The COVID-19-induced stock market crash isn’t the first decline I’ve experienced as an investor, but it’s been a challenging one to grapple with. During past downturns, I’ve only had to worry about my portfolio’s health — not my physical health. But now, there’s so much uncertainty just not regarding the stock market’s recovery, but our country’s physical, economical, and mental recovery on a whole.
All of this has prompted me to invest a little bit differently this time around. Here are a few tweaks I’m implementing.
1. I’m diverting less spare cash to my brokerage account
Right now is a prime opportunity to load up on quality stocks at a discount, and during a normal market crash, I’d be funneling pretty much every extra dollar that comes my way into my brokerage account. But this situation is different, and because we have no way of knowing what life will look like two, three, five, or 12 months from now, I’m being a little more cautious — namely, by padding my emergency fund (even though it’s already at a healthy level) and then putting what’s left over into my brokerage account. I want that extra cushion in the bank in case a full-blown recession hits, and while I’m losing out on some opportunities by padding my savings, I’m also gaining peace of mind.
2. I’m focusing on individual stocks over index funds
Index funds can be a solid buy during a stock market downturn because their movement mimics the broader market. If you buy, say, an S&P 500 index fund when that index is down, once it picks back up, you stand to gain — all without having to do a ton of legwork. I happen to be a big fan of index funds and told myself I’d buy more if the market went down, but instead, I took the opportunity to buy a few tech stocks that I’d been eying for months (or years) that were finally affordable enough to snatch up, as well as some relatively cheap travel stocks. The reason? I’d already done my research on these companies and felt they were a good buy before the market tanked, so I wanted to snag them at a lower share price while I could.
3. I’m front-loading my retirement plan contributions
Because I own an S-Corp and pay myself a salary, I have the option to fund my Solo 401(k) a couple of ways — I can contribute a maximum of $19,500 from my salary, which is the 401(k) limit this year for anyone under 50, and I can then contribute a portion of my business’s net income, up to a maximum of another $37,500 on top of my $19,500. Because I don’t know how much income my business will generate, I can’t yet calculate what my total allowable Solo 401(k) contribution will be for the year. But since I know I’m eligible to put in up to $19,500 from my salary, I went ahead and front-loaded that contribution so it’s all in my account. Normally, I’d divvy that $19,500 up across 12 months of contributions, but since now’s a good time to buy long-term investments at a discount, I wanted that money in my 401(k) right away.
Though stock market crashes are fairly common, this particular one occurred so rapidly it threw investors for a loop. And the fact that it was spurred by a major health crisis has made it all the more difficult to process. As such, I’ve made a few changes that I feel will benefit me, and I’d encourage any investor, even seasoned ones, to see if it makes sense to do the same.
Main Street to Become Sole Investment Adviser to HMS Income – Stockhouse
HOUSTON, July 2, 2020 /PRNewswire/ — Main Street Capital Corporation (NYSE: MAIN) (“Main Street”) is pleased to announce that MSC Adviser I, LLC (“MSC Adviser”), a wholly owned subsidiary of Main Street and the current investment sub-adviser to the current investment adviser and administrator to HMS Income Fund, Inc. (the “Fund”), has entered into a definitive asset purchase agreement under which MSC Adviser will become the sole investment adviser and administrator to the Fund, subject to certain closing conditions. The parties expect the transaction to be completed in the fourth quarter of 2020.
“We are excited about the opportunity to serve as the sole investment adviser to HMS Income Fund,” said Dwayne L. Hyzak, Chief Executive Officer of Main Street. “Assuming this role is a natural progression from our role as investment sub-adviser to the fund. Since HMS Income Fund was launched in 2012, we have sourced each of the fund’s investments and are the right party to successfully position the fund for the future.”
Following the closing of the transaction, MSC Adviser will replace HMS Adviser LP, a wholly owned affiliate of Hines Interests Limited Partnership (“Hines”), as the investment adviser and administrator to the Fund. MSC Adviser’s proposed investment advisory agreement is intended to benefit the Fund’s stockholders as the management fee rate will be reduced from 2.00% to 1.75%, with no changes to the incentive fee calculations. The new advisory agreement with MSC Adviser, which has been unanimously approved by the board of directors of the Fund, including all of the independent directors, remains subject to approval by the stockholders of the Fund.
Consummation of the transactions contemplated by the asset purchase agreement is subject to approval of the new investment advisory agreement by stockholders of the Fund and other customary closing conditions. Post-closing, the Fund is expected to change its name to MSC Income Fund, Inc.
ABOUT MAIN STREET CAPITAL CORPORATION
Main Street (www.mainstcapital.com) is a principal investment firm that primarily provides long-term debt and equity capital to lower middle market companies and debt capital to middle market companies. Main Street’s portfolio investments are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. Main Street seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. Main Street’s lower middle market companies generally have annual revenues between $10 million and $150 million. Main Street’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies.
