in 2023.

RMDs for Employer Roth Accounts Waived

Starting in 2024, employer Roth accounts (such as 401(k)s, 402(b)s, and TSPs) will not be subject to RMDs – just like Roth IRAs. However, if you have funds in a Roth 401(k) and are 73 or over in 2023, you still have to meet your 2023 RMD in that account. This removes the urgency to roll over employer Roth 401K accounts into Roth IRAs as you near your RMD age and adds more flexibility in account ownership in retirement.

QCDs Expanded to CRUTs and CRATS

As of 2023, Qualified Charitable Distributions (QCDs) can be used to fund Charitable Remainder Unitrusts (CRUTs) and Charitable Remainder Annuity Trusts (CRATs) with a one-time gift of up to $50,000. Previously, QCDs to these trusts were not allowed. The new law does put two significant limitations to this opportunity however. First, stating that the QCD distribution must only be to a CRUT or CRAT that “is funded exclusively by qualified charitable distributions”. Secondly, all distributions to the trust beneficiaries will be classified as ordinary income, removing more tax preferred distributions of capital gains or qualified dividends like a “standard” CRAT or CRUT. Bottom line, there is an opportunity, but with a number of strings attached that may limit its usefulness to many.

For those nearing retirement: Opportunities to save more, but with complications.

IRA Catch-Up

In prior years, through 2023, the catch-up contribution for IRAs for those over 50 years old was held static at $1,000. A 55-year-old can contribute up to $7,000 ($6,000 base plus the $1,000 catch-up) in an IRA for tax year 2022. Starting in 2024 that catch-up limit will be indexed to inflation. This is an effort to increase that limit over time to better reflect its impact to savers getting ready for retirement. This won’t create a significant increase in the amount available year to year, but aligns it more so with other limitations that are indexed to inflation, allowing it to increase over time. For those looking to maximize this savings every year, you will need to verify the new annual value each year.  

“Super Catch-Up”

SECURE 2.0 introduces a new category of catch-up contributions, the “Super Catch-Up”, for those ages 60-63 in 401(k)s, 403(b)s, and the Thrift Savings Plan. Current law allows in 2023 a catch-up contribution in these accounts of $7,500 (on top of the standard limit of $22,500 for a total of $30,000). Starting in 2025 those in that narrow age range are eligible to contribute a catch-up of $10,000 or 150% of the standard catch-up. Starting in 2026 this Super Catch-Up is adjusted for prior year’s inflation rate.  In effect this creates three tiers of contribution limits in these employer sponsored plans based on ages:

  1. Under 50: Base Contribution ($22,500 in 2023);
  2. 50-59 and 64+: Base plus Standard Contribution ($22,500+$7,500 in 2023);
  3. 60-63: Base plus the Super Catch-Up.

Bottom-line, as you near retirement you can potentially add even more to your employer sponsored retirement plans, but have to be vigilant of your specific applicable limits each year.

Catch-Ups Forced to Roth

With this one the new law gives us another significant complication. Starting in 2024 all catch-up contributions, that’s anything above the base contributions for that account type, must be done into a Roth account. Funds in a Roth account are a powerful thing for your financial future, but with a Roth contribution you have to pay the tax now. This takes away the opportunity to take pre-tax deductions on catch-up contributions for those in higher tax brackets. This only applies to those individuals with wages over $145,000 in the prior year. To help paint that picture a bit, let’s say you are 55 years old in 2024 and made $185,000 in wages in the prior year, 2023. In 2024 you can fund your 401(k) up to $30,000 (assuming no changes from 2022 limits for illustration purposes). But that $7,500 of catch-up contributions would have to be made to the Roth 401(k) and you would be on the hook for those income taxes in 2024. This is one of the key “revenue generators” included within the bill, and has some of the biggest questions on the HOW this would be put into practice. This provision makes the importance of a holistic planning approach, ensuring to balance your past, current, and future tax situation, current assets, and lifestyle plan even more important in making the decision to contribute catch-up funds to your employer plans.

For those in the early- to mid-career stages: More changes to your employer sponsored plans (401(k), 403(b), Thrift Savings Plan).

