​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 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.

​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. 
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. 

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. 
​
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.
​

Your 5-Point Stress-Free Money Plan.
A conversation with Charles Schwab’s SVP and Chief Fixed Income Strategist Kathy A. Jones.
 
The S&P500 just hit a new record high. Investors have heaved a sigh of relief. However, memories of March and the 35% losses in the Dow Jones Industrial Average still haunt us. The White House boasts of job creation and the stock rally, downplaying the unfavorable data, like the 2Q 2020 GDP contraction of -32.9%, the 10.2% unemployment rate, financial leverage, high price/earnings ratios, junk bonds and the 28 million people who are claiming unemployment benefits. These statistics affect all of our lives.

Rather than hope and pray that the storm is over, now is a great time to build a solid financial house. Adopt a strategy that affords you the cash you might need in an emergency, and prevents your retirement from evanescing if stocks turn south. To assist you with your blueprint, I reached out to Kathy A. Jones for her inside perspective and wisdom. Kathy Jones is the Chief Fixed Income Strategist and SVP for Charles Schwab. In a candid and informative conversation, Kathy outlines key strategies each one of us can and should adopt now.
 
Your 5-Point Stress-Free Money Plan.

1. Make sure that you have enough cash in your retirement plans and bank accounts, in case of losing a job or any other financial hardship.
2. Review your investments to ensure they are properly diversified. Even the safe side has risk these days. So, you have to know what you own and why are you own it.
3. Shorten the terms of your bonds and Treasury bills.
4. Avoid industries that are overleveraged and vulnerable to the pandemic and recession. Make sure that any bonds or fixed income is creditworthy.
5. Do not just have blind faith that somebody else is doing this for you. It’s your money and you have to be the boss.

 
Below is an excerpt of my conversation with Kathy Jones. You can watch the complete interview with Kathy A. Jones on my channel at YouTube.com/NataliePace.

Natalie Pace: 2Q 2020 saw the worst economic GDP contraction in recorded history (since at least 1974), at -32.9%. In February and March, the financial markets had frozen up. Even Treasury bills were illiquid. The Federal Reserve Board printed over $3 trillion to prevent a complete financial meltdown, and pushed the public debt up to $26.6 trillion in the bargain. What’s safe in that environment?   

KAJ: U.S. treasuries are safe. If you hold them to maturity, you’ll get your principal back. I don’t think the U.S. government is going to default on that.

NP: The yield on Treasury bills is so low. Who wants to get locked into 1% yield or less, when that barely covers the expenses in many funds? Also, in March, even Treasury bills were illiquid.

KAJ: You could see depreciation in [treasuries] between the time you invest and the time they mature. One thing to do is to shorten the maturity or the duration. The longer the term, the more the risk of rates rising and seeing a price decline. With short term, you still have that safety and liquidity, but you’re not taking interest rate risk.

NP: Do you think there is a risk of downgrades in the municipal bond space? States and cities have been hit hard with pandemic-related expenses and a massive drop in tax income.

KAJ: We do think there is risk of downgrades. I’m worried about the state and local governments. They’re under a tremendous amount of stress from the pandemic. They’re losing tax revenue. They bear a lot of the brunt of the cost of this recovery, particularly with firefighters and hospitals. We suggest that investors focus on the higher-rated bonds, both in corporate and municipal bonds.

NP: Most people are not aware of the leverage in the corporate space. More than half of the S&P500 is rated at speculative (junk) or just one downgrade away from junk. Do investors have to look more closely at their corporate bond funds and holdings?

KAJ: In the corporate bond market, you want to stay in the A-rated space. Maybe a few BBBs, but you don’t want to get too committed to that space because if they get downgraded they end up in the junk bond space. When a bond gets downgraded, the price will gap down. There is a potential for the company to cascade into a default. Make sure there is not too much debt to repay, and that they are not a business that is really harmed by the pandemic, like tourism or retail. Industries that have been hurt by the pandemic are at risk of a downgrade.

NP: What happens in a downgrade?

