The President accredits Regeneron’s antibody cocktail with curing him of COVID19 and helping him to feel better than he has ever felt. Could an FDA fast-track approval happen before the election? Will the treatment be free? The Cliff Notes are that the fast-track is pretty unlikely, and the first 70,000-300,000 doses will be free.
 
Regeneron filed for a fast-track approval under the Emergency Use Authorization from the FDA on Oct. 8, 2020. The FDA is under extreme pressure from the White House to approve a treatment before November 3, 2020. Whether or not this will happen is anyone’s guess. The trial results reported by Regeneron and the President were positive, but are not yet validated in a peer-review trial.
 
Typically, the FDA wants to see at least six-months of follow-up to ensure that there are no serious adverse events after the treatment. If that standard is applied, then the approval will not happen before the election. Regeneron began its first phase of trials on June 11, 2020. The 2/3 phases were launched on July 6, 2020.
 
How much money will the company get for potentially saving the President’s life? How can the drug be free, if the company wants to stay in business? According to Regeneron’s press release of Oct. 7, 2020, the government has committed to making the treatment available to Americans at no cost, if the REGN-COV2 investigational antibody combination for COVID-19 is granted an Emergency Use Authorization from the FDA. Regeneron received $450 million from the U.S. Department of Health and Human Services to manufacture 70,000 to 300,000 treatments of REGN-COV2, which will be owned by the government. So, this number of initial treatments will be free.
 
Many more doses will be needed, however. There have been 8.2 million COVID19 cases in the U.S., with 219,541 deaths (as of 10.19.2020). There are almost 50,000 new cases announced daily in the U.S. Sadly, even at the upper range of the deal – 300,000 – Regeneron’s therapies wouldn’t last a week. There are currently 50,000 doses of the drug available, with a goal of having 300,000 doses within a few months.   
 
Will a Treatment Send Regeneron’s Stock Soaring?
Stocks are purchased by people, and people can be irrational. So, regardless of whether it is a good investment, an approval could positively impact Regeneron’s stock, even though the stock is already near an all-time high, with a price-earnings ratio of 23. A year ago, the stock was trading at half of today’s value.
 
The government deal will not dramatically increase Regeneron’s earnings – at least not in the near term. If the 3Q 2020 revenue is similar to 2Q 2020, then the year-over-year revenue will decline about 5%. That is including the government’s check.
 
If future treatments go through the normal pricing system, then this should help to boost Regeneron’s earnings and support a higher share price. However, if the government wants to keep the treatments free, then the price is fixed for Regeneron at lower than the normal marketplace.
 
As an example, when Gilead was approved for Sovaldi (a cure for Hepatits C) on December 6, 2013, the company’s share price went from $70/share to $114/share. In the months leading up to the approval, the share price doubled, just on the potential of the approval. However, Gilead was roundly censured for making the cost of the cure $84,000 or more. With the political heat of a pandemic, it is doubtful that Regeneron, or any other company, will attempt those kinds of profits.
 
Regeneron reports 3Q 2020 earnings on Nov. 5, 2020, two days after the election, before the markets open.
 
Smaller Companies Involved in the Race for a COVID Treatment and Vaccine
There are two other smaller companies with COVID partnerships with the NIH that are promising. Adaptive Biotechnology has a partnership with Amgen and Microsoft, among others. On August 4, 2020, the company announced the first T-cell monitoring tool that will be useful in developing a vaccine. Amgen is part of the NIH’s public-private partnership to advance a COVID treatment and cure.
 
Vir Biotechnology has a partnership with GlaxoSmithKline and is currently in a Phase 3 trial for a treatment for COVID called VIR-7831. Results on that study are expected to be available at the end of 2020. The Vir antibody treatment could be a competitor of Regeneron’s. Vir’s president and CEO is George Scangos, Ph.D. He was the former CEO of Biogen, a $44 billion company. Vir is part of the NIH’s public-private partnership to advance a COVID treatment and cure.
 
Finally, Inari Medical launched an IPO this year, and has gone on to see sales soar by 152%. The company is not a COVID contender. Rather they have an FDA-approved clot retriever product that helps patients suffering from venous diseases, without the use of thrombolytic drugs. The market is projected to be $3.6 billion annually. Inari’s trailing 12-month revenue is $86 million. So, the growth potential is noteworthy.
 
All three of these companies are still cash-negative. Inari and Adaptive are trading near their 52-week highs, while Vir Biotechnology is at $37.25, down from a high of $75.00 in August. All of these companies were trading at much lower prices in March 2020, during the stock market rout. Vir's price weakness has a lot to do with insider selling, which can be a red flag -- particularly when the company is promoting an effective treatment during a pandemic. The chief seller is Herbert Virgin, the Chief Scientist.
 
Large Companies Involved in the Race for a COVID Treatment and Vaccine
GlaxoSmithKline, Pfizer, Johnson and Johnson, Eli Lilly and more are also involved in the race for a COVID19 treatment and cure. As you might have heard, there was a patient with a serious adverse event (a disease that is not being disclosed due to patient confidentiality) that has paused the Johnson & Johnson Phase 3 clinical trials for a vaccine. Eli Lilly has also had a study paused.
The large biotechs will become distribution partners, if one of the smaller companies beats them to a treatment or vaccine. Like many massive companies, the large biotechs have slow or negative revenue growth. However, unlike a lot of other industries that have had to suspend or cut dividends this year, the companies mentioned directly above are still offering a dividend.
 
If you’re interested in viewing our Biotech Stock Report Card, please request for it on one of our social media platforms, or by emailing info@NataliePace.com. You can reach us at Twitter.com/NataliePace,  Instagram.com/NatalieWynnePace and Facebook.com/TheABCsofMoney.
 
 
Full Disclosure: I own shares of some of the biotechnology companies mentioned in this blog.
 
If you'd like to learn how to evaluate stocks from a No. 1 ranked stock picker, register for the Jan. 16-18, 2021 New Year, New You Retreat. Sign up by Oct. 31, 2020 (Halloween) to receive the lowest price and a complimentary 50-minute private, prosperity coaching session. Call 310-430-2397 or email  info@NataliePace.com now to learn more or to register. You can also access additional information by clicking on the banner ad below, which will take you to the retreat flyer.  

Other Blogs of Interest
​Tesla Will Have an Outstanding Earnings Report
Should You Wait Until After the Election to Fix Your Wealth Plan?
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Crystal Ball for the Remainder of 2020 (Including the Election). 
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Real Estate Solutions for a Post-Pandemic World.
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The Cannabis Capital Crunch and Stock Meltdown.
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​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
​

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 4th edition of The ABCs of Money was released on October 17, 2020. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. 

Tesla reports earnings on Oct. 21, 2020 after the markets close. On Oct. 2, 2020, in their Deliveries Report, they knocked the numbers to space. Tesla had record vehicle production of 145,036 vehicles and record deliveries of 139,300. That portends what should be the best earnings report in the history of the company. It does not indicate, however, that the auto industry is going to flourish in the current recession. And by every measure, the great news for Tesla is already more than astronomically priced in.  
 
 
Electric Vehicles are Hot
On September 23, 2020, California Governor Gavin Newsom issued an Executive Order mandating that all new cars and passenger trucks in his state be zero-emissions by 2035. EVs didn’t need an executive order to be the hottest selling vertical in the auto industry. While Tesla’s deliveries are up 43.5% year over year, Ford’s are down 4.9% (to 551,796). GM vehicle sales are down 10% over the same period (to 665,192). Both GM and Ford are currently leaning into truck and SUVs, after Tesla took over the sedan market with its Tesla 3.

GM CEO Mary Barra is promising a future of “zero crashes, zero emissions and zero congestion.” She’s leaning into EVs, self-driving and connectivity in her Vehicle to Everything
Plan. GM is advising and investing in China.
 
Of course, Tesla is already in China with a Gigafactory and car sales and is expanding into Europe with the Berlin Factory projected to be completed in July 2021. However, the competition for Tesla is starting to heat up. China’s own EV provider, Nio, saw deliveries soar 154% in the 3rd quarter of 2020, to 12,206. That’s only 9% of Tesla’s deliveries. However, if the company’s momentum continues apace, Nio will be better able to support its rather lofty market value of $29.45 billion.

Tesla's Share Price
Tesla has had a massive jump in value in 2020, for a combined value of $416.2 billion – more than Toyota, GM and Ford combined. Elon Musk remarked on May 1, 2020 that Tesla stock was too high. Since then it has gone even higher.
 
Tesla’s price/earnings ratio is 1187. That’s astronomically high, even for a company that just increased sales by 43.5%. (Remember sales were down -5% in the 2nd quarter of 2020.) Even great companies can get drug down if the markets head south. In March of 2020, you could have purchased Tesla for $72, rather than today’s price of $449.67.
 
If there is any stumble at all in Tesla’s execution, then shareholders could rush for the exits – taking profits as fast as they can. This has happened many times with the company, with much of the volatility linked directly to Tesla‘s CEO Elon Musk.
 
Auto Sales in Recessions
The jump in EV sales in the 3rd quarter of 2020 might make you think we are out of the woods in the current recession. However, that would be a dangerous assumption, if it turns out not to be true. Auto sales struggle in recessions. When there is high unemployment, people can’t afford to buy a new car. In a speech on October 2, 2020, Federal Reserve Board chairman Jerome Powell said that a “broader measure” of the employment situation indicates that unemployment might be as high as 11%. Some folks don’t realize we’re in a recession, or are perhaps denying that the economy has suffered as much as it has, and are hoping that the election might fix things. Auto loan debt has been quite elevated for years, and is currently at $1.34 trillion. As I’ve indicated in many blogs, financial instability is a concern (this was a major concern of a new IMF blog as well). Debt was massive before the pandemic. See the chart below for details.
 

​GM and Chrysler both had bankruptcies in 2009, after years of net losses. GM and Ford both saw sales/revenue slump by more than half in the 2nd quarter of this year. Toyota’s sales were down by 40%. Even Tesla’s sales sank 5% in the 2nd quarter of 2020. The 3rd quarter was much better for most auto manufacturers. That has more to do with borrowed time and money than to a robust economy and strong consumer.

With a market value of just $30 billion, a speculative bond rating and total liabilities of $225 billion, Ford might need to restructure its debt through a Chapter 11 bankruptcy. On Oct. 1, 2020, Ford announced major leadership changes, including a new CEO and CFO, effective immediately. That’s never a good sign, particularly in a recession, with all of the debt, pensions and other post-employment benefits (OPEBs) that Ford is grappling with. The former CEO of Ford, Jim Hackett, has been selling his Ford stock (another red flag). FYI: Ford was downgraded to junk in September of 2019 by Moody’s – before the pandemic.

Bottom Line
Buying auto stock in a recession can be perilous to your fiscal health – particularly if you are buying high. Tesla’s 2nd quarter will be stellar and will definitely make headlines. However, the good news may already be priced into Tesla’s stock. In fact, if the company stumbles going forward, there could be a sell-off. The product has an outstanding record. It’s typically the CEO that gets into hot water. For the rest of the industry, legacy auto manufacturers will continue to lag the marketplace until they get a stronger foothold in the EV market. The exception to that is definitely Nio, which is seeing sales soar in China.

You can learn how to pick great companies, like Tesla and Nio, by attending our Investor Educational Retreats. Call 310-430-2397 or visit NataliePace.com to learn more. 

You can read about our time-proven, easy-as-a-pie-chart nest egg strategies, in my book The ABCs of Money. (The 4th edition will be published very soon.) You can learn and implement these transformational, time-proven tools at our Investor Educational Retreats. (Go to NataliePace.com to discover when the next retreat will be.) You can call or email our office for pricing and information on receiving an unbiased 2nd opinion of your current plan, which comes with a personalized roadmap for safety and diversification. Call 310-430-2397 or email info@NataliePace.com.