Automatic Enrollment

Starting in 2025, new employer plans (yes, just for any new plans) are required to automatically enroll employees starting at a minimum of 3% contributions. Many employers already have automatic enrollment with a gradual increase over a timeframe, but up until 2025 it is optional for employers. Automatic enrollment has been found to be a great tool in helping individuals start to save for retirement. If you are already diligent to ensure you get your employer match this is a no-change change; however, if you change employers make sure you read the plan documents carefully to determine its specific contribution increase path to avoid any surprises down the road.

Automatic Rollovers

The new law allows for 401(k) providers to automatically move your old 401(k) from a prior company to your new employer’s plan starting in 2025. This is an attempt to combat the “lost 401(k)” issues some individuals experience as they move from one company to another and potentially leave behind retirement savings. This is another item with many unknowns around HOW this would be realistically completed. Considering the questions on how this would be put in practice, it is still recommended that you carefully track prior accounts in employer sponsored plans and rollover to either a Rollover IRA or your new employer plan as appropriate for you.

Establishment of an Emergency Savings Account

To help employees save for emergencies, and reduce the reliance on hardship withdrawals from retirement accounts or taking on debt, the new law introduces an option for employers to offer an Emergency Savings Account starting in 2024. This would be savings in an after-tax basis, so no pre-tax deduction for these contributions. This would be limited to contributions of $2,500 per year and 4 withdrawals per year. If you find yourself struggling to meet your emergency savings needs, this may be a good tool for you to automate that deduction to the account and avoiding the need to reach into your 401(k) or short-term debt to fund those surprises.

Student Loan Match

This targets those individuals that are not contributing to retirement savings through work due to needing the cash flow to pay off student loans. Starting in 2024 companies can match student loan payments in retirement plans, like they would if the individual was contributing directly to the retirement plan up to the companies match. This would allow those in this position to start building some retirement savings and take advantage of compounding over a longer timeframe.

PLEASE NOTE:

Many of these provisions are optional, not mandatory, to the employer to include. If there is a provision that you are particularly interested in and want included in your company’s plan be proactive and reach out to your Human Resources point-of-contact and let them know.

For education savers and beneficiaries: There is more flexibility with savings in 529 Accounts.


529 Rollover Option

This provision has the potential to affect you across the life stages. 529s can be a great tool to save for education related expenses. Recently the 529 options were expanded to allow for expenses for K-12 and trade schools, in addition to college. However, in the event of overfunding a 529 there were limited options to get money out of the 529 without penalties. The new law, starting in 2024, allows extra funds in a 529 account to be rolled into a Roth IRA owned by the 529’s beneficiary. There are, of course, limits in place: you can only make contributions up to the individual IRA contribution limit ($6,000 in 2022), there’s a lifetime cap of $35,000, and the 529 must have been open for at least 15 years.

To illustrate this, let’s assume a grandparent established a large 529 when their grandchild was born. That grandchild graduates in 2025 with a bachelor’s degree and is done with schooling, and there is $15,000 still in the 529. One option that has been used widely is reassigning that 529 to another individual, like another grandchild. With the new law the grandparent could instead use the 529 funds to make a Roth IRA contribution on behalf of the grandchild in 2025, 2026, etc. until those funds run out. This new provision could provide for some new and unique opportunities for families both in the event of excess funds and in the development of a gifting strategy prior to education. However, this is another of the provisions that has a lot of questions in terms of the HOW we will see this put into practice going forward.

In Conclusion (for now):

This is by no means a comprehensive list of changes within the bill, but hopefully, it provides insight into the potential impacts from some of the major provisions of the new law and how they may affect our financial lives.

With change comes opportunities. By leveraging a financial plan that encompasses all parts of your financial life, these new “tools” can be thoughtfully put to use to reach your unique goals.

Fear Factor

Written by Jeff Jones on . Posted in blog, Investment Planning, News.

Note: This published on December 30th, 2022 and may not be reflective of current market or investing issues.

When I say ‘fear factor,’ I’m not talking about that old American television game show from the early 2000s where contestants blindly stuck their hands in boxes of spiders *shiver*, among other ridiculous stunts, in an attempt to win money. I’m referring to good, old-fashioned fear, apprehension, alarm, and distress.