KAJ: Things go down a lot faster than they go up. Know what you own. You want to understand what the dynamics and risks are. Liquidity can disappear really quickly. If you can’t sell your bond at a reasonable price in a reasonable amount of time if you need the money, that can put you in a bad place.

NP: There’s a Wall Street aphorism: “Never reach for yield.” How relevant is this today?

KAJ: I’m seeing suggestions that people should veer out of Treasuries and other safe, liquid assets and go into higher yielding assets. That’s not a terrible idea, except that most of those assets don’t have the liquidity that safe assets do. If you tie your money up in private equities or other alternative investments, you may have trouble getting that money out when you need it.

NP: The Federal Reserve Board has been purchasing bonds and even junk bond ETFs, leading those to trade back near the highs they were at in February, before the pandemic. Do investors need to be more cautious with these speculative issues?

KAJ: The market is acting like they are safer than they are. The Feds intended to make sure that the junk bond market had liquidity. It had frozen up. However, we can still see bankruptcies and defaults in there. Know what you own. Be careful. As long as the music keeps playing, people want to keep dancing. You don’t want to be the one left on the dance floor when the music stops.

NP: In a recent blog, you talked about how a weaker dollar might benefit emerging market bonds. Please talk a little about that.

KAJ: The dollar is poised to move a bit lower from here. That is typically good for emerging market bonds. They are quite volatile, and there are a lot of countries that are still feeling the pain of the pandemic. If you’re willing to take the risk in an emerging market ETF that is broadly diversified, they should be at a point in the cycle where they start to benefit. Argentina, Turkey and South Africa are places where you might not want to be involved. Typically, a diversified ETF or managed fund will give you exposure to a broad range of countries, so that you are not susceptible to a loss in one or two bonds.
​
NP: We’ve seen mutual fund redemption suspensions, mostly in European funds. Should investors be concerned that they will be locked out of access to their money?

KAJ: The fund can build in different provisions in their legal documents. It’s one thing to watch for. It’s a very uncomfortable feeling when you can’t get your money when you want to. Sometimes it’s not the worst thing. People panic and sell into an illiquid market. The gates can prevent that from happening.

NP: Is the U.S. at risk of a credit downgrade?

KAJ: We’ve been put on notice by a couple of the rating agencies. We are running these big deficits. It’s one thing to run a deficit in a recession. However, there doesn’t seem to be the political will to deal with that or make a plan. The rating agencies are telling us that if we don’t come up with a plan or show some concern, they’re going to downgrade us.

NP: It sounds like now is a good time to review your financial plan and make sure that you are safe, protected and properly diversified.

KAJ: These are difficult times for people. Sit down and look at your portfolio. 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. The markets are doing better. Things are calming down.
​

​You can watch the complete interview with Kathy A. Jones on my channel at YouTube.com/NataliePace.

​Tesla surprised investors with its resilience in the 2nd quarter of 2020, delivering 90,987 vehicles in the quarter, down just 4,213 from the same quarter last year. Tesla’s revenue was down only 5% year over year. Considering this is one of the most unprecedented recessions we’ve seen in history, the demand and delivery are both impressive. When you compare Tesla to Ford and General Motors, which saw revenue sink by half or more, the 2Q 2020 performance of Musk’s clean energy company seems almost too good to be true. Even Toyota Motors saw revenue slide by 40% year over year in the 2nd quarter of 2020.
 

​Meanwhile, China’s Nio, a Tesla electric vehicle competitor, reported an increase of 145% in revenue, from USD$218 million to USD$526.4 million. Nio delivered 10,331 vehicles in the 2nd quarter of 2020, compared to 3,553 in 2Q 2019 and 3,838 in 1Q 2020. Nio’s net loss in 2Q 2020 was -$166.5 million, with $1.6 billion cash on hand. Clearly China’s new EV manufacturer, which prices its vehicles aggressively lower than Tesla, is gaining in popularity. Tesla is still the EV leader in China, with 11,041 Model 3’s sold in July of 2020. However, Nio’s challenge is something that Tesla is surely taking notice of.

