Podcast Episode - Getting Real With Your Money During The COVID-19 Crisis


Investing, Saving Money


March 22, 2020

Listen to Podcast Episode:

In today’s podcast, Suze opens up with a heartfelt and frank conversation about what is really going on right now, in response to the COVID-19 crisis and the need to save every penny.


Podcast Transcript:

Suze Orman here and you are listening to the Women and Money podcast, it is March 22, 2020. You know, it's been three weeks now since I posted the first podcast on March 1 saying, it's all right, not so bad, don't freak out, just let's see what happens. And I just want to say this to you, that I honestly believed at that date, honestly believed that the government would step in and really be bold in its moves and not stand in denial that this virus was real. And I thought for sure, of course, they're going to put away partisanship, they're going to put away everything, and all they're going to care about is that this is serious now. It's serious, and that they're going to take their example from what China did, and they're going to shut down the United States. I have to tell you, from the bottom of my heart, I believed that and then that didn't happen, and I continued to hear denial after denial. At first, you know, the message was, oh, it's only five people, it's not going to be bad. I'm like, no, what are you, crazy? And denial and denial and guess what? I'm still hearing denial because if this really was something that our government, in my opinion, was really putting your needs, your health needs, your life, in front of their economic perception as to how well they're handling this, they would have shut down the entire United States. If they had simply done that we would not be in the situation that we are in today. And today's podcast, I'm not going to lie to you, is a very hard one for me. It's hard for me because you know, when things start to happen, it affects everybody as well as, you know, you have people in there on the news and all of us are there to guide you and to make sure you're all OK, and give you, hopefully, unbiased opinions as to what's going on. And then it gets hard. It gets hard when you actually see people getting sick around you. You have one person that you know that's died. You know, so, before I even go on with this, you know, the NBC family lost a member of its family to the virus. Larry Edgeworth, who for years was the audio guy who went around with everybody when they did remotes, and everybody loved him. And this really was brought home to me last night when I was watching Rachel Maddow. And yes, I love MSNBC, I love CNBC, I love CNN. No, I do not like FOX because I just want you to think about this. Fox was, for how long, saying that this was a hoax, this was a political ploy? You do get, everybody, right, that they put your lives in danger? That they're part of the cause of this, do you get that? That so many people didn't take it seriously and they still don't take it seriously because of what they say on that network. Really? I don't care if you're Republican or you're a Democrat, just don't lie to the public when it's about their future. So, they're guilty as charged with everybody else who's been in denial. But the problem is, that when it hits home like it did last night, and I was watching Rachel Maddow and at the very end, as she was giving her tribute to Larry, she broke down in tears. And that's when I realized, of course, how much can one person take when you know what's really going on out there and you see the facts and you see the figures? And you know, I'm talking to all these people, and people that really know, people that are in the know, and they're saying things that are like, really oh my God, oh my God, really? That it's very hard to come out and do a podcast, or go on the air, or tell everybody things. And of course, I know my job is to make sure that you are hopeful and that everything is OK. But it's also really my job, in my opinion, to be as honest with all of you as I possibly can. And we now have crossed after three weeks into this, and our hospital systems, no matter what is being said every day at a press conference, that help is coming, ventilators are coming, this is coming. I'm talking to people who are running hospitals and they don't have anything. They're asking America if you have sewing machines, can you make them masks? Can you help them? The United States of America can't even provide for the medical staff that's to take care of all of us and to keep them safe and sound. So, as I'm looking at all of this and more and more people are getting sick and the numbers are expanding, and one state after another is doing the job that the government, the federal government, should have done three weeks ago and they're shutting everything down. The ramifications of this now because it's been allowed to go longer than it should have, are going to be devastating, to say the least. Now, I will, very shortly here, go into a Suze School. I will also be talking to you about the stock market and what you need to know. But this is really a lot larger conversation that I want to have with you right now. And this is a conversation about getting real. Getting real with the facts now, and the probability that when we do end this, and we will end this, this virus will end. Will it be eight weeks from now, six months from now? I don't know, but it will