I know, this post is starting off on a strong, positive note. But stick with me. You know I’ll turn this into a story about financial planning or investment management, and you’re not wrong.

Market Watching

I have often told my clients and prospective clients that I’m not a “market watcher,” which is why I love having a dedicated investment advisor here at Longview. I have a confession to make: that’s not entirely true; however, my market watching is due to tracking the market for clients who are interested in putting set-aside monies to work in the market.

But when the fear factor sets in, it can make us do irrational things. You’ve probably heard the saying ‘buy low, sell high,’ but fear can flip that statement on its head. When we see a downturn and panic rises, we might wonder if we should just go to cash and wait it out. This can be detrimental to a financial plan. If we take the downside and miss the upturn, recovery becomes much more difficult.

CNN actually has a Fear & Greed Index that looks back over different periods of time to evaluate the levels of fear and greed in the marketplace. Keep in mind that this index is based on theory and consists of several indicators, so don’t take it at face value. (Link: https://www.cnn.com/markets/fear-and-greed)

Neil Diamond even has a song called “Fear of the Marketplace.” It’s a far cry from “Sweet Caroline.” I don’t recommend it, but if you insist (ads are not related to Longview):

Market Performance

It’s December 29th as I write this, and the one-year view of the S&P 500 Index isn’t looking very appealing. It’s a red line, and we’re not much above the low for the year. Take a look:

Pretty unsightly, right? This is where the fear factor can really set in. We see the downturn, and we worry. Or maybe we don’t. Maybe we realize that taking the “long view” is a better approach – one with less fear.

Now, let’s look at the same S&P 500 Index performance over a five-year period:

That’s a much more appealing result. Despite the 2022 performance, the market has climbed since the beginning of 2018. You were much better off remaining in the market during that time.

Neil, your thoughts

So, I invite you to join me as a self-proclaimed non-market watcher. I find myself harboring far less fear when I do. In the words of Neil Diamond:

Fear of the marketplace.
Just gotta forget the whole damn thing.

Thanks, Neil. I’ll do just that, and I hope you can, too.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Market Commentary

Written by Wes Johnson on . Posted in blog, Investment Planning, News.

Note: This market review was published on May 24th, 2022 and may not be reflective of current market or investing issues.

“A genius is the man who can do the average thing when everyone else around him is losing his mind.”

~ Napoleon

The news around the economy and markets is getting pretty loud these days. I thought it would be appropriate to look at some facts and practical advice on how to make wise decisions in uncertain times. Let’s first analyze the current situation. Inflation is high. Labor is tight. GDP growth is slowing or has slowed. The Federal Reserve is tightening policy. The US stock market is in a correction (down 10%+) or bear market (down 20%+). The bond market, which is supposed to be safe, has been down more than 10% this year. Housing is slowing. These are leading to more and more headlines on the subject of bear markets and recessions. All of these headlines evoke feelings and emotions that can lead investors to make the wrong decisions at the wrong time. A friend of mine likes to say, “Don’t panic, but if you do, panic first.”  The great Peter Lynch said this, “Corrections are unpredictable. By selling stocks to avoid pain, you can miss the next gain.”  The thing to remember is that corrections and bear markets are natural and not to be feared.

Let’s look at some facts on bear markets. On average, the stock market during a bear market drops 36%, lasts less than 10 months, and happens about every four years.[1]  In other words, they happen fairly frequently and are over relatively quickly. That begs the question, why don’t you exit positions and enter back when the coast is clear? To answer that, let’s look at up days during bear markets. Half of the highest gaining days for the stock market have happened during bear markets. Another 34% of the highest gaining days happened just as the bear market has ended when it’s unclear that it has ended. In other words, it’s extremely difficult to predict these things because there are massive up days, and it’s unclear when they end. One of my investing heroes, Cliff Asness of AQR, had a paper at his firm titled Sin A Little.[2]  In it he describes that you can’t time the market, but if you have a diversified portfolio and see an opportunity to lean into a situation that makes sense to either underweight or overweight holdings, it can help. This is a practical way to help weather turbulent markets.

So, what are some other practical ways to make lemonade when the markets are handing out lemons?