A Spate of SPACs
Nio is proving to be quite different from the spate of EV companies that have entered the stock market through a Special Purpose Acquisition Company (SPAC). Fisker, Lordstown and Nikola are seeing their share prices soar, largely through investor FOMO (Fear of Missing Out) rather than car sales. Fisker went bankrupt in 2013 after failing to make a dent in Tesla’s market. Apollo is betting that the company can perform better this time around, though launching the IPO SPAC in the middle of a recession isn’t the best strategy for success. Lordstown, a GM-backed EV truck, won’t have its first full year of sales until 2022. Nikola’s market value is $16 billion, despite having no sales or revenue to date.
 
​3Q 2020 Earnings
So, how will the 3rd quarter of 2020 look for auto manufacturers? For the legacy brands like Toyota, GM and Ford, 2Q 2020 was a disaster. The 3Q earnings season will start in October of 2020. If we look back to the Great Recession as an indicator of what happens to car sales in a recession, we see that even the hottest company of the day (Toyota and hybrids) saw revenue drop by 23% in 2009, from 2008. GM & Chrysler both declared bankruptcy in 2009. Toyota’s stock dropped by more than half. GM & Chrysler’s stock became worthless. So, will the 3rd quarter of 2020 hit EVs, including Tesla and Nio, hard?
 
We won’t get our first peek into how the 3rd quarter looks for sales until Tesla’s deliveries report the first week of October. However, perusing the lithium miners’ earnings reports provides some context. While the overall positive trend for EVs is likely to continue once we get past the current economic crisis, Livent Corporation reported on August 19, 2020 that lithium demand was weak as “customers delay planned orders until later in the year.” Livent’s revenue was down 43% year over year in the 2nd quarter of 2020. Albermarle noted that “We expect the impact of low OEM automotive production to be felt more acutely in Q3 2020 [in lithium].”
 

Car Buyers
How will Work from Home, Stay at Home Orders, COVID-19, high unemployment and the current recession affect auto purchases in the 3rd quarter of 2020? The New York Federal Reserve Bank reported that there was $1.43 trillion in auto loan debt in the 2nd quarter of 2020. The delinquency rate was quite low at 2.26%. However, this statistic could be rather deceiving, due to the moratorium on collections going on. “Protections afforded to American consumers through the CARES Act have prevented large-scale delinquency from appearing on credit reports and damaging future credit access” said Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Fed. “However, these temporary relief measures may also mask the very real financial challenges that Americans may be experiencing as a result of the COVID-19 pandemic and the subsequent economic slowdown.”
 
China appears to have arrested the current pandemic. The IMF is predicting that the Chinese economy will produce 1% GDP growth in 2020, while the rest of the world sees rates of contraction never before seen. The U.S. real GDP is predicted to contract by -8% in 2020, with Europe contracting in the -10% range.

Price Matters
It’s clear from the 2Q 2020 earnings reports that EVs are far more popular than old-school gas guzzlers. However, even if Nio continues its dominance in sales growth and Tesla continues to weather the storm, you are likely to be buying high if you purchase either stock at today’s prices. Most stock prices go down in a recession – even the stock of great companies.
 
Tesla had annual sales of $24.6 billion, with a loss of $862 million in 2019. The company was valued at $350 billion on August 21, 2020. That is a higher valuation than Toyota, GM & Ford combined. Toyota, GM & Ford were all profitable in 2019, and their combined sales were over half a trillion. Tesla's current price-earnings ratio is over 1000. 
 
The current stock market rally is built on hope and forbearance policies, not real growth. It’s important to remember that the U.S. 2Q 2020 GDP contraction was the worst since at least 1974 (when the data began to be collected and reported), at -32.9%.
 