Register for the Jan. 16-18, 2021 New Year, New You Retreat by Oct. 31, 2020 (Halloween) to receive the lowest price and a complimentary 50-minute private, prosperity coaching session. Call 310-430-2397 or email  info@NataliePace.com now to learn more or to register. You can also access additional information by clicking on the banner ad below, which will take you to the retreat flyer.  
​​

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Is Tesla Worth GM and Ford Combined.
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The Cannabis Capital Crunch and Stock Meltdown.
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​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
​

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 3rd edition of The ABCs of Money was released in 2020. The 4th edition, updated to include the COVID-19 Recession, will be released soon. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. ​

​Dear Natalie, I asked my broker if I should be re-examining things, and he said, “No, we’re in a bull market.” When I asked again, he said, “Wait until after the election. The stock market will do great if Trump is re-elected.” However, I’m not convinced that waiting is the right thing to do, particularly since I remember my freak-out in March, when my nest egg was down by 35%. Can you offer some clarity?
 
Signed, Confused. I Don’t Know Who or What to Believe.

Dear Worried (and Rightfully So),
 
First off, when you don’t know who or what to believe, trust results. By that I mean, always grade your guru before you listen to anything he says. For instance, you mentioned that your portfolio was down 35% between February 19, 2020 and March 23, 2020. If that was the case, then you are riding a Wall Street rollercoaster. When it goes up, your wealth increases. However, when it heads south, you’re vulnerable. That Buy & Hope plan has been losing more than half in each of the last two recessions. Additionally, most plans that go in whatever direction that the market does, perform about 2% under the general marketplace returns, due to fees.
 
It’s better to be early than late. As you noticed in March, if you wait for the headlines, it’s too late to protect your wealth. So, waiting until after the election to fix a broken plan isn’t a good idea.
 
If you look at your 2018 statements, you might notice that you also lost money in 2018. If you had the same plan in the Great Recession, then chances are quite high that you lost 55% or more, and then spent the next 7.5 years hoping and praying to recover, instead of earning gains. At the bottom of the market, the sales pitch shifts to, “If you sell now, you’ll be selling low.”
 
There is a time-proven plan that earned gains in the Great Recession and outperformed the bull market in between. That plan is outlined in The ABCs of Money and taught at our Investor Educational Retreats. It’s also enthusiastically endorsed by Nobel Prize winning economist Gary Becker and the chairman of TD AMERITRADE, Joe Moglia (along with the many happy Main Street investors who use this system). Listen to Nilo Bolden describe her experience by clicking on her name. In other words, this plan has a Ph.D. in results.

A well-designed plan doesn’t lose more than half in recessions. It protects you from market downturns, while allowing you to build wealth during bull markets. This plan is easy-as-a-pie-chart. Buy & Hold broker-salesmen don’t implement this plan because their own monetization and wealth strategy doesn’t profit from it. There are brokerages that are leaning into Modern Portfolio Theory with annual rebalancing – the cornerstone of the ABCs of Money. (Buy & Hold brokers say they use MPT. However, when you look at your portfolio, even if there are 20 pages of holdings, chances are very high that you are not properly diversified.)
 
You are the boss of your money. Take ownership. You wouldn’t learn cooking from a chef who burns meals.   

My guess is that you are also worried because what your broker-salesman is saying doesn’t make sense. In fact, stocks fare better under Democrats (this is well-known on Wall Street). While your broker says we’re in a bull market, you’re seeing a lot of disturbing signs of the current recession. There are plenty of them. Unemployment is about 11%, according to Jerome Powell, speaking to the National Association for Business Economics on October 6, 2020 (click to read). (Read my blog to learn how the BLS has been underreporting unemployment.) There are currently 26.5 million people taking some kind of unemployment. Office buildings, apartment buildings and malls are ghost towns. 52% of 18-29 year-olds are living with a parent. This is higher than the Great Depression. The 1st and 2nd quarter 2020 GDP reports were contractions of -5% and -31.4%, respectively. Airlines and states are laying off workers in record numbers. Disney laid off 28,000 employees on September 30, 2020. September 30, 2020 is the date the government stopped subsidizing companies for employees who aren’t working.
 

​Revenue in industries like travel, airlines, casinos and more is down by more than 80%. At the same time, over half of the S&P500 is at or near junk bond status – including a lot of U.S. banks and brokerages. As a reminder, a lot of our banks, brokerages and insurance companies wouldn’t even be in business if we hadn’t bailed them out in 2008. Have you really gotten a true picture of the economy from your broker?
 

 
​The Federal Reserve has purchased 1000 bonds and a lot of bond ETFs to try and keep things afloat – so that there is a more orderly procession through the bankruptcy courts for those companies that need to restructure their debt. (The Feds are not supposed to purchase stocks. A Wall Street insider told me that he thinks they might be, however.) Jerome Powell told Congress that, “Our actions, taken together, have helped unlock more than $1 trillion of funding, which, in turn, has helped keep organizations from shuttering, putting them in a better position to keep workers on and to hire them back as the economy continues to recover.”
 
Here are a few Stock Report Cards on some of the more hard-hit industries. Click on the report card to access a blog, where you can get additional information on airlines, casinos and auto manufacturers (including EVs and China's Tesla). 
 

When companies restructure, your bonds lose money. In general, bonds are illiquid and negative-yielding. Listen to my interview with Kathy A. Jones, the Chief Fixed Income Strategist at Charles Schwab Inc. on my YouTube channel for additional information on the risk in bonds, and what you can do about it.
 
Fixed income is a word used in financial services for the “safe” side of your portfolio. Fixed income means your principal should stay intact, while you earn a predictable income. However, as you will learn in my interview with Kathy Jones, bonds are not living up to the name fixed income. You’re not getting the promised yield, and you could lose principal on your investment. This is a problem because the safe side is supposed to help keep your portfolio buoyant in troubled times. Bonds did that in the Great Recession and the Dot Com Recession, but are as risky as stocks in the current recession.
 
These are all facts. If you knew where to access the official statistics and data, it would be easy to confirm. (I’ve provided links to many of the government agencies that provide the data. Just click on the blue-highlighted words to access them.)
 
You can access other experts explaining what’s really going on in the economy by scrolling through the videos on my YouTube.com/NataliePace channel. There you will find my interview with Howard Silverblatt, the Senior Index Analyst at the S&P Dow Jones Indices (home to the S&P500®), who candidly told our viewers that stock prices are so high he needs to get a Kleenex because his nose is bleeding.

Federal Reserve Board chairman Jerome Powell has been very candid about the challenges of the current recession. When he testified before Congress on September 22, 2020, he said, “The path ahead continues to be highly uncertain… A full recovery is likely to come only when people are confident that it is safe to reengage in a broad range of activities.”

The Bottom Line
We are in an unprecedented recession. The economy is being propped up with a flood of cash, the buying of almost 1000 bonds, a moratorium on evictions and foreclosures, paying people who don’t go to work, and broker salesmen who tell their clients not to do anything. That is always the case in recessions, which is why it typically takes about 18-24 months for stock prices to hit rock bottom. Everyone waits, until something terrible happens. There are a series of unfortunate events that cause a sell-off each time. Then things stabilize (or in the case of 2020 recover). Then another terrible thing happens, followed by another a few months later, again and again, until the bottom is finally reached. If you wait until the headlines and brokers turn apocalyptic, which they always do at the bottom of the market after a carnage of client losses, it will (obviously) be too late to protect your wealth. In fact, at that point, it would be a better idea to buy low. However, if you have lost half of your wealth and all of your liquidity, then you won’t be in a position to buy low.
 
When things are over leveraged, it is really only a matter of time before some industries and companies have to restructure and change their business plan. We’ve seen that with retail for two years now. The airlines, the travel industry, casinos, commercial real estate, auto manufacturing, hospitality and many more industries are in trouble. As you can see in the Stock Report Cards above, many have lost more than half of their revenue.
 
Most of these industries, including our banks, were highly leveraged before the pandemic. As I’ve said many times, more than half of the S&P500® are at or near junk bond status, including a lot of financial services companies. In adverse times, speculative companies have a lot of trouble. You don’t want that trouble to come on your dime.
 
The right answer is not to sell everything and go live in a yurt. It is to be properly diversified and protected, and  to know what is safe in a world where bonds are illiquid and negative yielding, money market funds have redemption gates and liquidity fees, stocks and real estate are overpriced and insurance companies and banks are in the large group hanging out just above junk bond status (and would not be in business if we hadn’t bailed them out in 2008).
 
Losing more than half every eight to ten years and then spending the bull market crawling back to even is a Wall Street roller coaster and a terrible plan. A better strategy is to protect your wealth and liquidity, so that when asset prices tank, you have the capital to buy low. A properly diversified plan allows you to benefit from bull markets – even mini bull markets that are manufactured during a recession (and could be short-lived).



Editor’s Note: All of the blue-highlighted words above link to blogs where you can learn more. There is also a list of recent blogs below. 

​The October Surprise turned out to be quite a bit different than any of us were expecting. (As you’re aware, The President and First Lady tested positive for the coronavirus on Oct. 1, 2020. The President was moved to the Walter Reed Hospital on October 2, 2020.) However, there is another built-in October surprise that’s going to come up on October 29, 2020 that investors should be aware of.
 
-3.7% 2020 Contraction in the Economy
In the September 2020 meeting, the Federal Reserve Board projections predicted the contraction in the U.S. economy in 2020 will be -3.7%. Since the first quarter contraction was -5% and the second quarter contraction was -31.4%, the third and fourth quarters are clearly expected to perform much better. Indeed, it is easy to imagine that with many cities easing restrictions on businesses and consumers, there was more commerce going on in the third quarter than there was in the second quarter. Things are certainly not back to normal. However, sequentially the growth could look pretty good. Particularly since, as the Administration does with the astronomically high unemployment figures, where they tout how many jobs have been created, there will be no emphasis on the Recession, and a lot of emphasis on the “recovery.”
 
The Numbers are Greased
The contraction would certainly be worse if there was not a moratorium on foreclosures and evictions. The recession would also look substantially more dire if there weren’t a lot of employees at companies like Disney and the airlines that were paid not to go to work. There are a lot of corporations that would be in serious trouble if the Federal Reserve had not purchased almost 1000 short-term bonds. So, it’s very important to understand that the GDP growth numbers are not really telling the full story.
 
Politicians Like to Brag
While you heard crickets every time the second quarter contraction was mentioned, which was one for the history books and the worst on record, you can expect to hear a lot of braggadocio once the third quarter GDP growth statistics are released at 8:30 AM ET on October 29, 2020. Rather than talk about how serious the contraction is, how some industries have changed for the foreseeable future and what we’re going to do to put millions of unemployed folks back to work, we will likely hear that the GDP growth in the third-quarter was one of the best in the past two decades. Those kind of Tweets and headlines might make people believe that the economy is stronger than it really is, and could influence who they vote for.
 
Will Stocks Rally on the News
Will stocks rally on the news? That is less clear. The stock market is overpriced. Investors are already banking on a recovery. The Santa Rally is pretty common in normal times. However, in recessions, stocks can tank in October, November and even December. It’s definitely not a given that stocks will rally. When the third-quarter numbers are released at the end of October, investors could just heave a sigh of relief because the news is already priced in (overpriced in). If the numbers are not as strong as everyone hopes for, then there could definitely be a sell-off, or if anything else occurs that makes people less confident in their government, business and economy.
 