  • Diversification. Having a portfolio that can benefit in different environments and circumstances can help calm fears in a hurry.
  • Tax-loss harvesting. If you have an investment portfolio that is in a taxable account, selling holdings at losses can help with taxes at the end of the year. Rotating those holdings into similar positions can keep your portfolio exposures the same but benefit from those realized losses. It also helps to not anchor to the losses if they are sold.
  • Accelerate investment. If the market gives you a discount and you can afford accelerating your retirement or investment savings, it can pay off down the road. When shopping for a car and you have been seeing prices going up year in and year out and all of a sudden you that same car you want is selling 20% lower, you buy it. The same thing happens in bear markets and corrections.
  • Rebalance. If you are holding a diversified portfolio, you are going to have holdings that are down and some that are up. It makes sense to sell the things that are up and buy the things that are down.
  • Dollar-Cost Average. Dollar-cost averaging is simply buying investments over time. Regular contributions to your investments allow you to take the opportunity to buy over time at potentially lower rates.
  • Limit Distributions. Taking distributions from your accounts as the market is decreasing means there is less available for the recovery. When possible, we recommend limited distributions during a bear market.
  • Stay the course. As indicated above, staying the course can lead to higher returns long- term. The highest gaining days usually occur in a bear market and sharp gains can happen quickly.

Remember, when all you see is negativity that there are some proactive steps that can be taken. Negative returns will come and that is a great time to position for success in the future. Capitalism exists to provide efficient use of resources, and when there become excesses in the system, recessions and bear markets come to correct those misuses. These things can be painful, but they can also lay the foundation for future growth.

[1] https://www.hartfordfunds.com/practice-management/client-conversations/bear-markets.html

[2] https://www.aqr.com/Insights/Research/White-Papers/Market-Timing-Sin-a-Little

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Quarterly Market Commentary

Written by Wes Johnson on . Posted in blog, Investment Planning.

Note: This market review was published on November 2nd, 2021 and may not be reflective of current market or investing issues.

The third quarter was an eventful one in the US, although the S&P 500 only ended up gaining 0.11%1.  Markets started the quarter strong, before giving back almost all of their gains during the month of September where they had a drawdown of nearly 4%1.  There was a lot going on that lead to the drawdown, but one of the biggest issues was the federal governments budget negotiations. 

The federal government has a fiscal year that runs from October 1st to September 30th every year.  This year Republicans and Democrats were clashing over the annual spending bill and passed the October 1 deadline to fund the government.  While this is not the first time that this has happened and there has been a government shutdown, this time there was a real threat that the government was going to miss a payment on their debt, resulting in the United States government defaulting on what is considered to be one of the safest investments in the world.

In addition to fiscal spending issues, COVID and the Delta variant made a huge resurgence in the late summer with cases in the United States peaking around the first week of September and deaths peaking around two weeks later2. While most of the country was able to avoid severe restrictions and lockdowns, they did come back in some areas which put pressure on economic growth.

The hot topic in the world of finance right now is inflation.  From gas stations to grocery stores, costs are increasing at a faster pace than they have since the Great Recession over a decade ago.  The Consumer Price Index rose at an annual rate of more than 5% in September3. While inflation has been increasing for most of the year, the Federal Reserve has continuously downplayed the effects that it will have and labeled it as “transitory.” However, they have now come to admit that it is persisting longer than they expected due to labor shortages and supply chain issues.

As we look toward the end of 2021, which we cannot believe is only two months away, there are plenty of things to keep our eye on concerning our investments.  First, the federal government seems to be nearing a compromise on another large spending bill which is currently priced at around $1.75 trillion in addition to another $1 trillion infrastructure bill that has already been passed by the Senate, the spending bill will need to be passed before the end of the year to avoid another government shutdown and potential default.  Next, inflation is likely to remain elevated into the near future as the labor shortage and supply chain issues show no sign of being corrected as we enter the holiday shopping season. Finally, the latest wave of COVID cases is in decline and vaccinations continue to rise, if these trends are to continue, they should be supportive of further economic growth.

