Welcome to the first Return on Time Newsletter. ROT is a no-BS newsletter that cuts through the overly optimistic and overly pessimistic far-too-confusing media to deliver a balanced view backed with data so you can make profitable decisions. 

Return On Time Invested (ROTI) in 10 minutes a week.

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VALUATIONS MATTER:Valuation is a critical process of determining the current (or future) worth of an asset or a company. Today, the stock market is valued at levels last seen only in 1929 and 2000. While valuations don’t represent the return you receive in the short term, they do tend to accurately predict your 10 year return. Every week, we will keep a pulse on our top 4 US market valuation indicators.

BENEATH THE SURFACE: Microsoft, Apple, Amazon, Alphabet (Google), and Facebook now make up ~26% of the S&P500. This is the highest weighting of top stocks since the Dot Com Bubble in 2000. So, when you invest $1000 in the S&P500 today, nearly $260 goes into 5 companies, $1.80 goes into airlines,  $0.10 goes into retailers, and you see a similar trend in other industries that are serious components to the US economy. So much for diversification!

Just for reference, below is a graph showing the weightings of top 10 S&P500 holdings from 1996 to 2020.

SO, WHERE’S THE OPPORTUNITY? The pandemic has benefited big tech significantly during the pandemic. However, in the long run, big tech relies on a healthy economy with many businesses thriving. For example, Alphabet and Facebook are heavily reliant on ad spend by other businesses. Contrary to popular belief, the top 5 tech companies are not omnipotent. We’ll share some key insights in our newsletter next week that help you identify potential opportunities! 

WORRIED? STAY INVESTED. It’s important to stay invested because timing the market simply does not work.There are many investors that are very upset that they panic sold in late March, locking in temporary losses as permanent losses. Here is a screenshot of one of my portfolios since late 2015 and while it’s up significantly, imagine if I had sold in late 2018 or during this current crash. My thesis is very simple – only deploy cash when an asset is valued fairly and never sell an asset you believe in even if it drops significantly (as long as the business fundamentals remain strong long term). Instead, buy more! BOTTOM LINE: The worst thing you can do is panic sell or sell out of existing assets thinking cash is a safe alternative. Ray Dalio says, “cash is trash” when we can press a button and print a few trillion. It’s a scary market with very serious distortions but great long term opportunities always exist. And please, don’t be a typical post-March 2020 Robinhood trader. Invest responsibly.

STR8 UP FACTS:  

• Those of us that read finance news regularly were slammed with doom and gloom headlines suggesting that US GDP plunged by 33% in the 2nd quarter. That is scary, but don’t listen to the headlines. The real decline in Q2 2020 is 9.5%. That’s still the worst in nearly 70 years of quarterly data but we did shut down the entire country… are we really all that surprised?
• Relatively good news: The Atlanta Federal Reserve Bank GDPNow model is currently estimating 20.5% (seasonally adjusted annual rate) real growth in Q3 GDP. 
• Last Thursday, the Bureau of Labor Statistics released that 1.2m initial jobless unemployment claims were filed in the week prior. So far, we are at 20 straight weeks where unemployment claims have been higher than the worst weeks of the 2008-2009 recession.
• Last Friday, the Bureau of Labor Statistics released the July official unemployment rate as 10.2%, down from 11.1% in June. At the same time, the data shows that the jobs market slowed in July. Keep in mind that the Great Recession peaked at a 10% unemployment rate. Unofficially, the unemployment rate is likely a few percentage points higher than reported.

Other interesting economic data: 

• The US personal savings rate is up substantially from 7% average to as high as 33.5% in April to 19% in June 2020. Not completely surprising, but some of this has to do with various stimulus efforts as well.
• Government transfer payments (pretty much all the stimulus) is at an all time high. As a result, personal incomes have actually increased by 7.6% year over year as of June 2020 during this recession. This is pretty much unheard of as incomes typically decline during a recession. Thank ya, government.
• OpenTable publishes a daily report on the state of the restaurant industry, drawing on its significant data sets. As expected, seated diners are still way down in the US but we have seen a consistent recovery here since the beginning of June 2020 when seated diners were down nearly 81%. In some other countries that controlled the pandemic early on, they’ve recovered and then some.
• Google Mobility publishes regular reports on COVID19 mobility drawing on its vast user data (both historical and real time). Yeah, not a fan of the privacy part but hey, at least we have the data.
  Latest Google Mobility Report for the US

BOTTOM LINE: The US economy is resilient, even in the face of our pandemic and growing divide. The last few months are evidence of American ingenuity (as well as ignorance that is costing us). One of the biggest issues we face today is all the seriously conflicting data like a declining employment rate, yet the second highest week of Americans receiving unemployment. The data is concerning and there is serious questions and likely pain ahead, but first we really need to bring this pandemic back in control in the states. Maybe the bottom line is actually… consider wearing a mask to save your economy and the American people faster.