Bottom Line
Nio’s entry into the electric vehicle space in China is notable. So far, the company seems to be making all the right moves. Nio ranked highest in China’s New-Vehicle Quality Experience Index, conducted by J.D. Power in July of 2019. The company’s cars offer luxury and affordability, coming in far lower-priced than Tesla, while also qualifying for government subsidies to help Chinese buyers with the purchase. Nio’s board boasts of executives with ties to NetEase and TenCent Holdings. Nio (meaning blue skies) could be the car company to watch in the months and years to come, and is on my stock shopping list, waiting for a better price. (Special shout-out to Mitchell for finding Nio at our Oct. 2019 Retreat!)


If you're interested in learning how to pick stocks from a No. 1 stock picker, and in learning essential investing tools, 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
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. 

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. 

I recently saw an ad that was paid for by a mortgage broker-salesman. It read, “Why are you still renting, when you don’t have to put anything down to buy a home and interest rates are historically low?” This is a prime example of: “Grade your guru before you listen to anything she says.” The mortgage salesman wants you to buy a home, so that she can sell you a mortgage. The same thing happened in 2006 and 2007, and we all know how that story ended (in the Great Recession).
 
If low interest rates and no-down home purchases were the only considerations, then of course, you should run out and buy a home now – particularly if your mortgage is lower than your rent. However, those aren’t the only factors to successful home ownership. And if you fall for the bait, then you could be in serious financial trouble – a debtor’s prison of sorts – for the next decade. So, be sure to apply the seven additional home purchase criteria below before jumping in.
 
7 Considerations that You Should Also Factor in Before You Buy a Home in 2020
 
Never Buy High
Mortgage Delinquencies Portend a Drop in Prices
Home Price Trends in Recessions
The Thrive Budget
The 4 D’s
The Shadow Inventory
Interest Rates
 
And here is a little color on each point.
 
Never Buy High
Real estate prices are higher than ever, and unaffordable (i.e. costs more than 30% of your income) in 68% of U.S. cities. If you buy high and the price drops, you have trouble on several fronts. Your FICO score drops because your debt now exceeds your asset. Your ability to sell is wiped out, which means you’re locked into where you are, even if a better or more affordable opportunity, including a better career, arises elsewhere. You can’t refinance or get a HELOC, and are hampered on receiving any funds for other needs or ventures, due to owing more than your home is worth. This means you’ll have to borrow on credit cards, at usurious rates, until that last line of credit sinks under a mountain of debt.
 
​As you can see in the chart below, if you live in Boulder, you’d need to devote half of your salary to your home purchase. That’s unsustainable. In places like Los Angeles, New York City and San Francisco, housing unaffordability is absolutely eye-popping, costing the average worker 73-110% of her salary (source: AttomData).

 
Mortgage Delinquencies Portend a Drop in Prices
The FHA delinquency rate just hit the highest it has ever been since the surveys began in 1979, at 15.65%. This is with a moratorium on foreclosures and evictions. However, the freeze-out will not last forever. High unemployment makes it difficult for people to pay their rent and mortgages. Many people are solving that problem with intergenerational housing.
 
If you buy now, and a boatload of your neighbors lose or give up their homes, then the home prices in your area will fall. As Rick Sharga, the executive vice president at RealtyTrac said in a press release on August 13, 2020, “It’s inevitable that there will be a significant increase in foreclosures once these moratoria have expired, although it’s unlikely that we’ll see default rates reach the levels we saw during the Great Recession.”
 
Home prices are already dropping in San Francisco (4.9%) and New York (4.2%) (source: Zillow). San Francisco has a flood of new listings, putting inventory up 96% year over year.
 

Home Price Trends in Recessions
In 2006, the national median existing home sales price hit an all-time high of $221,900. By 2011, it had dropped by 25% to $166,100. Those cities with the greatest speculation and price increases, like Las Vegas, Stockton, Miami and Phoenix, saw their home prices implode by half or more. The largest drop was between 2006 and 2009. However, the low wasn’t hit until 2011.
 
FYI: In June of this year (2020), home prices were back to a median nationwide high of $295,300 (source: The National Association of Realtors). Wages have not kept apace with housing costs, which is why unaffordability has become a buzz word all over the land.