References

1https://www.cnbc.com/quotes/.SPX

2https://covid.cdc.gov/covid-data-tracker/#trends_dailydeaths_7daycasesper100k|new_death|seven_day_cum_new_cases_per_100k

3https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

1st Quarter 2021 Market Commentary

Written by Wes Johnson on . Posted in blog, Investment Planning.

Note: This market review was published on May 3rd, 2021 and may not be reflective of current market or investing issues.

The first quarter saw strong equity returns in the US with the S&P 500 up just over 7%1. International markets lagged the US, with the MSCI ACWI ex US increasing almost 3.6%2.  Under the surface, there was a rotation of leadership that took place in the market from growth to value assets.  Many of the large cap growth companies, that were up strong following the COVID-19 crash, have begun to lag the more cyclical companies.  The largest company in the world, Apple, has experience two 20% drawdowns in the last six months3.  In spite of the declines in large cap tech companies, like Apple, the broader market has been able to push to all time highs because of this rotation. Along with the rotation from growth to value, small cap stocks have also started to outperform large cap names.  It begs the question “what’s going on?” 

The simplest way to answer that is the expected, and ongoing, economic recovery.  With the rollout of the COVID-19 vaccines in the United States going better than expected, and states beginning to reopen their economies, economic activity is increasing.  When there is strong economic growth, along with expectations that growth will continue or accelerate, value stocks tend to outperform their growth counterparts and small cap stocks tend to outperform large cap. 

There are still a few concerns that could de-rail this economic recovery.  First of all, while the vaccine rollout in the United States has been faster and more effective than most thought it would be, countries around the world are not seeing the same success. If other countries are not able to increase the speed of their vaccinations, their economic issues could affect our economy due to how intertwined global trade is.  Second, it seems that every few weeks there is another variant of the COVID-19 virus that pops up somewhere around the world.  We have seen the UK variant that seemed to have a higher transmission rate, the South African variant that seemed to have a higher fatality rate, and now there is an Indian variant that has started to spread.  If one or more of these variants are found to be transmittable despite one being vaccinated, then we could end up seeing mask mandates, social distancing, and lockdown protocols being issued again, which would at best slow the economic recovery and at worst send us into another recession.

While the economy seems to be off to a strong new expansionary period, there are also concerns as to whether or not the expansion is sustainable once fiscal and monetary support are scaled back or removed.  Currently, the Federal Reserve Bank of the United States has their primary interest rate set between 0% and 0.25%, making capital very cheap for businesses that need it.  The federal government has been spending money at a record pace in order to support businesses, state and local governments, and individuals.  Unemployment insurance has been expanded to support more people, at a higher level, for longer periods of time. Direct payments have been sent to individuals who meet certain income requirements, state and local governments have received monetary support due to decreased tax revenue, and businesses were able to apply for PPP loans that for many were forgiven.  Once these support systems of the economy begin to fade away it is unclear if the economy will be able to stand on its own. 

Additionally, with the amount of spending that has been seen there is an increased fear that inflation could see a meaningful increase for the first time in well over a decade.  There have already been a few companies that have come out publicly and said that they are going to have to raise their prices due to increasing costs that they have seen over the past few months.  If these trends continue, inflation could exceed the Federal Reserve target of 2%, which they have said they would welcome based on their new average inflation target.  It is important to know what the effects would be if inflation were to see a sustainable increase of over 2%.  Some of the first effects would likely be commodity prices and interest rates rising, and the value of the US Dollar declining.  What would this mean for asset prices though?  Bonds, especially treasuries, would decrease in value as interest rates rise. Stocks would most likely have a mixed reaction.  Growth stocks that have done so well over the past decade, especially those that have not proven profitable, would likely struggle as the cost of capital rises for them and they are no longer able to fund their growth with cheap debt.  Value stocks, especially those that have higher pricing power, would likely benefit from the strong economic growth and increased spending of consumers. 

While there will always be more questions than answers when it comes to future performance in markets, we can use current data and historical references to make informed investment decisions.  As the supposed quote from Mark Twain goes, “history doesn’t repeat, but it does rhyme.”

1https://www.cnbc.com/quotes/.SPX

2Morningstar.com

3https://www.cnbc.com/quotes/AAPL?qsearchterm=aapl

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

4th Quarter 2020 Market Commentary

Written by Wes Johnson on . Posted in blog, Investment Planning.