The Economic Situation
Stocks are overpriced by almost every measure. Bonds are highly illiquid and are negative-yielding. Money market funds have redemption gates and liquidity fees. Many banks, brokerages, insurance companies and financial services firms are at or near junk bond status, as is over half of the S&P 500.
 

Unemployment is above 8%. 26.5 million people are taking some sort of unemployment. 22.7% of the workforce is working from home. Some industries have changed for the foreseeable future, including airlines, oil, office buildings, hotels and small businesses. Office buildings and apartment buildings in overpriced cities like New York and San Francisco have become ghost towns. Things won’t return to normal until people feel safe being inside again in close proximity to others. Some of the changes may be more lasting simply because they are now preferred, such as Work from Home.
 
The Bottom Line
These are unprecedented times. The economy is suffering greatly. The Federal Reserve, Treasury Secretary and The Administration are trying to keep asset prices high by buying up corporate bonds and bond ETFs, by handing out money, through the eviction and foreclosure moratorium and through other measures. This may result in a positive October GDP growth surprise on Oct. 29, 2020. However, real growth is when productive people create the products of tomorrow that citizens around the world can’t live without – not by paying people not to work. A well-diversified 401K, IRA and investment strategy allows you to profit if stocks and real estate prices go up, while protecting you from another rout, such as we saw between February 19, 2020 and March 23, 2020.
 
With the risk of overpriced stock heading south as high as it is, even given the improving, propped-up economy, it is a very good idea to know what you own and have confidence in your financial plan now. If you wait for the headlines that we’re in trouble, it is always too late to protect your wealth.
 
​
You can read about our time-proven, easy-as-a-pie-chart nest egg strategies, in my book The ABCs of Money. (The 4th edition will be published very soon.) You can learn these transformational tools at our Investor Educational Retreats. (Go to NataliePace.com to discover then the next retreat will be.) You can call or email our office for pricing and information on an unbiased 2nd opinion of your current plan, which comes with a roadmap for safety and diversification. Call 310-430-2397 or email info@NataliePace.com.

Other Blogs of Interest
​Is Your Bank a Junk Bond
Do Stocks Fare Better Under Democrats or Republicans?
Put Your Money Where Your Heart Is.
Crystal Ball for the Remainder of 2020 (Including the Election). 
Microcap Gaming Company Doubles 2Q 2020 Revenue.
​Apple & Tesla Stock Splits.
Schwab's Chief Fixed Income Strategist on What's Safe.
China's Tesla (Nio). 2Q Sales Soar.
Why Are You Still Renting? (Errr. There is More Than This to Consider!)
MedMen's Turnaround Plan Attracts A-List Board Members.
​Wealth Myths That Keep You Poor. Prosperity Truths That Make You Rich. 
Protecting Your Wealth and Home in a Recession.
Technology and Silver are Golden.
The Economy Contracts 32.9% in the 2nd Quarter of 2020.
Real Estate: Feeling Equity Rich? Make Sure That Feeling Isn't Fleeting.
Airline Revenue Plunges 86%. 
10 Questions for College Success
Bank Earnings Season. Crimes. Cronyism. Speculation.
Real Estate Solutions for a Post-Pandemic World.
Copper and Chile Update.
Gold Soars. Some Gold Funds Tank. 
Will the Facebook Ad Boycott De-FANG Stocks? 
Why Did My Cannabis Stock Go Down? 
Which Countries Are Hot in a Global Pandemic? 
Is Your Financial Advisor Good at Navigating Stormy Seas?
$10 Avocados, Lies, Damn Lies, Statistics & Wall Street Secrets. 
It's Never a Crash.
Work From Home and Intergenerational Housing.
Biotech Races for a Coronavirus Cure. 
Are You Worried About Money? 
May is a Good Time for Rebalancing.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
Why Did my Bonds Lose Money?
Cannabis Update. 
Recession Proof Your Life. Free Videocon Monday, May 10, 2020. 
The Recession will be Announced on July 30, 2020. 
Apple Reports Terrible Earnings. 
We Are in a Recession. 
Unemployment, Rising Stocks. What's Going On?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
21st Century Solutions for Protecting Your Home, Nest Egg & Job.
Wall Street Insiders are Selling Like There is No Tomorrow.
Why Are My Bonds Losing Money?
Tomorrow is Going to be Another Tough Day.
Price Matters. Stock Prices are Still Too High. 
Should You Ride Things Out?
7 Recession Indicators
Corona Virus Update.
The Bank Bail-in Plan on Your Dime.
NASDAQ is Up 6X. 
CoronaVirus: Which Companies and Countries Will be Most Impacted.
Is Tesla Worth GM and Ford Combined.
Artificial Intelligence is on Fire. Is it Time to Buy S'More?
Take the Retirement Challenge.
2020 Investor IQ Test.
Answers to the 2020 Investor IQ Test.
The Cannabis Capital Crunch and Stock Meltdown.
Does Your Commute Pollute More Than Planes? 
Are Health Care Costs Killing Your Budget? 
2020 Crystal Ball.
The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities. 
What Love, Time and Charity Have to do with our Commonwealth. Interview with MacArthur Genius Award Winner Kevin Murphy.
Unicorns Yesterday. Fairy Tales Today. IPO Losses Top $100 Billion. 
Price Matters. 
Will There be a Santa Rally? It's Up to Apple. 
Harness Your Emotions for Successful Investing.
What the Ford Downgrade Means for Main Street.
The Dow Dropped Over 1000 Points
Do We Talk Ourselves into Recessions? Interview with Nobel Prize Winning Economist Robert J. Shiller.
Ford is Downgraded to Junk.
Gold Mining ETFs Have Doubled. 
The Gold Bull Market Has Begun. 
The We Work IPO. 
The Highs and Hangovers of Investing in Cannabis. 
Recession Proof Your Life. 
What's Your Exit Strategy? 
It's Time To Do Your Annual Rebalancing.
Are You Suffering From Buy High, Sell Low Mentality?
Financial Engineering is Not Real Growth.
The Zoom IPO. 
Uber vs. Lyft. Which IPO Will Drive Returns?
Boeing Cuts 737 Production by 20%.
The Lyft IPO Hits Wall Street. Should you tak
Cannabis Doubles. Did you miss the party?
12 Investing Mistakes
The High Cost of Free Advice. 
2018 Was the Worst December Since the Great Depression. 
Russia Dumps Treasuries and Buys Gold
OPEC and Russia Cut Oil Production. 
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
​

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 3rd edition of The ABCs of Money was released in 2020. The 4th edition, updated to include the COVID-19 Recession, will be released soon. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. ​

​Did you know that over half of the companies in the S&P 500 are at or near junk bond status? That statistic includes a lot of major U.S. banks. Do you wonder where your bank lies in the mix? See below.
 

​Editor’s Note: BBB is the lowest rung of investment grade. With BBB companies, according to the S&P Global ratings definitions, “Adverse conditions or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments.” BB, B, CCC, CC, C = Significant speculative characteristics. BB = least degree of speculation, with C being the highest.
 
Redemption Gates and Liquidity Fees
Why should this matter to you? Banks and other financial services companies now have redemption gates and liquidity fees on their money market funds. Many of their staff encourage investors to move from FDIC-insured cash accounts into money market funds. Why? The money market funds are the bank’s “bail-in” plan. That is in fact why these rules were approved and enacted in 2017 – to prevent a run on the bank. The new clauses could limit your ability to withdraw your money, and/or a fee could be imposed.
 
Recently, I got a notice from a couple who wrote that they felt their money was secure because, even though it was in a bank money market fund, it was FDIC-insured. Sometimes the fine print, though enforceable, is seen as something that won’t happen. Bank and financial services representatives might even tell you not to worry about it. However, as you can see from the chart below, redemption suspensions have already begun in some mutual funds in Europe.

​Fitch Ratings just gave the U.S. a negative outlook on its AAA rating. Canada was downgraded to AA+ on June 24, 2020 by Fitch.
 
We are in unprecedented times. Conditions that are authorized in the fine print are occurring. In addition to making sure that your FDIC-insured cash is safe (i.e. not subject to redemption gates, liquidity fees and potentially even loss of principal), it’s a good idea to read the fine print on your mutual funds as well.
 
Money Market Funds Can Lose Value
Another issue with money market funds is that the fund itself can lose value. In fact, the time when the financial services company is most likely to impose a redemption gate or liquidity fee is if the fund “breaks the buck” (loses too much money).
 
Cash might lose buying power if the dollar weakens, as is currently happening. The dollar is projected to continue weakening against other currencies. However, cash in a money market fund could lose some of your investment, in addition to losing buying power.
 
Financial Services Companies
Financial services companies also offer money market funds. If you have a 401k, chances are high that your “safe” money is either in a bond, a money market fund or a Treasury bills fund. Since there is so much leverage in the financial services industry, it’s a good idea to know how healthy the fund company that underwrites your future is, and to read the fine print on the products. Financial products are not FDIC-insured. Not all bank products are FDIC-insured either, including insurance products that the bank offers and some high-yielding CDs and products.
 

Which S&P 500 Companies are Below Investment Grade?
11.6% of the S&P 500, 58 companies, are below investment grade. American Airlines has the lowest rating, at B-. You’re probably not surprised to find that United and Delta are in the bunch, alongside Royal Caribbean, Ford Motor Company, Live Nations Entertainment, Wynn, MGM Resorts International and some retail brands. However, there are even some technology companies hanging out below investment grade – including Netflix, Advanced Micro Devices and Twitter.
 
The Bottom Line
The world is highly leveraged with a lot of paper money floating around. There is substantial more risk on the safe side of your nest egg then you might be aware of. In addition, you’re not getting paid to take on that risk. What will pay off is to be informed and stay a step ahead of any bad news that appears on the horizon. Once bad news hits a headline, it’s too late to protect your assets.
 
During an unprecedented recession, such as we are in today, it’s imperative to read and understand the fine print. Don’t reach for yield. As Roy Rogers once said, “I’m more concerned with the return of my money than the return on my money.”
 
Learn more about the risk in bonds, annuities, money market funds, REITs and more in the blogs below. (Search by name and click on the blue highlights.)


You can read about our time-proven, easy-as-a-pie-chart nest egg strategies, in my book The ABCs of Money. (The 4th edition will be published very soon.) You can learn these transformational tools at our Oct. 3-5, 2020 Investor Educational Retreat. You can call or email our office for pricing and information on an unbiased 2nd opinion of your current plan, which comes with a roadmap for safety and diversification. Call 310-430-2397 or email info@NataliePace.com.

