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Economy Opening… Stop… Start…

While everyone is eager to get the economy started, get back to work, get back to normal! What we have seen this week with States and industry openings, may be a harbinger of the new “normal” at least for some time.

We will reopen but we may not be normal for a while

Since we know social distancing will stay in place for some months to come we can pretty much rule out crowded karaoke night at the local pub, or that big stadium rock concert you bought tickets to happening.

A few states like Texas and Georgia began opening their economies in late April. Almost immediately cases of COVID-19 increased in the Texas panhandle, due to outbreaks in meat packing plants amongst the approximately 12,000 industry workers. Although all plants did not reclose, early response teams were sent to test and get a handle on the outbreaks.

Ford Motor Company opened its American auto plants just recently and then was forced to shut down two plants temporarily. While one plant had a worker test positive and was shut down for disinfecting, another production line was halted because workers tested positive at a nearby parts plant – a link in their supply chain – and were unable to continue production.

We have seen the gigantic food industry in our country try to pivot their processing, packaging, and delivery resources to retail and away from restaurants – some of whom have shuttered completely, others still open but at a much reduced rate for take out only. While a restaurant can shut down in a day, a farmer can hardly stop a radish from growing or a hog from fattening up, try as they might. The food that would normally go to restaurants or big events now has no where to go. And this affects both small and large farms. It can take years to build up a customer base for your product. Farmers can’t just knock on doors and sell those products to a few grocery stores, and so that means loss. Not only loss of income but loss of investment dollars that just went to waste. And a break – if temporary – in the food chain even after reopening the economy. farmers may not have had the wherewithal, nor the confidence, to replant and regrow the next round

As we begin to reopen we may see holes popping up in several supply chains, not just food. What products should have gone into manufacturing or retail for sale are now hanging out in storage, or worse, have ended up in landfills. Once production starts up across the country (and the world) there is no guarantee that raw materials and goods and even services will be readily available on time – which is what a well working supply chain requires.

Besides supply chain kinks, possible worker absenteeism from outbreaks, businesses do not thrive unless they have that magical thing called the customer. While continuing to wear masks and maintain social distance are on reopening plans, what can’t be planned is customer confidence. A crowded waiting room once set a glow on restaurateurs’ hearts, but that sight might make potential customers flee. Imagine the sight of a crowded waiting room in the doctor’s office. It could be some time before customers are open for reopening.

And like the great recession from a decade ago, while we can’t be certain how quickly the economy recover, what we can be sure of is that at least some businesses will never reopen. We have already lost to the coronavirus Souplantation (and possibly all salad bars for all time), JC Penney retail, and at least 30 locations of Gold’s Gym that will never reopen.

Road Map to Opening

The news can be confusing. We hear that the nation is slowly reopening. Each state has a different plan, and county, and even each city! But a few clicks can keep you informed.

Information about your city is a few clicks away

Generally speaking this is a State issue. While the Federal government can give guidelines on how a State operates – including rules about opening businesses, wearing masks, etc. – only a State can make laws that govern behavior on the ground. Even each county and city is in charge of how reopening goes in their particular municipality. Though most States require that rules should not be less restrictive than the State level.

The United States Reopening Plan is located on the official White House website if you are looking to find out what the Federal plan looks like.

To find out what affects you, start with your own State’s website. In California, for instance, there are stages which you can find out about on the California road map site. Looking for your State’s official website is simple. The IRS has culled a list of each state government website so you can easily click through to the reopening plan.

If you are looking for more specific information on COVID-19 you can go to the CDC’s website where they list the websites for the health departments in each State.

And if you are looking for information about what is required in your particular city, you can easily find your city by searching the name and “official website” which will usually end with a .org. Particularly if you own a business it is important to get the information that directly affects you. And revisit often as this is a dynamic situation and you don’t want to be either behind or ahead of the curve.

Tried Calling?

In response to the increased requests for information the Internal Revenue Service is adding 3,500 telephone representatives to answer some of the most common questions about Economic Impact Payments.

Calling to find out about payment now easier

Though that number may seem abundant it certainly will not completely eliminate long hold times if you do choose to call. The IRS continues to encourage the use of IRS.gov to find answers. If you do call answers for most Economic Impact Payment questions will be available on the automated message for people who call the phone number provided in the letter (Notice 1444). Those who need additional assistance at the conclusion of the message will have the option of talking to a telephone representative.

The IRS regularly posts new and updated answers to the most frequently asked questions about Economic Impact Payments and the Get My Payment tool. Those who wish to know the status of their Economic Impact Payment are reminded to check Get My Payment regularly; the information is frequently updated as the IRS continues to process the remaining payments for delivery.

For those who are eligible for an Economic Impact Payment but aren’t required to file a tax return, the IRS reminds them the Non-Filers tool also remains available in English or Spanish for them to register for a payment.

Free Credit Reports

Normally all consumers are entitled to a free credit report from each of the three major reporting agencies once a year. This was provided by the Fair Credit Reporting Act (FCRA) which required Equifax, Experian, and TransUnion to provide you with a free copy of your credit report, at your request, once every 12 months. And this is enforced by the Federal Trade Commission (FTC), the nation’s consumer protection agency.