end. That we probably will not only find ourselves in a recession, it will feel like a depression. And I do not care if the numbers don't say it, because I'm not really believing the numbers now that a lot of people are putting out. But don't be surprised if you see unemployment going up to 12%. That millions and millions of you are out of jobs currently. And I know you're all expecting that your jobs are absolutely going to come back so that this isn't going to affect you for long. Here is my fear everybody. Even though unemployment more realistically will probably go to 6%, or that's what they're going to tell you, anyway, that it's at shortly here. That many of the companies, if we don't solve this soon, soon, many of the companies may not be in business to be able to employ you again. And I'm not saying that to scare you, I'm saying that because it's a reality of what's going on. While all of us are home, a new set of social norms, believe it or not, is setting in. And the reason that I know this is that I was supposed to do an interview on CNN, yesterday, actually. And for many reasons, I didn't do it. And when we were talking about it, the producer was saying to me, you know, Suze, every single person now is broadcasting from home. I can't tell you how much money it has saved us in booking all of these studios for all of you to go in to interview. It's almost as if, oh my God, our budgets have gone away and we're doing the exact same thing and we're learning how to do it so you don't even know that people are coming from their homes. And I'm thinking to myself, yeah, that's right, here we go. Will schools start to learn they don't need to have all these classrooms because the kids can learn equally as well from at home? So you don't have to spend $20k, $30k, and $50k a year to send your kid to school when they can learn online? Is it possible that many of us don't need to go into an office anymore, and we could all do our work at home so that the companies don't have to have offices and the expense of offices? Are we looking at a total change in the jobs that do come back, jobs that don't come back, and where those jobs actually are performed? Yeah, I think we absolutely are looking at a total revamping of how business goes on after this is over. So, I do not expect us to go back to business as usual. That is number one. Number two, this health crisis, so we are fighting two wars at once. Obviously, a health crisis and obviously, a financial crisis. Two wars now that have totally gotten out of control. And honest to God, everybody, I did not believe that starting in March. I didn't. I'm still sitting here in shock that how could they have let this happen? How? But they did. They did, and you best not forget that they did. You best not forget that. But here's the thing, is that to solve these wars now, we are not talking about $1 trillion or $2 trillion, we're talking about $3 trillion, $4 trillion, $5 trillion, maybe even $6 trillion. And our economy? Where do we find that kind of money when we passed a tax cut, really, for the wealthy a few years ago that added $1.3 trillion to our deficit. That tax cut never should have happened, but it was happening under the ploy that oh, all the business owners, all the corporations that got the biggest tax cut would take it and pass it down to the employees. Did that happen to all of you? Did that happen to you? I don't think so. Because most of the corporations did what was called a stock buyback. Money that should have gone down to you, they took and they bought back their own stock to fill their own coffers. Now, I am not sitting here on some radical rant. You just really need to hear the truth, and you write to me and you tell me that you trust me. So, I'm not saying this just so that you vote a certain way or whatever. I am telling you the facts of what really happened, but you don't have to believe me. If you work for a corporation, did you get those raises? Did that come down to you? If you don't work for a corporation, did that tax cut really help you? Did it really help you, really? Or do you miss the fact that you can't itemize, really, because it doesn't make sense anymore and do certain things and have certain write-offs anymore. Did you miss any of that? I don't know, I think you probably should. But, the point that I'm trying to make here is that this now is something that all of us are going to have to deal with for years to come. Regardless, if the stock market snaps back, doesn't snap back, this is so far beyond the stock market I can't even tell you. And so what is also upsetting me is that the emails that I'm still getting are emails about, is this a good time to buy a new home, Suze? Suze, I need a new car, should I buy a car now? I want to buy a car, I want to do this renovation, I want to take this vacation, I'm going to do this, I'm going to do that. And you're asking me questions about what you should do with the money in your retirement accounts in the future. You're going to retire in two or three years, what should you invest in now? All right, I need you to stop this and I need you really to postpone every single purchase unless you are so flush, a multi, multi, multi-millionaire. I need you to get the severity of the economic possible depression that we may be facing. This is not the time to be buying a new home, a larger home. You want to downsize, you want to cut your