Other Blogs of Interest
Do Stocks Fare Better Under Democrats or Republicans?
Put Your Money Where Your Heart Is.
Crystal Ball for the Remainder of 2020 (Including the Election). 
Microcap Gaming Company Doubles 2Q 2020 Revenue.
​Apple & Tesla Stock Splits.
Schwab's Chief Fixed Income Strategist on What's Safe.
China's Tesla (Nio). 2Q Sales Soar.
Why Are You Still Renting? (Errr. There is More Than This to Consider!)
MedMen's Turnaround Plan Attracts A-List Board Members.
​Wealth Myths That Keep You Poor. Prosperity Truths That Make You Rich. 
Protecting Your Wealth and Home in a Recession.
Technology and Silver are Golden.
The Economy Contracts 32.9% in the 2nd Quarter of 2020.
Real Estate: Feeling Equity Rich? Make Sure That Feeling Isn't Fleeting.
Airline Revenue Plunges 86%. 
10 Questions for College Success
Bank Earnings Season. Crimes. Cronyism. Speculation.
Real Estate Solutions for a Post-Pandemic World.
Copper and Chile Update.
Gold Soars. Some Gold Funds Tank. 
Will the Facebook Ad Boycott De-FANG Stocks? 
Why Did My Cannabis Stock Go Down? 
Which Countries Are Hot in a Global Pandemic? 
Is Your Financial Advisor Good at Navigating Stormy Seas?
$10 Avocados, Lies, Damn Lies, Statistics & Wall Street Secrets. 
It's Never a Crash.
Work From Home and Intergenerational Housing.
Biotech Races for a Coronavirus Cure. 
Are You Worried About Money? 
May is a Good Time for Rebalancing.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
Why Did my Bonds Lose Money?
Cannabis Update. 
Recession Proof Your Life. Free Videocon Monday, May 10, 2020. 
The Recession will be Announced on July 30, 2020. 
Apple Reports Terrible Earnings. 
We Are in a Recession. 
Unemployment, Rising Stocks. What's Going On?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
21st Century Solutions for Protecting Your Home, Nest Egg & Job.
Wall Street Insiders are Selling Like There is No Tomorrow.
Why Are My Bonds Losing Money?
Tomorrow is Going to be Another Tough Day.
Price Matters. Stock Prices are Still Too High. 
Should You Ride Things Out?
7 Recession Indicators
Corona Virus Update.
The Bank Bail-in Plan on Your Dime.
NASDAQ is Up 6X. 
CoronaVirus: Which Companies and Countries Will be Most Impacted.
Is Tesla Worth GM and Ford Combined.
Artificial Intelligence is on Fire. Is it Time to Buy S'More?
Take the Retirement Challenge.
2020 Investor IQ Test.
Answers to the 2020 Investor IQ Test.
The Cannabis Capital Crunch and Stock Meltdown.
Does Your Commute Pollute More Than Planes? 
Are Health Care Costs Killing Your Budget? 
2020 Crystal Ball.
The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities. 
What Love, Time and Charity Have to do with our Commonwealth. Interview with MacArthur Genius Award Winner Kevin Murphy.
Unicorns Yesterday. Fairy Tales Today. IPO Losses Top $100 Billion. 
Price Matters. 
Will There be a Santa Rally? It's Up to Apple. 
Harness Your Emotions for Successful Investing.
What the Ford Downgrade Means for Main Street.
The Dow Dropped Over 1000 Points
Do We Talk Ourselves into Recessions? Interview with Nobel Prize Winning Economist Robert J. Shiller.
Ford is Downgraded to Junk.
Gold Mining ETFs Have Doubled. 
The Gold Bull Market Has Begun. 
The We Work IPO. 
The Highs and Hangovers of Investing in Cannabis. 
Recession Proof Your Life. 
What's Your Exit Strategy? 
It's Time To Do Your Annual Rebalancing.
Are You Suffering From Buy High, Sell Low Mentality?
Financial Engineering is Not Real Growth.
The Zoom IPO. 
Uber vs. Lyft. Which IPO Will Drive Returns?
Boeing Cuts 737 Production by 20%.
The Lyft IPO Hits Wall Street. Should you tak
Cannabis Doubles. Did you miss the party?
12 Investing Mistakes
The High Cost of Free Advice. 
2018 Was the Worst December Since the Great Depression. 
Russia Dumps Treasuries and Buys Gold
OPEC and Russia Cut Oil Production. 
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 3rd edition of The ABCs of Money was released in 2020. The 4th edition, updated to include the COVID-19 Recession, will be released soon. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. ​

​Will the Stock Market Fare Better Under Biden or Trump?
The statistics might surprise you.
 
Stock Market Performance by President
As you can see from the charts below, Democrats have a better track record for the stock market than Republicans. This is something that Wall Street insiders are all aware of. According to Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania, in his book Stocks for the Long Run, “Bull markets and bear markets come and go, and it’s more to do with business cycles than Presidents.” 

21st Century Wall Street Rollercoaster
It’s important to note, however, that 21st Century business cycles have fundamentally changed – with the contractions becoming crises. As Jerome Powell noted in his infamous Jackson Hole speech on August 27, 2020, “Before the Great Moderation, expansions typically ended in overheating and rising inflation. Since then, prior to the current pandemic-induced downturn, a series of historically long expansions had been more likely to end with episodes of financial instability, prompting essential efforts to substantially increase the strength and resilience of the financial system.”

​Powell is referring to the 78% NASDAQ losses in the Dot Com Recession, the 55% Dow Jones Industrial Average losses (and bank meltdown) of the Great Recession and the 35% knife drop that happened between February 19, 2020, and March 23, 2020. We have clawed back some losses, but that doesn’t mean we are out of the woods. For more background on what’s going on and what the rest of 2020 will look like, read my “Crystal Ball for the 2nd Half 2020” blog.
 

Part of the problem is political gridlock, where there is no backbone to address the spending challenges of today. Raising taxes or cutting spending can cost you your seat in Washington. Economists will tell you that lower taxes are an effective way to stimulate growth. However, when you fail to cut spending to allow for the reduced tax income, which happened under the Administrations of #45, #43, #41 and #40, then you create financial imbalances. It’s easy for the financial imbalances and instability, which Jerome Powell is referring to, to build up when you have less income combined with as much or more spending. If it happened in your household, you’d be in trouble pretty fast, as you can’t print up more fiat currency to try and bridge your way to a better tomorrow. Pretty soon, you’ll have to borrow at very high interest rates, or on a credit card. You won’t have your debt bailed out by the Federal Reserve, as major, heavily indebted U.S. corporations did this year.
 
The U.S. has been running budget deficits since 1960, with the exception of a three-year period under President Clinton and one-year under President Johnson (in 1969). (Click to see the data.) The U.S. public debt is now an eyepopping $26.7 trillion. We have added over $3.3 trillion to the U.S. public debt since February. However, prior to that, the toll was ticking up by over a trillion a year (including under the current Administration).
 

​Bipartisan Solutions
The only way that we get back to spending within our means, and paying off a Mt. Everest of debt, is for both sides of the aisle to work together. When the issues are politicized and people are polarized, the necessary reforms are not addressed with transparency and solutions are not achieved. We all want the same thing: greater prosperity and opportunity, and a fair playing ground to achieve that. We differ on the process to get there. The risks of continuing the way we have, with slow growth, unsustainable debt and devastating recessions, are too great to continue The Blame Game of procrastination.
 
Are Election Years Super Performers?
 
It used to be that election years were great – the 2nd best performers in the 4-year cycle (led by pre-election years). As you can see in the Election Year Chart below, election years are now all over the map. The Dot Com and the Great Recessions show up in the 20-year data, but not the 10-year data. In those recessions, the election years were devastating. 2000 saw a -10% drop in the S&P500. 2008 saw a -38.5% correction.
 

Will There Be a Santa Rally in 2020?
In 2008 (the Great Recession), September, October and November sank like a rock, with losses of -9.08%, -16.94% and -7.49%, respectively This was after a fairly calm July and August. December tried to offer a gift lift of 0.78%. In 2000 (the Dot Com Recession), September dropped -5.35%, October leveled out at -0.49% losses, November tanked with an -8.01% correction and December tried to put a gift of 0.41% in the stocking. This was after robust gains in August of 2000 of 6.07%. So, having a good summer actually presaged disaster in those recessions.
 
We are in a recession, with unemployment, debt, leverage and other economic data that looks worse than the Great Depression. The historic data on how markets perform in recessions isn’t encouraging. As Howard Silverblatt, the senior index analyst of the S&P Dow Jones Indices, wrote in an email on July 31, 2020, this market rally has been built on “fear of losing out by individuals, the need to make the numbers by money managers, and the universal need to believe...  As for doomsayers and (shocked) short-sellers, eventually they will be right, but when?”
 
Buy & Hope Doesn’t Work
Buy & Hope is a strategy that worked during the Great Moderation (last century), but has cost investors up to half, or more, of their wealth in the last three recessions. Proper diversification and annual rebalancing is a time-proven 21st Century strategy.
 
In today’s world, with so much debt, it is important to know what is safe. Bonds can become illiquid and lose principal. Money market funds have redemption gates and liquidity fees. (It’s listed in the fine print. This was a new rule implemented in 2017 to prevent a run on the banks.) Read my blog and watch my videoconference with Kathy A. Jones, the Chief Fixed Income Strategist of Charles Schwab, to learn more.
 
You can read about our time-proven, easy-as-a-pie-chart nest egg strategies, in my book The ABCs of Money. You can learn these transformational tools at our Oct. 3-5, 2020 Investor Educational Retreat. You can call or email our office for pricing and information on an unbiased 2nd opinion of your current plan, which comes with a roadmap for safety and diversification. Call 310-430-2397 or email info@NataliePace.com.
 
 

​Other Blogs of Interest
Put Your Money Where Your Heart Is.
Crystal Ball for the Remainder of 2020 (Including the Election). 
Microcap Gaming Company Doubles 2Q 2020 Revenue.
​Apple & Tesla Stock Splits.
Schwab's Chief Fixed Income Strategist on What's Safe.
China's Tesla (Nio). 2Q Sales Soar.
Why Are You Still Renting? (Errr. There is More Than This to Consider!)
MedMen's Turnaround Plan Attracts A-List Board Members.
​Wealth Myths That Keep You Poor. Prosperity Truths That Make You Rich. 
Protecting Your Wealth and Home in a Recession.
Technology and Silver are Golden.
The Economy Contracts 32.9% in the 2nd Quarter of 2020.
Real Estate: Feeling Equity Rich? Make Sure That Feeling Isn't Fleeting.
Airline Revenue Plunges 86%. 
10 Questions for College Success
Bank Earnings Season. Crimes. Cronyism. Speculation.
Real Estate Solutions for a Post-Pandemic World.
Copper and Chile Update.
Gold Soars. Some Gold Funds Tank. 
Will the Facebook Ad Boycott De-FANG Stocks? 
Why Did My Cannabis Stock Go Down? 
Which Countries Are Hot in a Global Pandemic? 
Is Your Financial Advisor Good at Navigating Stormy Seas?
$10 Avocados, Lies, Damn Lies, Statistics & Wall Street Secrets. 
It's Never a Crash.
Work From Home and Intergenerational Housing.
Biotech Races for a Coronavirus Cure. 
Are You Worried About Money? 
May is a Good Time for Rebalancing.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
Why Did my Bonds Lose Money?
Cannabis Update. 
Recession Proof Your Life. Free Videocon Monday, May 10, 2020. 
The Recession will be Announced on July 30, 2020. 
Apple Reports Terrible Earnings. 
We Are in a Recession. 
Unemployment, Rising Stocks. What's Going On?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
21st Century Solutions for Protecting Your Home, Nest Egg & Job.
Wall Street Insiders are Selling Like There is No Tomorrow.
Why Are My Bonds Losing Money?
Tomorrow is Going to be Another Tough Day.
Price Matters. Stock Prices are Still Too High. 
Should You Ride Things Out?
7 Recession Indicators
Corona Virus Update.
The Bank Bail-in Plan on Your Dime.
NASDAQ is Up 6X. 
CoronaVirus: Which Companies and Countries Will be Most Impacted.
Is Tesla Worth GM and Ford Combined.
Artificial Intelligence is on Fire. Is it Time to Buy S'More?
Take the Retirement Challenge.
2020 Investor IQ Test.
Answers to the 2020 Investor IQ Test.
The Cannabis Capital Crunch and Stock Meltdown.
Does Your Commute Pollute More Than Planes? 
Are Health Care Costs Killing Your Budget? 
2020 Crystal Ball.
The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities. 
What Love, Time and Charity Have to do with our Commonwealth. Interview with MacArthur Genius Award Winner Kevin Murphy.
Unicorns Yesterday. Fairy Tales Today. IPO Losses Top $100 Billion. 
Price Matters. 
Will There be a Santa Rally? It's Up to Apple. 
Harness Your Emotions for Successful Investing.
What the Ford Downgrade Means for Main Street.
The Dow Dropped Over 1000 Points
Do We Talk Ourselves into Recessions? Interview with Nobel Prize Winning Economist Robert J. Shiller.
Ford is Downgraded to Junk.
Gold Mining ETFs Have Doubled. 
The Gold Bull Market Has Begun. 
The We Work IPO. 
The Highs and Hangovers of Investing in Cannabis. 
Recession Proof Your Life. 
What's Your Exit Strategy? 
It's Time To Do Your Annual Rebalancing.
Are You Suffering From Buy High, Sell Low Mentality?
Financial Engineering is Not Real Growth.
The Zoom IPO. 
Uber vs. Lyft. Which IPO Will Drive Returns?
Boeing Cuts 737 Production by 20%.
The Lyft IPO Hits Wall Street. Should you tak
Cannabis Doubles. Did you miss the party?
12 Investing Mistakes
The High Cost of Free Advice. 
2018 Was the Worst December Since the Great Depression. 
Russia Dumps Treasuries and Buys Gold
OPEC and Russia Cut Oil Production. 
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 3rd edition of The ABCs of Money was released in 2020. The 4th edition, updated to include the COVID-19 Recession, will be released soon. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. ​