Now, through April 2021, all three reporting agencies will be offering one free report weekly so that you can more closely monitor your credit. You can got to AnnualCreditReport.com to request your copies.

The credit agencies cull information from all your lenders and determine your credit worthiness based on how much you earn, how much you owe, and how much credit you have available to you. They also take into account your payment history, whether you have been chronically late, or always on time paying your creditors, medical bills, and sometimes even rent. It is important – especially if you are going to be requesting a new loan (credit card, mortgage, car loan, etc.) in the near future – to make sure all of the information on your report is up to date and accurate.

What Are Libraries Doing Now

In the era of coronavirus almost every business has been affected. But we forget sometimes about the other resources in our community. What about our libraries?

Still a great resource even in “stay at home”

During and after disasters and big community events libraries are normally available and open, providing services from information, to shelter, entertainment, to food security. In this pandemic though they can’t be open. But that doesn’t mean they have given up serving us.

Many libraries across the country had already gone online in some way. Either they provided ebooks, audio books, and newspaper access on their websites. Now this forum is all they have so many are bumping up their presence.

While it may have been years since you have visited your local library in person you may miss them now. Here in the Coachella Valley our library system is run by the County of Riverside. We also have access to the Rancho Mirage Library and Conservatory.

What libraries provide us in normal times and how they are coping now:

Libraries provide us with books. Right now you can’t check out a physical book because the library is closed. But check your library’s website – there are many, many books available for e-readers or audio books. And if you don’t have a library card, don’t worry, you can get one online too.

Libraries provide us with supplemental education. If you check your library website you will be able to find activities and guidance for homeschooling and supplemental education for grades K-12.

Librarians steer you towards the right resource. With libraries closed it may be difficult to find the information you are looking for to support your argument for a paper or find out what years the Civil War was active, for instance, from reliable online resources. But guess what, you can use the library’s chat function to talk to a librarian who can still steer you to the right resource which you may even be able to check out as an e-book.

Libraries provide free activities. For school age children it can be every ten minutes that they are bored. They (and you) may miss the library activities where a zoologist would bring in a lizard to pet, or a puppeteer put on a show. Instead of YouTube you can send your kids to the library’s website for fun (and educational) games to try online as well as curated videos.

Libraries provide entertainment you would not see elsewhere. Maybe it’s our puppeteer from above or a flutist playing chamber music but libraries are always looking for unusual and mind expanding entertainments. While it may be some time before you can actually go to the library to see something interesting, the library system is stepping outside its comfort zone and entering the realm of online entertainment like this video from the Riverside County Library system posted on May the 4^th (be with you!) about Star Wars. Some libraries are even continuing with their activities online like Cathedral City Library’s Triva and Mocktails weekly event for adults.

And if you happen to have a book checked out right now you’re forgiven! No late fees until libraries are reopen!

Cannabis Markup to Remain the 80%

The CDTFA (California Department of Tax and Fee Administration) is charged with determining the California excise markup amount every six months.

Earlier this year it was raised from 60% to 80%. The CDTFA has now released its determination for what the markup will be for June-December 2020 and it will remain 80%.

Distributors of cannabis products are responsible to calculate and collect the excise tax from retailers. You can find out more about cannabis tax rates and calculations at CDTFA.ca.gov

Time to Retire?

If you are nearing the age of 62, and particularly if you have been laid off or your work reduced due to the coronavirus, you may wonder if it’s time to take social security benefits.

While you can that doesn’t necessarily mean you should. The Social Security Administration has on their site a benefits calculator which can help you figure out how much you will receive each month. Perhaps the most important consideration is that once you begin taking your benefits they will not change. If you take your benefits at age 62 you will receive 75% of what is owed to you – this is because you will be receiving benefits longer. If you take your benefits at your full retirement age (this age depends on your year of birth which you can find out here) you will receive 100% of the benefits due to you.

So, as you are considering whether you can make ends meet, keep in mind that if you continue to work before you reach your full retirement age your benefits will be reduced. The good news though is that your benefit will be adjusted based on your continued work and added to your benefit amount once you reach full retirement age.

But wait, there’s more. Have you worked enough? In order to be eligible to receive benefits you must have earned 40 credits – translated into English that means you have to have worked for a cumulative 10 years at a job where you were paying into the system. So, that means if you worked 5 years as an employee and 5 years as an independent contractor and have not paid self-employment taxes then you have 20 credits or 5 years towards receiving social security.

You can make up for those 5 years by paying those back taxes. Or you can get employment with a company that will class you as an employee – if you have time. Your ten years needs to be earned before you reach your full retirement age. What is important to know is that income earned as an independent contractor is not calculated into your social security benefits unless you have paid self-employment taxes.

Whatever your age it is good time spent planning how and when you will take your social security benefits.

Online Buying Up

As one may expect, since stay at home orders, buying online has soared.

Adobe Analytics, which aggregates and analyzes more than a trillion data points from digital retailers that use its software — including 80 of the top 100 ecommerce sites — found online grocery store sales surged by 110% between March and April.