expenses, fine. But stop with major purchases right here and right now, because the future is unknown, and this is the time for you to conserve in every possible way. Even in my own household, I have asked for absolute conservation of water, of electricity, of every possible thing. As you know, I live on an island. We have to manufacture that, and so to manufacture it, it is expensive. So I have said to everybody, stop it! If the grass has to die, the grass is going to die. If your pool isn't heated, your pool isn't heated. Stop it, people. Stop it. So you need to ask yourself if you didn't make another penny for the next year or two, would you be absolutely, financially fine? Would you be able to pay all your bills? Would everything be OK? And if the answer to that is yes, OK. But, I really think you, at times like this, when are you going to be healthy? Are you not going to be healthy? Is the virus hits you? I mean, nobody knows. Can you just conserve your money right now? Now, this is not about the stock market, this is not what I'm talking about here. I'm talking about your own personal financial behaviors right now. Stop acting like everything is OK and that you're continuing to spend, even though you're inside your home. This, again, is the time to really, really take this very, very seriously. Because in fact, it is. So if the government doesn't act quickly, like I mean, today, and doesn't fund trillions of dollars to save everything, well, I'm not sure, we're going to have to see what we do with all of that. So this was just a reality of what's really happening right now, and I know you know that. So let's hope, let's just hope that our government really shuts down the entire United States, now. Hopefully, by the time this even gets on the air, he's already done so, but why do I think that's not going to happen? All right, let's go on to why we really wanted to do today's podcast, which was about investing and my thoughts in the stock market. Listen, I get that we're down dramatically and I'm still going to stick by it. Eventually, we could go down, I told you this a few podcasts ago, we could easily go to 17,500. We could go to 12,000 but eventually, it will return with a vengeance when it does. There are some extraordinary buying opportunities out there, not that you should be doing so in a lump sum yet, but I am not worried about the stock market, believe it or not. I get it, it's up, it's down, but I know the history of the stock market. I know that what it can do when it's ready to do it, it just needs some information as to why it should do that. And the information is, we've shut down the entire United States, we're dealing with this virus, we've done this, we've done that. We have enough doctors, we have enough ventilators, we have enough mass, we have everything, and then the market will turn. Until then, I doubt highly that anything, when you're looking at the stock market it is going to make you smile, except for maybe a day or two at a time. I want to talk about oil for a second. A few Sundays ago, I said, and it might be one of the worst calls I've ever made, time will tell, that I liked an ETF by the name of XLE, which was in the oil industry. And when I made that call, I honest to God believed, again, that the President would make a call to Saudi Arabia and stop the nonsense that is going on. I cannot believe that that has not happened. Oil is, I can't even believe it. So, you know when I sit here and I know what the logical thing is that somebody needs to do to turn this situation around, that of course, they're going to do it. I can't believe that we're being held hostage by Russia and Saudi Arabia. Really, everybody, the United States of America is being held hostage, and nobody's doing anything about it. And what scares me now, and I'm going to be very careful about when I make recommendations, is your writing to me, you're going, I love XLE. I bought it at $35 then a few days later, I bought it again, and a few days later I bought it again. When I said to you to dollar-cost average in teeny, teeny amounts, I said $50, $100. Do you remember me saying somebody said $500? And I said, I don't care if you have $10 million, to not put that much money in it, it was just a little play. But when I say dollar-cost average, it's not every time it goes down. Dollar-cost averaging is when you put money in every single month because I'm sure a month later it will be a whole lot lower than it was. So, if you haven't bought XLE yet, stop. Stop it already, everybody. Do I really think oil will return? Oh, you betcha I do. I think it will start to return in June of this year. But because you aren't doing it correctly, and you're just doing it, and I don't even know if you're doing it with money that you can afford to lose. Because a lot of you are telling me, Suze, I have $500 to my name and I bought some XLE. What are you, crazy? You need to have an eight-month emergency fund. If you don't have any cash, rather than investing in the stock market, you need to be saving your cash right now. That's what you need to be doing. Again, do I think the markets will come back? I do. So if you're still employed, if you're still contributing to a 401k, you absolutely should continue to dollar-cost average. Or, if you still have money coming in, you have your eight-month emergency fund, or more, whatever it is, and you can fund a Roth IRA, great. But