Better yet, get a free mask on us. Refer 5 friends to our newsletter and we’ll send you a mask, free. Yes, free with 5 strings attached.

If you haven’t already buckled down for this recession, it’s not too late to start. We live in a tale of two worlds where ~32.1m now jobless Americans are receiving very significant government stimulus along with businesses in a number of ways.

So, how do you prepare? 

1.  Always have an emergency savings fund, ideally equal to at least 6 months of your average expenses. To be on the safe side in the current climate, 12 months is more ideal. If you haven’t started building one yet, you can start now. Financial safety is key to long term financial success.
2. Generate a safe return on your idle cash like your emergency savings fund. While most major banks have paid close to 0% interest since 2009 on savings accounts and abysmally low CD rates, there are a number of banks that maximize interest on your idle cash. The last few years, we have been using DepositAccounts.com to find the highest interest rates:
   Check out the latest & highest CD interest rates available.
   Check out the latest & highest bank interest rates available.
3. Optimize your credit score. Banks are tightening lending standards (aka making it harder to borrow) across home loans, auto loans, credit cards, and other lending products due to high levels of uncertainty in the economy. If you find yourself in a bind, a strong credit score may serve as a helpful lifeline. If nothing else, a strong credit score will help ensure you can continue living your life (e.g. buying a home, or a car) with fewer hurdles during the recession.
   You Can Instantly Increase Your Credit Scores for Free
4. Refinance your mortgage if you own a home. Mortgage rates are at record lows: A 30 year mortgage is now below 3% APR while the 15 year is as low as 1.99% APR with the most aggressive lenders. This is a great way to lower your monthly payment, save some extra cash every month, and/or build more equity.
   Compare rates today with BankRate
   Once you have some quotes, make sure it actually makes sense with Nerd Wallet’s Mortgage Refi Calculator
5. Pay down credit card debt. Credit card debt sucks. It’s a real trap with average credit card interest rates at roughly 16.03%. Pay it down as quick as possible, as long as you aren’t compromising your financial needs.
6. Maximize credit card rewards. Using credit cards with discipline is a great way to generate some extra cash via rewards, but it only works if you always pay the full balance on your credit card monthly.
7. Take advantage of bank credit card promotions/offers. Most banks now have an “Offers” or “Promotions” tab when you login for various retailers/products/services that you likely use regularly. You typically need to activate this offer in your login with a particular credit card. Here’s an example of current deals from Chase Bank (there is 44 available as of 8/6/2020):
   

BOTTOM LINE: We’re in the midst of a recession that has largely been masked by massive government stimulus. A lot of that major stimulus is now decreasing, and it’s time to be cautious with your finances until we have more clarity.Don’t make any financial decisions that could easily backfire… consider if you have enough cash/assets to live for 12 months without a job. It’s a strong exercise in general because life does happen. Hope for the best, plan for the worst.

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The life of an entrepreneur is filled with ups and downs. As the saying goes, life happens. And the more successful you are, the more life happens. Every week, we’ll share some inspiration or a short story on these key make-it-or-break-it moments. The first few weeks, you’ll hear from our founder Fehzan!

Every week, we’ll point out a few of our favorite resources/articles/news that actually provide value. 

Chamath Palihapitiya: Skip government bailouts, put more money ‘into the hands of consumers (6 Minute Video) – A quick background on Chamath followed by a few minutes of genius.

The ‘death of valuation’ and what it could mean for investors going forward (5 Min Read) – Warren Buffett in 1967, the growing dominance of growth stocks, and one firms realistic prediction. Short and to the point.

Robinhood Has Lured Young Traders, Sometimes With Devastating Results (5 Min Read)– A sobering perspective on Robinhood… maybe don’t bet the house! The stock market is not meant to be a boredom driven casino.

Two-thirds of laid-off workers may temporarily be receiving more money in unemployment benefits than they did from their jobs (5 Min Read) -​ 68% of jobless workers brought home more money with the CARES Act unemployment benefit, and 1 in every 5 nearly doubled their lost earnings with unemployment.

Why This is Unlike the Great Depression (Advanced 30 Min Read) – A great comparison to the Great Depression and why the COVID19 recession is just not the same… advanced yet highly enjoyable read. Warning: May still put you to sleep.

What did you think of our newsletter? Let us know, your feedback will help us improve the quality of our newsletter.

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