If you had all of the money in the world what kind of world would you create? What kind of fuel and energy would power our lives? Would you opt for organic food, if it were affordable and available? How would people move around in your utopia? The current pandemic has forced each one of us to evaluate our lives. Dramatic shifts are happening. Many are being forced on us.
 
The skies have never been cleaner in my lifetime. Traffic has never been so light and calm. What if these forced changes become permanent, either by choice or by nature’s command? And if we are no longer addicted to gasoline, and can work from home, what other sustainable solutions lie at hand? What investments should we collectively make to invest in a cleaner and greener tomorrow? What personal carbon neutral goals should we embrace for ourselves, as individuals, as corporations and collectively as taxpayers?

What we have discovered since the Enlightenment, with rapid innovations that have taken us to the Moon and beyond, with computers that can operate on our wrist, is that: if we dream it and commit to it, we can achieve it. So, what is our new collective dream?
 
Below are ten considerations as we all ponder co-creating greater peace, prosperity and planetary sustainability. The missing link in the past was that too many of us were marching for the planet, but not living a personal carbon neutral life. We had many justifications for this, usually starting with providing for ourselves and our families. We were never taught how to put our money where our heart is and profit from that – what the inherent personal and global value in that is. In fact, the broker/salesmen of the multi trillion-dollar financial services industry typically tell us the opposite – to worry about making profits, and then use our gains for good. Now that we have time to think about that proposition, the spuriousness becomes apparent. Should we profit from the products we picket? Will Altria gains buy a few more years of life for a loved one with cancer?
 
If you are someone who buys insurance, has a 401K or a money manager, or even if you are just a taxpayer, then now is the time to learn and understand exactly how our taxes, investments, choices and habits fund the very companies and products that we oppose in our world. We can switch out blind faith, Buy & Hope and riding the Wall Street rollercoaster with taking ownership of the companies, products and services that create a healthy life and world. We’ll have to make sure that our tax dollars are scrubbed clean, too. Change happens far more frequently through social movements than it does in the halls of Congress. If consumers and enlightened investors unite to put our money where our heart is, the leaders will be forced to follow. It all begins with wisdom.
 
Nine Considerations for Co-Creating a Beautiful Life & Planet
Consumer Dollars
Investing Dollars
Clean Energy
Micro Mobility, Mass Transit and Ride Share
Use Less
Community
#NoExcuseForSingleUse
Plant More Trees
The Earth Gratitude Project

 
And here are more details on each point.
 
Ten Considerations for Co-Creating a Beautiful Life & Planet
 
Consumer Dollars
We often have hubris in this department, thinking that we are doing the best that we can. However, that is based upon a large base of assumptions. In January, we might have assumed that we have to drive a long daily commute, and spend a large amount of our budget on gasoline each month. Today, we might be Working from Home, commuting barefoot from our kitchen to our home office and amazed at the savings.  
 
What if we take the consumption examination broader to include everything in our lives – including the money that we spend on electricity, 62% of which flows through to fossil fuel companies, on average. (See the source chart below.) Being a green consumer requires getting informed and taking a serious look at our daily habits to see what can be turned off, reimagined, repurposed and switched out to dramatically reduce or eliminate the need for oil, gas and the fossil fuels that are polluting our air, our water and our food, and contributing to climate change. The upside is that with smarter big-ticket choices, we can save thousands of dollars annually.

​

Individuals who use grid electricity, typically spend thousands annually and hundreds monthly. Homeowners with rooftop solar often only spend $50 or less each month. That’s a savings of thousands annually. You can pay back the solar within a few years, and then enjoy what amounts to a 15% or more Return on Investment annually, when you consider the energy savings each year. There is even a federal tax credit of 26% in 2020 and 22% in 2021. There are likely to be state and local incentives as well. Proper home insulation can dramatically reduce the need for heat and air, requiring less power and fewer solar panels.

Clean energy is local. What is right for Michigan will be different than what is right for Arizona. Poundbury, England, installed a gas-to-grid anaerobic digester. There are time-proven solutions for all climates that also offer substantial budget savings to boot. 
 
 
Investing Dollars
Are you profiting from the companies you are picketing? Do you know what you own in your retirement plans, annuities, savings and insurance plans? Are you aware of where your tax dollars flow? Of the 916 bonds that were purchased by the Federal Reserve this year (to prevent a financial meltdown when the markets became illiquid), the majority of the funds have gone to the products of last century, rather than clean energy and a more sustainable tomorrow.
 
Knowing what you own, being properly diversified and leaning into the products, goods and services of tomorrow could save your assets during the COVID-19 Recession and beyond. Most people lost more than half in the last two recessions, and 35% in March of 2020, whereas our easy-as-a-pie-chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. Investors who have followed our work phoned our offices filled with gratitude in February and March of this year, while others were desperate to learn our system to protect their wealth. The solutions are simple, which is why we call them The ABCs of Money that we all should have received in high school.
 
Buy & Hope is a last century strategy that hasn’t worked in the 21st Century. Annual rebalancing is a buy low, sell high plan on auto-pilot. Learn more in my book The ABCs of Money, in our retreats (visit NataliePace.com to learn more about the Oct. 3-5, 2020 Investor Educational Retreat) and with our unbiased 2nd opinion (call 310-430-2397 for pricing, information and testimonials).

​Clean Energy
As you can see in the chart above, our country is falling behind on clean energy generation. Currently, only 17.5% of the grid is powered by renewable energy. That’s up only 7% in a decade. In some states, the renewable energy percentage is in the low single digits. If you’d like to know how your state is doing, visit SpotforCleanEnergy.org. Floridians are always surprised to learn that less than 3% of their power is renewable.

Click to read about Santa Monica, California, which switched over to 100% renewable energy in February of 2019, and has a water independence project in motion. If your city or state is mostly powering with nuclear and fossil fuels, then you should be thinking of that every time you choose the stairs over the elevator, sit in a sunlit room or opt for other energy-smart choices rather than the habitual on/off switch. Every time you use grid power, you are firing up a coal plant or purchasing from a fracking natural gas facility. If rooftop solar isn’t right for your climate, then an anaerobic digester, passive solar and Passive Home technology might be the right solution for your community.

Micro Mobility, Mass Transit and Ride Share
Three years ago, you couldn’t hop on an e-scooter sharing app. 20 years ago, conspicuous bike lanes were few and far between. Thanks to renegade startups, courageous City Council members and Millennials/Gen Z, micro mobility has forced its way into cities.
 
A single-occupancy car commute is a waste of time, money and resources. Yet, many of us have found ourselves trapped in this lifestyle, even when gridlock added a great deal of stress and time to our daily lives. Fortunately, there are solutions in many cities now – solutions that can also pay you back. Micro mobility has bridged the last mile, so that people can (and do) take public transportation.
 
The cost of a car averages about $7,500/annually, when you include the car payment, car insurance, fuel and maintenance. (Electric Vehicles have far lower costs of fuel and maintenance.) If you opt for public transportation, biking, e-scooters and ride share when needed, your annual cost savings can be in the thousands. The National League of Cities has developed a Micro Mobility Report that helps local leadership to navigate through the transition with pilot programs, resources for funding and best practices for managing the special interest groups.

Use Less
This is the single-most effective way to be kinder and gentler to the planet. Remember to extend the idea to power and energy, in addition to using canvas bags. Take the stairs. Opt for sunlight and fresh air. Walk or bike to pick up that carton of milk. Say no to plastic and straws. Bring your own bulk and to-go containers to stores and restaurants. We know most of the things to do. However, getting it right means planning ahead, which is where many of us with the best intentions fall short. 
 
Community
When people work together things move quickly. There are people in your community who want organic food, clean energy, visible bike lanes, trees, clean air, healthy oceans, local water conservation and diverse wildlife. There are already great organizations that have resources for pretty much anything you desire to do. Are you interested in planting learning gardens in your kids’ school, or creating bike lanes to keep them safe? Are you motivated to lead a game-changing water conservation or renewable energy project in your city? Even a few hours a week working with others can bring about much-needed progress.
 
#NoExcuseForSingleUse
There is no excuse for single use anything. Use this hash tag to applaud any corporation getting it right, and for calling out corporations that need to fix their throw-away business model.
 
Plant More Trees
Soil regeneration and planting trees is a great way to sequester carbon for the good of the planet, people and all living things. The Dalai Lama has been teaching about this for decades. HRH The Prince of Wales has put his money and position behind organic farming, sustainable communities and all things green since the 1970s.
 
In the poorest parts of the city, where there is more concrete and fewer trees, the air temperature can be much hotter. Having more trees benefits the entire city, so becoming more civic minded, and reaching across socio-economic borders, benefits everyone.
 
At the same time, be sure that the local landscape is appropriate for your community. If you live in an area that is affected by drought, help schools and businesses remove the carpet of grass and install drought-resistant plants. Sometimes there are local incentives to do this. It’s important to save the water. There are many financial benefits to doing the right thing.
 
Watch the new documentary, Kiss the Ground, on Netflix on September 22, 2020 to learn more about carbon sequestration through sustainable farm practices, with an emphasis on healthy soil, plants and livestock. Read the two free Earth Gratitude ebooks to learn more sustainable strategies offered by the world's leading experts. Click to learn more about The Prince of Wales twin eco-cities. Discover Poundbury, Dorset on the Google Arts and Culture pages.
 

The Earth Gratitude Project
All great holidays have rituals. The Earth Gratitude Project was launched to honor and give thanks for Mother Earth with a fun net zero celebration on April 22nd each year. If we try something new on each Earth Day, it can become the way life is. The free Earth Gratitude ebooks offer inspiring projects to consider when planning your Earth Gratitude celebration with your friends and family. Why gratitude? When we flood our minds with the endorphins of gratitude, we receive the solutions necessary to preserve this beautiful blue ball that we call home.
 
Watch a 4-minute film at EarthGratitude.org of a young family who made a bold and inspiring choice to opt out of the daily commute and food covered in plastic, and into their dream-come-true off-grid home in the wilderness.
 