The Thrive Budget
The mortgage and real estate broker-dealers are not looking out for your ability to stay in your home. They need the sale (particularly in a recession), and will figure out creative solutions to any money challenge that presents the sale – even if it is ultimately toxic for your financial health. Earlier this month, I received seven phone calls from a mortgage broker-salesman in one day! (We saw this in spades in pre-Great Recession.)
 
It is your responsibility to make sure that you purchase a home you can afford (at a reasonable price). If you want to thrive, you’ll need to adopt a budget that allows you room for things other than just basic needs. Basically, you must purchase a home that you can easily afford, and amounts to less than 30% of your income. Being property rich and cash poor is not just a drudge. It is also perilous. Any unpredictable expense could be the tipping point that puts everything you own at risk. Read the Thrive Budget section of The ABCs of Money for additional information. Visit the home page at NataliePace.com to personalize your own Thrive Budget using our free web apps.
 
The 4 D’s
Death. Divorce. Disaster. Depression. These are the 4-D’s that you always want to be aware of in real estate. They make a seller desperate, which creates opportunities for the buyer. Two of these D’s – disaster and depression – are already in play.
 
It’s early in the recession, with the foreclosure and eviction moratoria in play until the end of the year. So, you might not be hearing much about just how precarious the economy is – particularly if you are swimming in the news of the S&P500 hitting a new high. However, as elevated levels of unemployment and underemployment continue, and once the bailout and freeze-out are lifted (or the landlords go under and banks start reporting losses), the false veneer that everything is okay will crumble. Therein lies disaster for the person who hasn’t been paying their rent or mortgage, and opportunity for the buyer who wishes to own their own home at a more affordable price.
 
The Shadow Inventory
As I mentioned above, it typically takes years for real estate prices to bottom out. However, if you are willing to shop in the shadow inventory, then you might start finding some bargains earlier. The shadow inventory can often offer up to a 30% discount off of the MLS (multiple listing services). So, what is shadow inventory? Most homes that are bank-owned, pre-foreclosure, foreclosed on or up for auction are not listed on the MLS.
 
I would also include the 3.4 million homes that are currently severely underwater (i.e. where the home mortgage is 25% or more than the value of the home) in the shadow inventory. Any homeowner who has a mortgage that is substantially higher than the value of their home right now is in a very bad spot if real estate prices weaken. By educating yourself and the underwater homeowner about possible exit routes and a better plan going forward, you might help them to save their lifeboat – their retirement plans. Without a good strategy, the underwater homeowner is at high risk of draining their retirement plans and then getting foreclosed on any way.
 
Interest Rates
Interest rates are at a historic low, and they are predicted to stay at zero for at least two years. According to the Federal Reserve Board’s financial projections, the Fed Fund rate should remain at or near zero through 2022. The longer run projection for the rate is 2.5%. As the FOMC wrote in a press release on July 29, 2020, “The Committee expects to maintain this target range [of 0 to 1/4 percent] until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
 
Inflation could change the game on this. However, so far there are few signs of distress. So, there doesn’t have to be an interest rate risk rush to buy high right now, just to catch historically low interest rates.

​Bottom Line
Being upside down on the mortgage and owing more for your home then it is worth can present a decade of financial hell for you. On the other hand, if you happen to find yourself on the right side of all of the above considerations, then now could be an excellent time to buy. In most markets, prices are at or near all-time highs and are unaffordable to the people who live in the area. The patient buyer will be happy she practiced wisdom and a solid strategy, and waited for (or created) the right opportunity, rather than taking the bait of the real estate or mortgage broker-salesmen and buying at an all-time high.


If you're interested in investing in real estate or in buying a new home, learn essential investing tools 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
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.

MedMen’s turnaround plan has been very impressive, attracting A-list board members and buy-in from landlords and lenders. Will it be enough to keep the company from having to declare bankruptcy?
 