ABOUT HMS INCOME FUND, INC.
HMS Income Fund, Inc. is a specialty finance company sponsored by Hines that makes debt and equity investments in middle market companies, which it defines as companies with annual revenues generally between $10 million and $3 billion and in lower middle market companies, which it defines as companies with annual revenues generally between $10 million and $150 million. The Fund is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended.
This press release contains certain forward-looking statements, including but not limited to those relating to potential approval of the new investment advisory agreement with MSC Adviser by the Fund’s stockholders, completion of other closing conditions to the asset purchase agreement, consummation of the transactions contemplated thereby and MSC Adviser becoming the sole investment adviser and administrator to the Fund. Any such statements other than statements of historical fact are likely to be affected by other unknowable future events and conditions, including elements of the future that are or are not under Main Street’s control, and that Main Street may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance or events. Actual performance, results and events could vary materially from these estimates and projections of the future as a result of a number of factors, risks and uncertainties, including, but not limited to, (i) the satisfaction or waiver of certain closing conditions specified in the asset purchase agreement relating to the proposed transactions, including the consents of certain third parties and the approval by the Fund’s stockholders of the new investment advisory agreement, (ii) the parties’ ability to successfully close the proposed transaction and the timing of such closing, (iii) the possibility that competing offers or acquisition proposals related to the proposed transaction will be made and, if made, could be successful and (iv) those described from time to time in Main Street’s filings with the Securities and Exchange Commission. Such statements speak only as of the time when made and are based on information available to Main Street as of the date hereof and are qualified in their entirety by this cautionary statement. Main Street assumes no obligation to revise or update any such statement now or in the future.
SOURCE Main Street Capital Corporation
Japan's investment drive in LNG faces risk of souring: study – The Guardian
By Aaron Sheldrick
TOKYO (Reuters) – Japan’s banks and public agencies have funnelled nearly $25 billion into liquefied natural gas (LNG) projects since 2017 but the investments may sour as prices plummet from the COVID-19 pandemic and as climate change risks rise, a new study shows.
Spurred on by the government to boost energy security since the 2011 Fukushima disaster shut down the country’s reactors, Japan’s investment in LNG rivals that for coal, the dirtiest fossil fuel, while more evidence is emerging of the high climate impacts from LNG and gas.
The backing of high-risk projects that require decades of sales to return investments looks questionable, with some facing the risk of delay or being scrapped, the study by Global Energy Monitor (GEM) released to Reuters showed.
“The original rationale for the program – enhanced energy security – appears now to be fundamentally flawed, as the simultaneous shocks of the COVID-19 pandemic and the 2020 oil price crash reveal the vulnerability of global LNG supply chains,” analysts Greig Aitken and Ted Nace wrote in the report.
Japan is the world’s biggest importer of LNG, with burning gas from LNG producing about 40% of the country’s electricity, though purchases are in long-term decline.
Competition from renewables and energy storage, which are growing cheaper, may also hit the investments, the report said.
GEM is a network of researchers focusing on fossil fuels and alternatives, the grouping says.
Japanese banks, public agencies and other entities have provided $23.4 billion of loans and support in 10 countries for more than 20 LNG terminals, tankers and pipelines, GEM said. Fourteen more LNG terminals in 11 countries are in line for Japanese financial support, the report said.
The report names government-owned Japan Bank for International Cooperation (JBIC), along with Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group, the country’s biggest commercial banks.
(Graphic: Top ten LNG loan arrangers since 2017, https://fingfx.thomsonreuters.com/gfx/ce/dgkplxjbdpb/LNG-league-table.PNG)
In response to questions about the report from Reuters, the commercial banks pointed to recent policy changes tightening fossil fuel lending, where they recognized the climate impacts of them. They are also big lenders to renewable energy infrastructure.
They declined to confirm the lending amounts or give details on any revisions in loan values. JBIC did not respond.
Underlining the risks to investments, Royal Dutch Shell this week announced plans to slash the value of its gas and oil assets by up to $22 billion.
Climate change is returning to the global agenda even as the coronavirus pandemic, which dominated headlines for months, is worsening.
More attention is also being focused on the atmosphere-warming impact of methane, which is often released or leaks from gas and oil facilities.
(Graphic: Spot LNG prices in Asia, https://fingfx.thomsonreuters.com/gfx/editorcharts/xlbpgowjepq/eikon.png)
(Editing by Jacqueline Wong)
Weekly Investment Update – 1 July 2020 – Investors' Corner BNP Paribas
US: a rethink of exit strategies
Across the US, 30 June saw more than 48 000 coronavirus cases – the most of any day of the pandemic. Officials in eight states — Alaska, Arizona, California, Georgia, Idaho, Oklahoma, South Carolina and Texas —announced single-day highs.