I’m an advocate of money while you sleep (investing) and free markets. However, we’ve seen Depression-like recessions, a stalled-out commitment to sustainability and cronyism economics take the stage in the 21st Century. Again, most people have lost half or more of their wealth in each of the last two recessions. The financial indicators of the current recession are worse than the Great Depression. So, why not learn how to put your money where your heart is and profit, while also protecting your wealth? We can stop allowing the status quo to co-opt our money to fund fossil fuels, habitat destruction and other enterprises that we strongly oppose. We can instead use our collective power to regenerate the soil, replant the forests, remove the plastic from the oceans and breathe cleaner, healthier air as a result. The pandemic’s interruption of our lives is an opportunity to rethink and re-create everything.
 
Every cent we own and every moment we spend is always an investment. Let’s invest in a beautiful world for our children and grandchildren to enjoy. Life is in upheaval. Everything is on the table. Many of us are have been forced to move swiftly to make the necessary changes to survive and thrive. While we are rebuilding everything, adding these 10 considerations into the mix might actually lead to a renaissance beyond our wildest dreams. This is a moment in time where we are all challenged to co-create an existence worthy of being remembered for ages to come. Let’s rise to the occasion. We must become informed and aware, and act with our eye on the destination, rather than the short-term thinking of how high stocks are today and how wealthy we feel, or how devastated we were yesterday (and perhaps tomorrow) when we lost more than 35% before we could even blink.
 
True wealth is not a rollercoaster. Living a rich life is priceless. Having a planet that nourishes and sustains us is a divine blessing, and is essential to our survival. So, let’s put our money where our heart is and profit, in every sense of the word.


​If you're interested in protecting and diversifying your retirement and investing portfolio, and learning how to put your money where your heart is (instead of profiting from polluters) join me at our Oct. 3-5, 2020 Investor Educational Retreat. Click on the banner ad below for additional information on the Oct. 3-5, 2020 Online Financial Empowerment Retreat. Families receive a discount for attending together. Call 310-430-2397 or email info@NataliePace.com for to get rates. 

​​"Many people, including educated men and women, often get into trouble when they 
neglect to follow simple and fundamental rules of the type provided [by Natalie]. 
This is why I recommend them with enthusiasm." 
Professor Gary S. Becker. Dr. Becker won the 1992 Nobel Prize in economics for his theories on human 

"College students need this information before they get their first credit card. Young adults need it before they buy their first home. Empty nesters can use the information to downsize to a sustainable lifestyle, before they get into trouble." 
Joe Moglia, Chairman, TD AMERITRADE.
​

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 3rd edition of The ABCs of Money was released in 2020. The 4th edition, updated to include the COVID-19 Recession, will be released soon. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. ​

​Crystal Ball for the Remainder of 2020.
 
How will the remainder of 2020 play out? Let’s consult the crystal ball of wisdom and data.
 
Don’t Fight the Fed
On August 27, 2020, Federal Reserve Board Chairman Jerome Powell announced that the Federal Reserve Board intends to keep interest rates rock bottom, even if inflation starts heating up. According to Jerome Powell, “Longer-term inflation expectations, which we have long seen as an important driver of actual inflation, and global disinflationary pressures may have been holding down inflation more than was generally anticipated.”  In other words, the problem continues to be deflation. So, a little kick above 3% might be helpful, in order to move the average closer to 2%.

It’s important to recognize that the above chart does not include asset prices, like housing, equities and fixed income. Those are very important caveats. Asset prices are historically high and debt is off the charts.  

​Although the speech acknowledged that interest rates are below their Effective Lower Bound (meaning the Feds have to resort to other tools to kickstart the economy) and the tendency for 21st Century Recessions to end in financial instability is a concern (meaning that the current asset bubbles could be a big problem), the Feds are betting (hoping?) that if corporations can count on low interest rates for years, they will put people back to work. Having a job means consumers can spend again, which should kickstart a recovery. Prior to the COVID-19 Recession, consumer spending made up 68% of GDP.

How Will the Fed’s New Policy Work?
According to Marc Miles, the former Editor of The Index of Economic Freedom and the former Assistant State Treasurer of New Jersey, the Feds have essentially adopted a Price Rule. The theory, advocated by Henry Calvert Simons (Milton Friedman’s teacher), is that if you just minimize volatility in the short term, everything normalizes over the long term (i.e. a 30 to 40-year period). Therefore, the goal is to keep prices (including asset prices) where they are. When the bond market seizes up, the Feds march in to purchase bonds and bond ETFs, including junk bond ETFs. Same thing for money market funds, Treasury bills and anything that moves. This is exactly what happened in March of 2020. Since that time the offer remains on the table, which has calmed the markets and spurred the NASDAQ and S&P500 to all-time highs. Investors are siding with the Fed. However, the smart money is aware of the underlying crisis, and will move swiftly if there are signs of weakness in any of the asset bubbles (just as they did in mid-February).
 
It is unusual for the Federal Reserve to purchase stocks. However, they crossed the line into equity territory with their purchases of bond ETFs. There is informed speculation that the Feds will resort to purchasing equities, if the stock market dives. Will they let stocks correct 78% as Dot Com stocks did between 2000 and 2002, or 55%, as the Dow Jones Industrial Average lost between October of 2007 and March of 2009? The drop between February 19, 2020, and March 23, 2020, was 35%. Experience teaches us that if you wait for the headlines, it’s too late to protect your wealth. So, you want to have a solid plan in place before the smart money sells.
 
On September, 2, 2020,The CDC announced a moratorium on evictions through Dec. 31, 2020. Last week, HUD announced a moratorium on homeowner evictions for Federal Housing Administration-insured homeowners through the end of the year. This helps anyone who is out of work from becoming out on the street. It also stabilizes rents and home prices – another part of the Price Rule plan. However, what happens to landlords and the banks who loaned money that is not being paid back? In theory, all of the money will still be owed. However, renters and homeowners who couldn’t pay in 2020 could have difficulty catching up in 2021. The current Administration, of course, wants these issues to become crises after the election, not before. These will be quite substantial challenges for the new Administration in 2021.
 
"If tenants are unable to pay their rent, then millions of our nation's housing providers – many of whom are individual landlords and small business owners – will be unable to meet their mortgage obligations, make payroll to their own employees, maintain a safe and healthy living environment for their tenants and pay their state and local government property taxes," said Bob Broeksmit, CEO of the Mortgage Bankers Association. "The result would be a cascading reaction that would only exacerbate the current economic crisis, leading to more job loss, financial pain, and long-lasting economic effects."

Will The Feds’ Plan Work?
The rally in stocks since March and the continued strength of the real estate market (buoyed up by a flight to the suburbs from overpriced cities and the eviction and mortgage moratoriums) lends support for the efficacy of the Price Rule. However, this doesn’t eliminate the risks of financial instability, particularly in those slow-growth corporations that were caught using their debt to repurchase stocks and pay high dividends. When their revenue plunged in the pandemic, creditors came calling and investors sold. We’ve seen a slew of corporate bankruptcies in 2020 – higher than what occurred in the Great Recession. (When companies declare bankruptcy, their stock traditionally goes to zero.) 2/3rds of the DJIA had a revenue contraction in the 2nd quarter, 73% currently have elevated price/earnings ratios and 57% are carrying very high debt/equity ratios. Investors are betting that, given time, post-pandemic and with the Fed support, those numbers will correct themselves.

In 74% of the U.S. cities, real estate is unaffordable to the people who live there. The current moratorium masks this basic problem. The Price Rule exacerbates a crisis that has kept Millennials from purchasing homes, and has many people spending more than 1/3 of their income on housing.

​

​A disciplined low-interest rate policy helped the U.S. to cycle out of very high debt levels post World War II. Today, we are also dealing with an aging population, whereas post World War II, the population demographics skewed much younger. In 1940, over 73% of the population was under the age of 45. The average age of death was 64 in men in 1945. Today, almost 44% of the population is over the age of 45. There was also “pent-up demand” from soldiers returning from war in the 1940s, according to Kathy Jones.

Today, the U.S. spends 18% of GDP ($3.5 trillion) on health care alone. Part of the problem is obesity in the U.S., which affects 42.4% of the population. Obesity causes a lot of health complications. The other issue is the cost of healthcare itself, which is substantially higher than the rest of the developed world. Over $2 trillion is spent annually on social security, Medicare and Medicaid, accounting for 47% of the U.S. budget. The U.S. budget receipts were $3.5 trillion in 2019, with outlays of $4.4 trillion (a deficit). The U.S. has been running budget deficits since 1960, with the exception of a three-year period under President Clinton and one-year under President Johnson (in 1969).

According to Liz Ann Sonders, the Chief Investment Strategist of Charles Schwab, “Powell didn’t mention much about all of the Fed’s facilities/liquidity provisions and the creation of possible asset bubbles; but it’s certainly top of mind for many investors. Longer-term, the question is whether the Fed is inflating asset bubbles, but also setting the stage for financial instability.” Educated investors know that although things feel “normalized,” we are sleeping on an economic volcano. The only question is when and how it will erupt. We are already seeing lava flows (bankruptcies) in various industries that are most susceptible to pandemic-related cultural shift. The problems in housing have been delayed through the end of the year. However, that does not eliminate them.
 
The Risks and Rewards of Low Interest Rates
 
Companies Can Borrow at a Lower Rate
By promising low interest rates for years to come, the Feds are encouraging long-term debt over short-term. If corporations can borrow and push out the payback date for decades, then, at least in theory, their net income should benefit from a reduction in the amount the company pays for interest. Marc Miles believes that, based upon the current pandemic-related reduced earnings, along with the interest savings, “The current level of stock prices is likely reasonable going forward.” The problem comes when there is a fundamental shift in the industry, as there has been for oil, commercial real estate, mall REITs, retail, travel & hospitality, auto manufacturing, airlines and other sectors that have seen a dramatic implosion of sales and revenue. Imagine giving the typewriter industry a 30-year loan in 1980, when personal computers were becoming available. Some of these industries were already being replaced, but have been put on the fast-track due to the pandemic.
 
Larger corporations have an easier time rolling over existing debt into long-term bonds. According to Liz Ann Sonders (in an email to me), “Small caps continue to have fundamental profiles that are significantly weaker (in general) than large caps; including weaker balance sheets (more debt), weaker profitability, a higher percentage of 'zombie' companies, etc.” Liz Ann’s team has been overweighting large caps and underweighting small caps on the equity side for the past three years.
 
Should You Own Bonds?
On the fixed income side, investors are not being paid for the risk of lending long term. Kathy A. Jones, the Chief Fixed Income Strategist for Charles Schwab, recommends keeping the terms short and the creditworthiness high in both corporate and municipal bonds. Both Kathy Jones and Marc Miles expressed concern for muni bonds. “State and local governments [are] losing tax revenue. They bear a lot of the brunt of the cost of this recovery, particularly with firefighters and hospitals,” according to Kathy Jones.
 
On August 19, 2020, Fitch Ratings downgraded the Rating Outlook for Munis with federal support. (Click to access the list, which includes a lot of mortgage backed securities.) As of April 29, 2020, the five states with the lowest credit ratings were Illinois, New Jersey, Kentucky, Connecticut and Pennsylvania.

Santa Rally 2020?
So, will stocks continue their rally through the end of 2020? According to S&P Dow Jones Indices’ Senior Index Analyst Howard Silverblatt, there are two things that will determine the fate of the market in the last half of 2020. One is the election (including the aid package and a possible government shutdown) and the second is COVID-19. According to Silverblatt, the market is pricing on the belief that earnings will hit a new high in the 4th quarter of 2021. “If, for any reason, the market needs to change that belief, even if it is just a timing change, it will need to reprice, and given the profits are so concentrated, that could be ugly,” according to Silverblatt.
 