Most apparel stores have had to close because of the pandemic but have continued and even boosted their online portals. Clothing stores response was to slash prices by an average of 12% between March and April — the largest monthly price decrease on record says Adobe Analytics. That helped boost apparel sales, which rose 34% over the same period.

When retailers have an excess of one item they will put that item on sale. In this era of coronavirus that has not changed. What in the apparel industry is going on sale right now? Pants.

That’s right. As most of us are staying safe at home we are not putting on pants. But pajama sales have soared.

Why Some Mortgage Companies Aren’t Flexible

We have heard in recent months about how many Americans have lost their jobs due to the coronavirus pandemic and the stay at home orders. Many of those folks have a mortgage they may not be able to pay.

Mortgage servicers are not as flexible as banks

After the great recession, companies that offer home mortgages became more conservative in the borrowers they lent to. Before the crisis there was a virtual pandemic of what were called “Liar Loans” entering the mortgage market – essentially lending more than a borrower could reasonably handle.

What the mortgage market didn’t examine were the lenders. Not all companies that offer home mortgages are banks. Banks are mandated by law to hold a certain amount of cash in reserve. During a crisis like the one we are currently in they have been allowed to dip into those funds to keep the bank running – even as many people cannot pay their mortgage.

Those mortgage companies that are not banks are merely managing the loan, not the holder of the note like a bank. A mortgage servicer merely collects the mortgage payment from homeowners, handles things like taxes, and then sends the money to the investors – the holders of the note. What they get in return is a small sliver of each loan, allowing them to pay their expenses and maybe even make a bit of profit.

Why mortgage servicers cannot float delinquent borrowers is that unlike banks they are not made to hold cash in reserve. So, no matter how Congress may require banks to offer mortgage relief, mortgage servicers are not in that category, and so not obligated to live by the same rules. If you find your mortgage company not being helpful it may be that they are a servicer and not a bank.

The Supply Chain

In the past few months you may have had more time on your hands, watched more news, or been reading more. So, you may have heard recently this phrase “breakdown in the supply chain”. We thought we would visit this topic with a broad overview of what is a supply chain.

Raw Materials

There are several basic steps on the supply chain. First, before anything else raw materials have to have been identified and cultivated. If you are looking for an engagement ring – one of the first places on that supply chain must be mining for the diamond. If it is a pair of pants then you have to start with planting cotton, let’s say for simplicity.

The raw material step may itself have several steps. Let’s look at our pants. The cotton grower may actually purchase seed from someone else, so the seed producer is the first step. The grower of the cotton may not do anything else but grow it and pick it, then the next step is curing the cotton – cleaning and spinning it into thread. That processor may not actually turn that cotton thread into fabric, so that material now needs to travel to a fabric processor.

Supplier

Now that we have all this fabric there needs to be someone to get it to the people who will make the pants. Most processors are too small to be able to deliver their fabric all over the country, maybe even all over the globe. That is where the supplier comes in. A supplier usually focuses on getting goods from processor to manufacturer so they may have a wide variety of products they provide. A fabric supplier may also deal in other things their customers will need – if they are delivering to their customer who will make our pants, they may also pick up buttons, and zippers, maybe even the paper for labels for the pants, they may even supply sewing machines and their parts.

Manufacturing

Once the manufacturer of our pants receives all the materials it needs it can go through the manufacturing process which will include things like design, sizing, cutting, stitching the parts together, and labeling for sale.

Distributor

Now that the pants are made, unless the company that made them is huge and can afford their own trucks and drivers, it will have to engage a distributor to deliver the pants to the retail stores that would like to sell them.

Like suppliers, distributors can carry many different products. So, when they drop off those pants, they may also drop off shirts and purses to the retailer they have gathered from other different manufacturers.

Retailer

The retailer now has the pants and they need to find a way to sell them. They have to find a way to get in touch with customers and encourage them to come in and look at the pants – so that means being in a location where there is a lot of foot traffic or advertising, get the word out to a wide variety of people.

Consumer

The consumer steps into the store, spots the pants, treies them on and likes them, decides to buy them and all is well in the world. The supply chain has worked the way it was supposed to. Everyone happy.

On The Whole

Though it is called a ‘chain’ it is much less linear in a world economy and more like a web. When the pandemic broke out in China, many factories were initially affected by workers not coming to work because they were sick. That was a break in the manufacturing link of the supply chain. All the businesses before and after that step are negatively affected. If you have raw cotton, but the fabric processor doesn’t need it because the factory that manufactures the pants is shut down because too many people are sick, you are left with a lot of cotton and nothing to do with it. If it doesn’t get processed it will go to waste. If the processor has no one to sell to they can’t very well carry on processing cotton into fabric, they only have so much capital to spend and only so much storage space to hold on to unsold fabric.

On the other side, the customer will come into the store and find no pants on the shelves so they may walk away and go to another store. The suppliers and distributors in between are equally affected.

If there are supply chain disruptions all along the line, because of illness, or as with our “stay at home” orders, it puts the whole system in trouble. Because supply chains for almost all products are increasingly global and web-like, what happens in other countries can really affect what happens in ours. And all the workers along the line, at all the steps, are also consumers of our pants. We really are all in this together, on a lot of levels.