still, dollar-cost average into it. All right, everybody? With that said, I just want to make a few comments here about Roth IRAs, as well as your extension that has happened for your taxes. You know, one thing the President did was he extended the date from when you can file and pay your taxes to July 15. When that date is extended it also means that the date that you have to open up an IRA, whether it's a Roth or traditional for the year 2019, has also been extended. So, just know that. Also, many of you have been wanting to convert from a traditional IRA to a Roth IRA. If that is the case, when the markets are down significantly like this, this is the time, if you have the money to pay the taxes because you need money to pay the taxes on what you are converting. But remember, we're in the year 2020, so, this conversion you will not owe taxes on it until April 15, 2021. So, you have time here, but you convert when the market is down, that is when you convert. Because when the market is down and stocks have gone down 50% so maybe, rather than having $20k you have $10k now. So, when you convert, you would only owe taxes on $10k, it might be something that you look into.The last thing I just want to say about that, is this, that do you understand why I like Roth IRAs so much now? And Roth 401ks? With the fact that the government is going to have to take out trillions and trillions of dollars of debt to solve this crisis, more than ever before in the history of the United States of America? Do you really think that one day our tax brackets aren't going to go back up to solve this problem? Do you really think that? So, I want you in a situation where what you have in your retirement accounts is what you have in your retirement accounts. So in a Roth 401k or 403b, whatever, if you gave up the tax write off today and you put money in your Roth retirement accounts when it's time for you to retire, you can withdraw it absolutely tax-free. And maybe that's what you would need to be doing right now? Maybe you want to pay off the mortgage on your home, whatever it is. If you have money in a Roth IRA and you're retired or a Roth whatever, you could do that tax-free. So, there are so many things here that are important for you to know. But what's also important for you to know is how to invest, and I see that we're already at so many minutes. But maybe I'll just go over it today so that you can stick with me here. Listen, I'm a firm believer in dividend-paying stocks. That you have got to understand when is a company a good company for you to invest in to get the dividend versus when it is not? And so many of you right now are chasing yields. Exxon is up 10%. Are you kidding me? Many of these stocks are now giving you double-digit interest on the dividends that you are going to earn if you buy it. If you buy a company that's offering you a double-digit yield as a dividend, chances are they are absolutely going to cut that dividend. So let's start at the beginning here. Why do companies pay dividends to begin with? They paid dividends because these are generally very mature companies, companies that have been in business for a long time and they are generating so much excess cash that they don't need anymore to put back into their business because their business is growing on its own. So what they do is they create a dividend, a dividend to please their stockholders to say, look, I'm getting growth and I'm getting paid a nice yield to hold this. And those are attractive stocks that attract more people to buy, especially at times like this, and so that's why they do it. But you have to know, is the dividend solid? Does the company have a good track record? You know there are companies and there is an index fund called the S&P 500 Dividend Aristocrats, the symbol is NOBL, which is comprised of stocks that have increased their dividends for the past 25 years. You know, McDonald's, McDonald's is a company that you would have made a significant amount of money on in the growth and their dividend, such a strong company. But then there are companies that really will cut their dividends, especially right now, because they're not generating any money. So, you need to know that if you're going to do dividend-paying stocks that they have good cash, a lot of cash. That they continuously look at their track record. How many years in a row have they raised their dividend? The really important thing that you want to know is their payout ratio. What percent of their earnings are they paying you out in dividends? So just listen to me for a second here. Let's say you have a stock and you can look this up anywhere. Just look at the numbers next to three little letters called EPS. EPS stands for earnings per share, and you want to know, you have a company, what are they earning? So, for every share that they have outstanding in the market that people own, how much are they earning from the money that they're making? What are they earning for every single share? And let's just say that their earnings per share are $2 a year. Let's just say that's true. You then want to look at the dividend, and let's say that they have a dividend that they pay you and dividends are paid every quarter. So every three months you normally get a dividend. And let's just say that the dividend payment for the entire year is $2, or even $3. What that says to you is that they are paying out in dividends either as