Note: This market review was published on December 28, 2020 and may not be reflective of current market or investing issues.

As 2020 comes to a close, it is a good time to reflect on how markets have performed throughout the year.  There has been a multitude of external factors that have had an impact on markets this year that include, Brexit, COVID-19, U.S. Elections, and a trade war.  With all of these in mind it is hard to imagine that here in December we would be at or near all-time highs in U.S. equity markets. With that said, investors have had record amounts of support both from monetary and fiscal authorities around the world.

With all of the negative effects that COVID-19 has had on the global economy, as of December 15th, the S&P 500 is up more than 13%1, the NASDAQ is up 39%2, and the Dow Jones Industrial Average is up 5%3 from the beginning of the year. Other asset classes have also done well this year; gold is up 19%4 for the year while silver is up 34%5.  However, not all assets have had a great year, the U.S. Dollar has fallen a little over 6%6, and WTI Crude Oil is down over 15%7 after being priced negatively in April.

Central banks around the world have provided unprecedented support to markets this year.  The Federal Reserve Bank has gone beyond just the purchasing of U.S. Treasury assets, and has purchased both mortgage-backed securities and corporate debt.  This amount of support was needed to provide liquidity in a time when companies were unable to get the funding that they needed in order to continue to operate.  The Fed also lowered their overnight lending rate to 0% and has expressed their intent to keep the rate at or near 0% for an extended period of time. 

What is really different about the response this time, as opposed to the Great Financial Crisis, is that federal governments around the world have taken a much more aggressive fiscal stance in response to the shutdowns.  In the United States, our Congress passed the CARES Act in March that allocated $2 trillion to different programs to support the economy.  Some of those programs included direct payments to certain individuals and families based on prior income, loans to businesses to support payroll, and funds to industries that were severely affected by the virus (i.e. airlines). In addition, Congress has also passed additional funding of $908 billion to further support the economy.

While these programs are indeed needed after the economy was all but closed entirely for months, it is not yet known what type of long-term effects they will have on our economy and markets.  With the amount of money being printed and spent by the federal government, we expect that inflation will increase, leading to higher commodity prices. Returns for broadly diversified portfolios will vary from year to year but are likely to be depressed over the next decade as we have essentially borrowed against our future returns to fuel this year’s dramatic rally. Fixed income will be one of the most difficult places to allocate funds as rates around the world are near or below 0%, although interest rates are poised to head higher if inflation does start to increase over the next few years.

Sincerely,

Longview Financial Advisors, Inc.

1https://www.cnbc.com/quotes/?symbol=.SPX

2https://www.cnbc.com/quotes/?symbol=.IXIC

3https://www.cnbc.com/quotes/?symbol=.DJI

4https://www.cnbc.com/quotes/?symbol=@GC.1

5https://www.cnbc.com/quotes/?symbol=@SI.1

6https://www.cnbc.com/quotes/?symbol=.DXY

7https://www.cnbc.com/quotes/?symbol=@CL.1

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

3rd Quarter 2020 Market Commentary

Written by Wes Johnson on . Posted in blog, Investment Planning.

Note: This market review was published on July 15th, 2020 and may not be reflective of current market or investing issues.

The first half of 2020 brought volatility back to the markets that has not been seen in a decade.  Not only did we see the fastest 30% decline in the history of the U.S. equity markets, but in the second quarter, markets staged a nearly equal rally.  As of the end of the second quarter the NASDAQ had reached an all-time high, the S&P 500 came within less than 5%1 of reaching its all time high, and the Dow Jones Industrial Average came within 8% of its all-time high2.  This rally was led by technology stocks and those that facilitate the movement toward a work from home culture in the United States.

The equity market rally in the United States has been faster and stronger than seen in other markets around the world, and has also happened while the economy has suffered some of the worst performance in decades.  Unemployment skyrocketed from less than 5% to more than 14%3, the Gross Domestic Product (GDP) of the United States is expected to decrease by more than 35% in the second quarter4, more than 8.5% of homeowners are currently not making their mortgage payments5.  The U.S. stock market seems to be almost completely disconnected from the real economy.