Financial Instability
Financial Stability was already a concern before the pandemic. In the November 2019 Financial Stability Report, the Federal Reserve Board noted that asset valuations and debt were both elevated, with debt concentrated in the “riskiest firms amid weak credit standards.” “I’m not surprised Powell didn’t mention asset prices or financial stability. It’s pretty clear that high valuations of asset prices are a trade-off the Fed is willing to make for an improving economy and a lower unemployment rate,” Kathy Jones wrote me in an email on August 27, 2020.
 
I will discuss this in greater detail in my upcoming blog, “Hail Mary Economics.” As you can see in the chart at the top of this blog, all of the things that were a concern in the Great Recession are far more alarming today.

The U.S. AAA Credit Rating
Fitch Ratings affirmed the U.S. AAA rating on July 31, 2020, but changed the outlook to negative. The problem is “the ongoing deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan,” according to Fitch’s press release. Fitch acknowledges that the Feds' response to the crisis “prevented a deeper downturn,” but notes that downside risks persist. The International Monetary Fund has predicted a contraction of -8.0% in the U.S. in 2020 (better than Europe, but worse than Russia, Asia, Japan and China.)

Will Fitch Downgrade the U.S. Credit?
The negative outlook is a massive warning. The U.S. was downgraded by Standard and Poor’s on August 5, 2011. In the wake of that downgrade, gold and silver soared to all-time highs. The rallies were short lived, however. Investors believed the recovery was truly underway, and 2.0% GDP growth in the 3rd quarter of 2011, after the hellacious Great Recession, was enough to prompt faith. The 2Q 2020 GDP was the worst contraction in recorded history (since at least 1947), at -31.7%. As I mentioned above, the IMF is projecting a full-year 2020 contraction of -8.0% for the U.S.

Gold recently set new all-time highs of $2,067.15/ounce, and has almost doubled since 2016. Silver had a slower start, but has doubled in price since March 2020, from $14 to $28/ounce. (Click to read my blogs.) Investors are adding a hedge and perceived safety to their portfolios. The continued strength belies that although many investors are maintaining a status quo for now, believing in the Fed policy, few are convinced of a sustained recovery yet. Investor activity and U.S. equity trading volume was double in February and March of this year to what it is now. The attitude appears to be "wait and see," while quietly diversifying and adding in hedge. If worry, doubt and fear set in over any reason at all, volume and VIX could spike and take equities south (at least until the Feds dash in and purchase equities).

Banks
On August 31, 2020, Fitch Ratings warned that the U.S. federal stimulus is delaying and masking the risk in U.S. banks. The banks have been offering forbearance to their customers, which typically runs out in 90 days, but will, in many instances, now be delayed through the end of 2020. Fitch warns that “Banks with greater exposure to the U.S. consumer are potentially more vulnerable to these downside risks.” Even with forbearance programs, the FHA mortgage delinquency rate just hit the highest it has ever been since the surveys began in 1979, at 15.65%, according to the Mortgage Bankers Association.
 
So far, credit card and car loan delinquencies remain low. However, as Fitch pointed out, this likely has a lot more to do with forbearance than with resilience. Weakness in the banking industry is a risk for stocks and bonds. High unemployment, at 10%, makes it difficult for a highly leveraged population to pay their mortgages, credit cards and car loans. The student loan delinquency rate has been above 20% for years.  
 
The Dollar
The dollar is expected to weaken, and has already softened against foreign currencies, even though Europe and the U.K. are predicted to have more severe 2020 contractions.

​Foreigners are holding about $4.145 trillion of the U.S. $26.6 trillion in public debt. However, low interest rates mean that those countries are not being paid to hold our debt, so there may not be a rush to add more. Fortunately, at this time, there isn’t a major challenger to overtake the U.S. as the premiere reserve currency. Most European and many Asian countries increased their holdings of U.S. Treasuries slightly over the past 12 months. China and Japan are still the top foreign holders, at $1.26 trillion and $1.07 trillion, respectively. Saudi Arabia has been divesting its U.S. T-bills. Russia dumped almost all of its U.S. Treasuries in August of 2018, and continues adding to its gold holdings. This may explain the increase in “unallocated” reserves over the past few years. It’s important to note that the U.S. has kept its AAA rating with Fitch Ratings and Moody’s Analytics based upon being a global reserve currency – essentially the fact that the rest of the world likes our dollar. A change in the dollar’s popularity weighs on the rating.
 
 ​
​Between 2001 and 2013, the biggest challenger to the U.S. currency was “unallocated reserves,” which are “foreign exchange reserves of those countries/territories that currently do not report to COFER but whose total foreign exchange reserves are included in the IFS world table,” according to the IMF. As you can see in the charts below, by the 3rd quarter of 2013, unallocated reserves made up 46% of the global reserves. In the 3rd quarter of 2013, the U.S. dollar made up 61.4% of allocated reserves, but only 1/3 of total reserves – lower than the unallocated reserves (at 46%).  Today, the U.S. makes up 57.9% of total reserves and 61.2% of allocated reserves. Unallocated reserves are back to just 6.6%. However, the trend has been increasing over the last 12 months.

​Bottom Line
The recession is global. The trends toward Work from Home are becoming more permanent. This negatively impacts oil, commercial real estate and auto manufacturers, and supports continued strength in technology and e-tail (though that strength is already overpriced into the stocks). Travel and hospitality will remain weak until people are confident that the virus has been contained. Consumer discretionary isn’t expected to recover until jobs recover, and even then sales could remain subdued. How many dresses do you need if you are working at a home office?
 
The only thing propping up the economy right now is the Federal Reserve Board and eviction moratoriums – not economic strength. A select group of economists are saying that the Price Rule will prevent the overprinting of fiat currency from becoming a financial crisis – something that would be a risk if the Feds weren’t buying up any asset that shows signs of illiquidity. (That’s why the Feds raise interest rates in prosperous times – to tighten the money supply. It’s something that was neglected in the most recent expansion.) Another group of economists and industry professionals are very concerned about financial stability and asset bubbles. As one C-level banker put it, “They are referring to the Vincent Price Rule because the economy is being animated with free money like one does a zombie with electricity.”
 
Which school of thought will win? Will the Price Rule smooth things over until peace and prosperity rise over our free land again? Will expensive stocks and bonds become magically affordable in the years to come. (I wouldn’t count on that. Wages have stagnated for decades.) Only time will tell how long the Feds can keep printing more money and buying everything that moves in the wrong direction. In the meantime, however, adopting a plan that works no matter which way stocks and bonds head will put you in the best seat.
 
What’s the price of those episodes of financial instability?
Most Main Street investors are risking half or more of their wealth.
 
As Jerome Powell said in his August 27, 2020, speech, “Before the Great Moderation, expansions typically ended in overheating and rising inflation. Since then, prior to the current pandemic-induced downturn, a series of historically long expansions had been more likely to end with episodes of financial instability, prompting essential efforts to substantially increase the strength and resilience of the financial system.” That’s a long way of saying that Buy & Hold is riding a Wall Street rollercoaster in the 21st Century, with most people losing half or more of their wealth in each of the last two recessions.  

Market timing doesn’t work. However, a properly diversified plan that is rebalanced regularly does. (I teach this strategy at my Investor Educational Retreats, and have written about them in my books, including The ABCs of Money.) As Kathy Jones recommends, “Ask yourself, ‘What made me uncomfortable in March? Do I want to change my allocation, so that I’m more comfortable? Do I really understand how much risk I am taking on?’ Have some cash on hand, so that you are covered if you get laid off or have a problem that needs to get addressed. Now is a great time to do this.” 
 
Final Thought
"Monetary and fiscal measures are not a substitute for competition and free-market arrangements but a means for attaining greater overall security, stability, and efficiency under such institutions. [Monetary policy] cannot be expected to bring either peace or prosperity out of economic civil war of monopolized industries and pressure groups." Henry Calvert Simons (Milton Friedman's teacher)
 
The above warning came from one of the strongest proponents of the Price Rule. It is an ominous reminder that when everything skews toward saving mega-corporations, at the expense of innovation and competition, the economy is going to have a problem. Should we be saving obsolete industries and executives who used low interest rates to pay high dividends to themselves and their friends, rather than shoring up their companies and creating the products of tomorrow? Or should we be investing in the products and entrepreneurs of tomorrow? These are questions worthy of being answered collectively. In the meantime, protect and diversify your wealth.
 

​If you're interested in protecting and diversifying your retirement and investing portfolio, join me at our Oct. 3-5, 2020 Investor Educational Retreat. Click on the banner ad below for additional information on the Oct. 3-5, 2020 Online Financial Empowerment Retreat. Families receive a discount for attending together. Call 310-430-2397 or email info@NataliePace.com for to get rates. 

​​"Many people, including educated men and women, often get into trouble when they 
neglect to follow simple and fundamental rules of the type provided [by Natalie]. 
This is why I recommend them with enthusiasm." 
Professor Gary S. Becker. Dr. Becker won the 1992 Nobel Prize in economics for his theories on human 

"College students need this information before they get their first credit card. Young adults need it before they buy their first home. Empty nesters can use the information to downsize to a sustainable lifestyle, before they get into trouble." 
Joe Moglia, Chairman, TD AMERITRADE.

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The Cannabis Capital Crunch and Stock Meltdown.
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The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities. 
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​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

​Gaming is having a massive resurgence, thanks to Shelter at Home, Educate at Home, Work from Home, Everything from Home, et al. All of the gaming companies reported an increase in revenue in the 2nd quarter of 2020. However, the clear winner wasn’t the maker of Fortnite (partially owned by Tencent), Call of Duty (Activision) or Grand Theft Auto (Take-Two Interactive), although each of those put in a strong showing. As is often the case, it was the little widget that makes everything work – the headset. As you can see in the Stock Report Card below, Turtle Beach’s revenue almost doubled in the 2nd quarter of 2020 year over year, soaring to sales of $79.7 million.

​ 
Turtle Beach’s net income was equally impressive, coming in at $8.2 million, compared to $2.4 million in 2Q 2019. While many companies, including Tesla and Apple, have suspended their forward guidance on revenue and EPS, Turtle Beach projects sales of $185 million in the 2nd half of 2020, with net income per share of $0.50. If we assume that each quarter is equal (which is unlikely), then 3Q 2020 revenue should come in at $92.5 million. That would be almost double what the 3rd quarter of 2019 saw, at $46.7 million. The 3rd quarter of 2019 also saw a net loss of $3.1 million. So, the profitability could be noteworthy as well. The 3rd quarter results should be announced around Nov. 6, 2020.  
 
According to Juergen Stark, CEO of Turtle Beach, “We believe the demand is … being driven by greater overall engagement of existing gamers, as well as new and lapsed gamers joining the market as new gaming headset users. In addition, non-gamers are buying headsets for at-home work, school and socializing.”
 
Like many gaming companies, Turtle Beach’s seasonally strong quarter is typically Christmas. Last year’s 4th quarter revenue was $101.8 million, with $20.4 million in net income. This year, the strong quarter might be moved to the Back to School season (the 3rd quarter), when parents purchase headsets to be able to work from home, while also monitoring the schooling of their kids. If the 2nd half of the year projection of $185 million in sales is divided equally or weighted toward the coming 3rd quarter, then the 4th quarter 2020 results will not look impressive compared to 2019. So, this is something to monitor when the earnings report is released in November.
 
It’s rare to find the best performer on a Stock Report Card to also be the one with the lowest price/earnings ratio. Turtle Beach has already enjoyed a rally of almost five-fold since the COVID-crisis stock market rout in March.
 