much as they are earning or more than they are earning. So, if their dividend for the year is $2 and their earnings per share is $2 per year, they are paying out 100% of their earnings to you in a dividend. That is not a company that you want to buy because that is too much. In my opinion, I would never buy a dividend-paying stock who's payout ratio is more than 50%.So in this case, if the dividend was $1 and they were earning $2 per share, and they had raised their dividends every year for 10 years, 15 years, they had a lot of cash on hand and they were in a good industry because you want your stocks to grow as well. I would buy it. Now, at times like this, given the fact that their earnings are absolutely going to go down the drain. You may see some fabulous companies with payout ratios above 50%. So you might want to just stay cool here when you're looking at that and go, oh, well Suze just said she would never do that. There are certain companies that I would make an exception on right now, and they would be companies in the service industry that really will be absolutely fine. And I could give you their names, but I'm really afraid you're just going to go out and buy them and you're going to be irresponsible, and who knows what you're going to do in your situation? But they are out there. Now, I just want to talk to you about besides stocks that pay dividends, on the next podcast, I want to talk to you about preferred stocks that pay dividends. Because common stock, everyday stocks that pay dividends, if they're just a straight dividend you pay ordinary income tax on that dividend. Preferred stocks that pay dividends are stocks that you pay capital gains tax on their dividend, which is a big deal. But, that will be for the next Suze School that we will do, and I'm going to be doing these a lot right now because I want you to understand the difference between dividend-paying stocks. I want you to understand the difference between preferred stocks, corporate bonds, bond funds, because so many of you, again, are making mistakes because you don't know what to do. And so I need to educate you or try to educate you so that when you are ready to invest or something, you employ your money in the best possible way.Just another thing is that somebody wrote in and they said Suze, why don't we just close down these markets for two weeks and then everything will kind of be OK? Why did they let the markets keep going down? If we closed on the stock markets, that would cause more chaos than you have any idea, because the people that would want to get out of the stock market because they need their money to live would be able to sell and everything. If you think this is bad, what we've been going through, if they shut down the stock market for two weeks, you don't even want to know what would happen at that point. So, I just want to tell you that's why we don't shut down the stock markets. So, once again we've had a podcast that is all over the place, but here is the bottom line, it's really important that you really put on your warrior hats. You know, I have three sayings that always get me through life when I'm facing a hard time for one reason or another. And they are these sayings: "So much time has passed, so little remains, why slacken now?" And that's my way of saying, listen, we've gotten this far. We're three weeks from when it kind of started when it was a reality to all of us. So, that's a lot of time in many ways. So, a lot of time has already passed. Just keep in there, stay in there now, hold in there. Don't make rash moves, just stay there. The next one is, "you are a warrior and do not turn your back on the battlefield." So, I understand that you're sequestered in your home. I understand that it's going crazy for you, especially the mothers out there with the kids and trying to keep them preoccupied and everything. But, you are all stronger than you have any idea, and you are not going to turn your back on this battlefield. And even though the government, in my opinion, has turned their back on you now for three weeks, hopefully, they will change that and they will step up to the plate and they will hit a home run out of the whole ballpark that saves us all. I don't know if they're going to do that or not, but I can only pray that that will happen. But regardless of what they do, you have to be a warrior and not turn your back on this battlefield and really understand what has happened and why it has happened. And last but not least is this. "You have to have faith that everything happens for the best." You just have to. I can't explain why a lot of things have happened in life. I don't know why some people suffer more than others, I'll never understand it. But somehow, you just have to have faith, faith that everything happens for the best. So with determination, with courage, and with faith, you also have to believe that anything and everything is possible. One day we will look back on this and hopefully, we will remember the lessons from this and hopefully, all of us will stay healthy because that really is the most important asset we will all ever have. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information.To find the right Credit Union for you, visit https://www.mycreditunion.gov/. Interested in Suze's Must Have Documents? Go to https://shop.suzeorman.com/checkout/cart/index/.

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