If the stock market really is so disconnected from the real economy, then what is fueling the markets strength? There are a few things that are going on that are supporting markets. First, is the amount of stimulus being provided by the Federal Reserve Bank (the Fed) and the Federal Government.  Second, the amount of COVID-19 cases may be rising, but the death rate in the U.S. has continued to fall.  Finally, there have been many announcements by pharmaceutical companies like Moderna, Novavax, and Pfizer around treatments and/or vaccines for the Coronavirus.

The stimulus from the Fed and from the Federal Government is already at levels that we have never seen before.  They have taken their overnight lending rate to 0%, as they did during the Great Financial Crisis in 2008, but they have also increased their Quantitative Easing program to include both investment grade and non-investment grade corporate debt.  They have bought billions of dollars of U.S. Treasuries, mortgage-backed securities, and corporate bonds in only a few months’ time.

As states began to reopen from their lockdowns throughout the second quarter of the year, we have started to see a dramatic rise in new cases of COVID-19.  While this is a concerning statistic, there is a silver lining that has helped the sentiment in the stock market, and that is that the fatality rate has continued to decline.  The first few weeks of July will be critical for this, as the number of deaths do tend to lag the number of cases.  If we do not begin to see an increase in the fatality rate, we can expect the trend to continue.

The news that has continued to have the largest effect on the U.S. market is optimism around a vaccine or treatment that is effective against COVID-19.  There are currently multiple companies that are researching a vaccine, and research has shown that Remdesivir (a drug made by Gilead) decreases the severity of the disease and the length of a patient’s hospital stay.  This is important as one of the biggest concerns about this pandemic was that hospital systems may be over-run.  The faster that patients can recover and be released from the hospital, the faster a bed and supplies can be open for another that needs them.

While there has been a lot of good news lately, it is important to remember that there is a lot that we still do not know about this virus and that we will likely not know for months to come.  The fatality rate has come down, viable treatments have been found to decrease the length and effects of the disease, and the economy is beginning to re-open and show signs of life.  We have a long way to go, but for now it looks like the worst may be behind us.

Sincerely,

Longview Financial Advisors, Inc.

1: https://www.cnbc.com/quotes/?symbol=.SPX

2: https://www.cnbc.com/quotes/?symbol=.DJI

3: “Civilian Unemployment Rate,” U.S. Bureau of Labor Statistics, June 2020, accessed July 02, 2020, https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.html

4: “GDPNow,” Federal Reserve Bank of Atlanta, July 02, 2020, accessed July 02, 2020, https://www.frbatlanta.org/cqer/research/gdpnow

5: Adam DeSanctis, “Share of Mortgage Loans in Forbearance Increases to 8.55%: Mortgage Bankers Association,” MBA, June 16, 2020, accessed July 02, 2020, https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Coronavirus (COVID-19) & Market Volatility Update – At War (April 9th, 2020)

Written by Jeff Cedarholm on . Posted in blog, Investment Planning, News.

Note: This market review was published on April 9th, 2020 and may not be reflective of current market or investing issues.

Wars can be very inconvenient and last a long time.  Around our office, we feel we are fighting wars on two fronts; one a health care war and the other, an economic war.

Health Care War – Obviously, this is not our area of expertise, so when life is threatened, one should at least find an expert.  Dr. Scott Gottlieb is one and in his recent editorial in the Wall Street Journal this past Monday, he lays out the two ways drugs are being developed in the near term: antivirals and antibody therapies.  Both of these approaches could be ready before a vaccine, which is probably still a year away.  These two drug approaches would help to blunt the ferociousness of Covid-19, while the hope is that a vaccine would prevent the illness altogether.  And while we are hopeful for any help, Dr. Gottlieb extends our return to normalcy much farther than our politicians, at least until year end.