A-List Board Members
MedMen is now under the aegis of interim CEO Tom Lynch, who has a background in restructuring companies out of court – something he did as the chairman and CEO of Frederick’s of Hollywood Group. Since Mr. Lynch has taken the reins, the MedMen board has brought in Mel Elias, the former president and CEO of the Coffee Bean & Tea Leaf; Errol Schweizer, former VP of Grocery at Whole Foods Market; and Niki Christoff, SVP of Strategy and Government Relations at Salesforce, among others. This level of board support bodes well for an out-of-court turnaround for this cannabis retailer.
 
Employees are still scoring the management low on Glassdoor. However, the current leadership hasn’t really had the reins long enough for better reviews to start showing up. In fact, the new CEO isn’t even listed there yet.

Lender and Landlord Support
On July 3, 2020, MedMen announced that their Turnaround Plan had received support from their landlords and lenders. According to the press release, “The Plan will defer approximately US$32 million in cash commitments over the next 12 months and provide additional balance sheet flexibility.” According to MedMen Interim Chief Executive Officer Tom Lynch, “We believe the widespread support we have received from our lenders and landlords will allow us to continue execution of the turnaround, continue to grow our best-in-class retail operations and drive towards positive free cash flow.”

The plan turns interest from cash payments into Payment-in-Kind warrants from now through March-June 2021, with a conversion rate of US$0.28-$0.34. MedMen’s share price on August 17, 2020, was US$0.165/share.
 
4Q 2020 and Full Year Results
One thing that could weigh heavily on the turnaround plan is the 4Q and full year 2020 earnings results covering April 1, 2020, through June 30, 2020. Earnings from that period should be announced the last week of October (based upon last year’s date of Oct. 28, 2019). In the 3rd quarter 2020 earnings call on May 27, 2020, Tom Lynch said, “We're down in April overall, but have seen a steady increase since. While we're still not back to our normal levels, pre-COVID, particularly in California, we're optimistic about our ability to recapture traffic as soon as stay at home orders are lifted.”

​If the 4th quarter 2020 revenue comes in at $46 million, where the 3rd quarter was, then the full year revenue will be in the $180 million range – +38% over last year’s record $130 million. If the 4th quarter revenue is lower (which is likely), it will still be easy for the full year to post gains. MedMen revenue in the 4th quarter of 2019 was $42 million.
 
Macro Trends
Another factor that could weigh down MedMen’s share price in the near term is the general marketplace itself. It’s rare for recessions to have more positive than negative months on Wall Street. In 2008, only 1/3 of the months were positive performers (March, April, August and December). So far in 2020, only March has registered negative, with 86% of the months accelerating gains.
 
While the recovering since the March 23, 2020, lows might seem like a boon for investors, when prices become too expensive, that typically portends a slide – especially in a recession. The only two times when stocks have been this expensive are in 1929 (before the Great Depression) and in 2000 (before the NASDAQ Composite Index lost 78% of its value).
 

Liabilities
MedMen had liabilities of $739 million, of which $185 million were “current” as of the 3rd quarter 2020 (May 27, 2020 press release). As of March 28, 2020, current assets totaled $123.9 million and included cash and cash equivalents of $31.8 million. The company is looking to sell their Arizona assets and licenses to beef up their cash position.

CBD Beverages
While all eyes are on which company will produce the Budweiser equivalent of CBD beverages, mixologists are taking it upon themselves to create their own CBD concoctions. You can get CBD beverage recipes, including a cannabis-infused lemonade, and other edible ideas on Ember, MedMen’s Cannabis and Culture online Journal.

​The new landlord and lender support will help with MedMen’s planned out-of-court turnaround. However, more cost cutting and increased revenue will be necessary for MedMen to get through the COVID crisis without Chapter 11 (bankruptcy) restructuring. Fortunately, interim CEO Tom Lynch has experience doing just that. In the near term, MedMen’s share price could be vulnerable to even further weakening. However, there is now evidence that an executable Turnaround Plan is already in play.
 
MedMen's stock is high risk. However, if it works out, it will yield a high reward.


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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.