In a recessionary year, it’s important to include macro trends in your buy/sell analysis. It’s clear that Turtle Beach stock can be vulnerable when stocks drop en masse. Between January and March of 2020, Turtle Beach lost more than half of its value.
 


​

​So, if the current market rally peters out, it could drag even great little companies like Turtle Beach down with it. On the other hand, if you purchase and the stock shows continued strong performance, you might have to move swiftly to capture gains. In such a volatile market as we’ve seen in 2020, the right answer tends to be not all and not nothing. It requires a lot of babysitting to be on the right side of the trade in 2020.
 
 

​Other Blogs of Interest
​Apple & Tesla Stock Splits.
Schwab's Chief Fixed Income Strategist on What's Safe.
China's Tesla (Nio). 2Q Sales Soar.
Why Are You Still Renting? (Errr. There is More Than This to Consider!)
MedMen's Turnaround Plan Attracts A-List Board Members.
​Wealth Myths That Keep You Poor. Prosperity Truths That Make You Rich. 
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Does Your Commute Pollute More Than Planes? 
Are Health Care Costs Killing Your Budget? 
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The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities. 
What Love, Time and Charity Have to do with our Commonwealth. Interview with MacArthur Genius Award Winner Kevin Murphy.
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What the Ford Downgrade Means for Main Street.
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The Gold Bull Market Has Begun. 
The We Work IPO. 
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What's Your Exit Strategy? 
It's Time To Do Your Annual Rebalancing.
Are You Suffering From Buy High, Sell Low Mentality?
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The Zoom IPO. 
Uber vs. Lyft. Which IPO Will Drive Returns?
Boeing Cuts 737 Production by 20%.
The Lyft IPO Hits Wall Street. Should you tak
Cannabis Doubles. Did you miss the party?
12 Investing Mistakes
The High Cost of Free Advice. 
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OPEC and Russia Cut Oil Production. 
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 3rd edition of The ABCs of Money was released in 2020. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. ​

Apple and Tesla Stock Splits. Should I Invest Now? Investors Ask Natalie.
 
Dear Natalie,
 
What do you think about Apple and Tesla splitting their stocks? Is now a good time to buy?
 
Tempted to Buy
 
Dear Tempted, but Questioning:
 
Good for you to ask the question, rather than just assume that you should buy. I’m not sure what is so alluring about penny stocks and stock splits, but many investors are tempted to shoot from the hip on these events. Doing that is more like investing in Hertz after it declared bankruptcy just because it’s cheap (a losing proposition), or buying one of the new Tesla competitors before they have any sales (with the exception of China’s Nio, which increased sales 147% year over year in the most recent quarter).

So, what is a stock split? It’s just a way for a company to make its stock cheaper, so more people can buy it. It would be like a pizzeria that sells giant slices for $8/each, deciding to cut that slice into 4 pieces and sell each piece for $2/each. Does that mean that the pizzeria will sell more slices or that your smaller slice is better than the larger slice? Nope. It’s actually the same thing. Whether you buy 4 small slices for $8 or one large slice for $8, it’s the same amount of pizza. So, you’re back to looking at the Stock Report Card to determine whether or not you should invest in Tesla and Apple, rather than thinking a stock split is a good reason to buy or sell.
 
I just did a blog on Tesla, so read that blog for additional information on whether or not Tesla is a good buy right now. Tesla is trading at 247 times its forward earnings. The historical average price/earnings ratio is in the 16-17 range.
 
Apple’s price/earnings ratio is also outlandish, at 40. So, if you buy right now, it is the equivalent of paying $15 for an avocado. Apple’s sales were $260 billion with $55 billion in net income last year. However, the company is likely overvalued at $2.15 trillion. You’re buying very high if you purchase Apple right now. Remember that successful investing does require buying low and selling high.
 
In addition to looking at the company itself, you also need to consider the following 3 questions.

1. What can the company do?
2. What can the industry do?
3. What will the general market do?

 
What Can the Industry Do?
 
With regard to autos (even electric vehicles), auto sales typically tank in recessions. Tesla’s 2nd quarter sales were down -4% in the last quarter. It would be a pretty big surprise if the 3rd quarter sales were higher than 2019. As with many companies, Tesla is not providing guidance on what the next quarter will look like. Tesla’s electric vehicles are the hottest trend in auto sales. However, fewer people are willing to take on a car payment when they are afraid of losing their job. There is also $14.27 trillion in consumer debt weighing down the American wallet, of which $1.34 trillion is auto loan debt.

So far the delinquencies are low, at 2.26%. However, that could be artificial, based upon general moratoria that have been put in place. As you can see in the chart below, debt is higher than it was before the Great Recession. So is the unemployment rate. That's a formula for big problems. Things are in an artificial lull right now, but that doesn't mean that we're out of the woods yet. 
 

Technology has been resilient. Apple’s sales were up 11% in the most recent quarter. If the company brings in the same revenue in the next quarter, then sales will be down -7% year over year. If there are any supply chain disruptions, or if sales are not as robust as they were, then the drop will be more noteworthy. Although technology is hot, and Work and Educate from Home trends require everyone to own a PC and a smart phone or tablet, it is possible that this need has already been satisfied. Also, the $1200/person stimulus paycheck helped folks to purchase in the last quarter. That free money hasn’t materialized yet in this quarter.

​What Will the General Market Do?
We are in an unprecedented recession. Stocks have recovered because the Federal Reserve bought up almost everything to prevent a collapse. There will continue to be defaults and bankruptcies, particularly in those industries that have been hardest hit by the pandemic, including retail, small businesses, oil, hospitality, travel, commercial real estate, malls, casinos, live entertainment, cruise ships and more. As you can see in the chart below, bankruptcies are quite elevated.

As Howard Silverblatt, the senior index analyst of the S&P500 ® said on July 31, 2020, this market rally has been built on “fear of losing out by individuals, the need to make the numbers by money managers, and the universal need to believe...  As for doomsayers and (shocked) short-sellers, eventually they will be right, but when?”
 
 
 In short, today is actually a 2nd chance for most people to get it right by rebalancing and making sure that they have enough safe. For those of you who rue that you didn’t have Apple or Tesla before these major rallies, then you need to learn more about our pie chart system, which allows you to own up to four hot slices. If you have clean energy or technology in your portfolio, now is a great time to rebalance and capture gains. Additionally, what’s hot and what’s safe changes every year. So, consider whether or not you think that Tesla will continue to be this hot going forward when deciding how much to keep in your portfolio.
 
​
Split Dates
August 28, 2020, for shareholders as of August 24, 2020, for Apple. 4 for 1.
August 31, 2020, for shareholders as of August 21, 2020, for Tesla. 5 for 1.
 

If you're interested in learning learning essential investing tools, deepening your wisdom or in rebalancing your retirement plans, join me at our Oct. 3-5, 2020 Investor Educational Retreat. Click on the banner ad below for additional information on the Oct. 3-5, 2020 Online Financial Empowerment Retreat. Families receive a discount for attending together. Call 310-430-2397 or email info@NataliePace.com for to get rates. 

​​"Many people, including educated men and women, often get into trouble when they 
neglect to follow simple and fundamental rules of the type provided [by Natalie]. 
This is why I recommend them with enthusiasm." 
Professor Gary S. Becker. Dr. Becker won the 1992 Nobel Prize in economics for his theories on human 

"College students need this information before they get their first credit card. Young adults need it before they buy their first home. Empty nesters can use the information to downsize to a sustainable lifestyle, before they get into trouble." 
Joe Moglia, Chairman, TD AMERITRADE.

Other Blogs of Interest
Schwab's Chief Fixed Income Strategist on What's Safe.
China's Tesla (Nio). 2Q Sales Soar.
Why Are You Still Renting? (Errr. There is More Than This to Consider!)
MedMen's Turnaround Plan Attracts A-List Board Members.
​Wealth Myths That Keep You Poor. Prosperity Truths That Make You Rich. 
Protecting Your Wealth and Home in a Recession.
Technology and Silver are Golden.
The Economy Contracts 32.9% in the 2nd Quarter of 2020.
Real Estate: Feeling Equity Rich? Make Sure That Feeling Isn't Fleeting.
Airline Revenue Plunges 86%. 
10 Questions for College Success
Bank Earnings Season. Crimes. Cronyism. Speculation.
Real Estate Solutions for a Post-Pandemic World.
Copper and Chile Update.
Gold Soars. Some Gold Funds Tank. 
Will the Facebook Ad Boycott De-FANG Stocks? 
Why Did My Cannabis Stock Go Down? 
Which Countries Are Hot in a Global Pandemic? 
Is Your Financial Advisor Good at Navigating Stormy Seas?
$10 Avocados, Lies, Damn Lies, Statistics & Wall Street Secrets. 
It's Never a Crash.
Work From Home and Intergenerational Housing.
Biotech Races for a Coronavirus Cure. 
Are You Worried About Money? 
May is a Good Time for Rebalancing.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
Why Did my Bonds Lose Money?
Cannabis Update. 
Recession Proof Your Life. Free Videocon Monday, May 10, 2020. 
The Recession will be Announced on July 30, 2020. 
Apple Reports Terrible Earnings. 
We Are in a Recession. 
Unemployment, Rising Stocks. What's Going On?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
21st Century Solutions for Protecting Your Home, Nest Egg & Job.
Wall Street Insiders are Selling Like There is No Tomorrow.
Why Are My Bonds Losing Money?
Tomorrow is Going to be Another Tough Day.
Price Matters. Stock Prices are Still Too High. 
Should You Ride Things Out?
7 Recession Indicators
Corona Virus Update.
The Bank Bail-in Plan on Your Dime.
NASDAQ is Up 6X. 
CoronaVirus: Which Companies and Countries Will be Most Impacted.
Is Tesla Worth GM and Ford Combined.
Artificial Intelligence is on Fire. Is it Time to Buy S'More?
Take the Retirement Challenge.
2020 Investor IQ Test.
Answers to the 2020 Investor IQ Test.
The Cannabis Capital Crunch and Stock Meltdown.
Does Your Commute Pollute More Than Planes? 
Are Health Care Costs Killing Your Budget? 
2020 Crystal Ball.
The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities. 
What Love, Time and Charity Have to do with our Commonwealth. Interview with MacArthur Genius Award Winner Kevin Murphy.
Unicorns Yesterday. Fairy Tales Today. IPO Losses Top $100 Billion. 
Price Matters. 
Will There be a Santa Rally? It's Up to Apple. 
Harness Your Emotions for Successful Investing.
What the Ford Downgrade Means for Main Street.
The Dow Dropped Over 1000 Points
Do We Talk Ourselves into Recessions? Interview with Nobel Prize Winning Economist Robert J. Shiller.
Ford is Downgraded to Junk.
Gold Mining ETFs Have Doubled. 
The Gold Bull Market Has Begun. 
The We Work IPO. 
The Highs and Hangovers of Investing in Cannabis. 
Recession Proof Your Life. 
What's Your Exit Strategy? 
It's Time To Do Your Annual Rebalancing.
Are You Suffering From Buy High, Sell Low Mentality?
Financial Engineering is Not Real Growth.
The Zoom IPO. 
Uber vs. Lyft. Which IPO Will Drive Returns?
Boeing Cuts 737 Production by 20%.
The Lyft IPO Hits Wall Street. Should you tak
Cannabis Doubles. Did you miss the party?
12 Investing Mistakes
The High Cost of Free Advice. 
2018 Was the Worst December Since the Great Depression. 
Russia Dumps Treasuries and Buys Gold
OPEC and Russia Cut Oil Production. 
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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
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