Economic War – At least we have a little better understanding of the recession we have entered, and the bear market that started last month.  This bear market is very purposeful and self-inflicted; the slowing down, and in some cases, stopping economic activity to slow and hopefully, stop the spread of the virus.  The health care fallout created by the virus is staggering and dire; the economic cure will be just as dire. As we watch the normal monthly and quarterly statistics, so far, the real numbers (unemployment) and the estimates (GDP) are off the charts to the down side.  A bear market usually follows three stages: 1) a down-side drop (or in this case, a crash), 2) an equity rally off the first low set (sometimes retracing ½ of the initial drop) and finally 3) a consolidation phase that takes the market down at least to retest the initial low, and in some cases takes the market well below the original low point.  Some bear markets are relatively short (nine months) and some may last over three years, like the tech bubble from 2000 to 2003.  The 2008 crisis lasted 18 months, from October 2007 to March 2009.  Longview’s primary thesis is that we are currently in the upside bounce phase, which is being materially supported by Congress and our Federal Reserve Bank.  While the news of Covid-19 should get slowly better over the next six to eight weeks, the economic news may get significantly worse, bad enough to constitute the third stage, a new testing of the bottom.  Early on, many economists have theorized that the economy may start growing again in the late third quarter, possibly September or October of this year.  Our feeling now is that it may take much longer.  Richard Bernstein, in a recent Barron’s article wrote: “At bottoms, people just assume that horrific performance is going on forever and nobody wants to invest.”  The same feeling many of you felt in early March 2009! Protecting your capital is our primary responsibility, and while we don’t know for sure where the market is going day to day, history is an excellent guide.

Many thanks for your continued confidence in Longview.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

2nd Quarter 2020 Market Commentary

Written by Wes Johnson on . Posted in blog, Investment Planning.

Note: This market review was published on April 8th, 2020 and may not be reflective of current market or investing issues.

2020 started off with a continuation of the longest bull market in history, but it didn’t last long into the new year.  The major U.S. Indices hit their final high of the bull market on February 18th, 2020, and it was quickly downhill from there.  It took slightly more than a month for the S&P 500 to reach its recent low of 2,191.86, a decline of more than 35%.1  This included the fastest 20% decline in its history, multiple days of futures trading being stopped at their maximum loss and gain, multiple tests of the market “circuit breakers” that pause trading for 15 minutes when the index falls by 7%, and some of the best and worst single days in the history of the market.  The first quarter of 2020 was truly one for the history books.

We are living through a time that will be talked about for generations.  We are in a health crisis the likes of which have not been seen for more than 100 years, and it is having drastic effects on the economy.  A new virus that currently has no cure, no vaccine to prevent, and no heard immunity; it is truly a perfect storm.  This virus has lead governments across the globe to take measures that only months ago we would have likely considered unthinkable.  Global supply chains have been shut down, countries have banned travel, thousands of businesses in the United States have been forced to close, and millions of Americans have already lost their jobs.  Unfortunately, this is only the beginning, and it is likely to get worse before it gets better.

The Federal Reserve has thrown everything it has at the markets in order to try and dampen the long-term effects of this crisis.  They cut rates by 1.50%, all the way to 0%, and all of the cuts were made during emergency meetings.  In addition to rate cuts they also announced multiple assets purchase programs which include buying treasury bonds, mortgage backed securities, municipal bonds, and for the first time in history, investment grade corporate bonds.  The Fed is not alone.  The federal government has also passed a massive stimulus bill of more than $2 trillion, which includes direct payments to American tax payers.

To add to the uncertainty, there was also stress on the global energy markets.  At their latest meeting, the Organization of the Petroleum Exporting Countries failed to come to an agreement with Russia on production cuts.  This led to an oil price war, with Saudi Arabia increasing production to their maximum capacity and dropping prices.  The price of oil has seen a dramatic drop since that meeting falling to a low of below $20.  This has put significant stress on U.S. energy companies which require a price much higher in order to produce a profit on their oil drilling operations. 

With all of the uncertainty surrounding the COVID-19 outbreak and the oil price war it is difficult to understand the effects that will be seen in the economy and the financial markets, both short and long term.  With that said, volatility is likely to remain high over the coming months while investors digest economic data, company earnings, and continued economic shutdowns.  It is also probable that some small businesses that have been forced to close will not be able to reopen and some of those that have lost their jobs will not see those jobs return.  The one thing that is certain is that this crisis is going to have real and lasting effects on our economy and on our population. 

We wish all of our clients, friends, and family health and safety during these uncertain times.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.