The record came on the same day as Dr Anthony Fauci, America’s top infectious disease expert, told Congress that the rate of new coronavirus infections could more than double to 100 000 a day if current outbreaks were not contained. He warned that the virus’s progression across the south and the west “puts the entire country at risk.”
The spread of the virus in the US is already forcing a rethink of the exit strategies from the lockdowns. States that had reopened either partly or completely are reversing course. The public appear to be taking matters into their own hands: retreating from public places such as restaurants and bars for fear of catching the virus, even when public policy does not require them to do so.
China: Beijing outbreak contained, but a new spike in Hubei
In China, the outbreak in Beijing has been brought under control, according to the Chinese Centre for Disease Control and Prevention. The lockdown measures imposed on several communities in Beijing have been lifted.
However, new measures have been introduced to control a fresh outbreak in nearby Hubei province. An area with almost half a million people in Anxin county, less than 100 miles from Beijing, has been sealed off under the same strict protocol that was imposed at the height of the pandemic in Wuhan earlier this year.
The news from Germany has been a little more encouraging with the estimates of the effective reproduction rate by the Robert Koch institute now back below one after a brief foray above two.
Containment without lockdowns and with a vaccine?
We think that the message from China and Germany is clear: it is possible to contain the virus outside of lockdowns, but it may require severe quarantine measures or a highly efficient test-and-trace regime that is capable of managing local flare-ups.
We continue to struggle with the idea that exits are straightforward and life can quickly return to normality in the absence of a vaccine. Indeed, we note comments by Dr Fauci that a vaccine might not be sufficient to generate herd immunity in the US because the vaccine might not be entirely effective and a significant minority of the population might refuse to take the vaccine.
Policy: slow progress in Europe
There is steady, but slow progress in Europe. Meeting in Meseberg, Chancellor Angela Merkel and Emmanuel President Macron reaffirmed the importance of a recovery fund that “has to really help those countries that are otherwise at risk of being much worse affected by the crisis”. However, there was also recognition of “some resistance to be overcome”.
Today, Germany assumes the rotating presidency of the Council of the European Union for the next six months. Chairing the meetings of ministers of member states will allow Berlin to shape the agenda more so than usual. Other countries will be looking to Germany to help broker compromises rather than to pursue specific national interests.
These next six months can be seen as crucial for Europe as the continent struggles to cope with the worst peacetime recession ever. If the EU can agree on the most impressive act of cross-border solidarity ever along the lines of the EUR 750 billion fund proposed by the European Commission, the EU and the eurozone could emerge stronger.
Any perception of a lack of solidarity between the lesser-hit north and the worse-hit south could undermine the cohesion of Europe. We expect European leaders to reach agreement on a fund eventually, but we suspect that the plan originally proposed by the Commission will be watered down.
Beyond fixing a course for the EU’s post-pandemic recovery, the region’s future relationship with the UK will also need to be re-defined before the end of the year.
QE challenge countered
The ECB has seemingly managed to defuse the row over the legality of its quantitative easing (QE) programme by publishing a defence of the scheme in its latest set of policy meeting minutes. German parliamentarians appear to be satisfied with this response, although it might be more accurate to say that they want to make the problem go away.
However, it is worth noting that the ECB emphasised the importance of respecting the capital key and issue limits in the design of an appropriate asset purchase programme, and that in turn could constrain the capacity of purchases in the future.
Meanwhile, the Standing Committee of China’s National People’s Congress is reported to have voted unanimously for the controversial national security law covering Hong Kong. In response, pro-democracy opposition party Demosisto has announced that it will disband. The US is revoking Hong Kong’s special status.
Markets and data
- Economic data continues to improve as lockdowns are eased (selectively). China is leading the way with manufacturing and services purchasing managers’ indices (PMIs) at above 50 and new export orders rising sharply. Levels of mobility are continuing to increase. This could help the real economy to rebound at a faster pace than was originally envisaged.
- However, concerns about pockets of rising numbers of new infections are weighing on market sentiment. This concern is tempering any move higher, causing markets to drift sideways. At the same time, monetary and fiscal support continue to underpin economies, and by extension markets, and buoy risky assets.
- In response to the Covid-19 crisis, we have seen USD 263 billion in ‘pandemic bond’ issuance, driven by companies and development banks to counter the negative economic impact of the virus outbreak; 51% of this pandemic bond issuance has come from China.
- Demand for high-yield (HY) bonds may rise as companies cut dividends. Central bank support appears to be making investors less wary of HY, particularly higher-rated HY issues. The new issue market has surged, with funding costs down significantly. This has dramatically improved the balance sheet liquidity of many HY companies and continues to cause risk premiums to tighten. That said, we expect downgrade and default risks to be higher for smaller and lower-rated HY companies.
- Outflows out of money market funds are accelerating. This excess cash, which had sought a safe haven during the height of the pandemic, is now looking for better returns. This continues to contribute to demand for risky assets and compress risk premiums.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
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