President Donald Trump halted negotiations for a coronavirus stimulus bill last week, but has changed his tune in the days since, once again encouraging Congress to make a deal.

Meanwhile, Michigan residents and businesses sit idle, pleading for federal help.

“For small businesses to survive, we need immediate and direct financial support,” said Gricelda Mata, CEO of Lindo Mexico Restaurante near Grand Rapids. “That’s why it’s so frustrating to see the president of the United States cease negotiations until after the election.”

Trump argued in an Oct. 6 that the Democrats weren’t negotiating in good faith, saying “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major stimulus bill that focuses on hard-working Americans and small business.”

Within minutes, the stock market took a hit. Stock prices recovered the next morning after Trump tweeted overnight his renewed support for some form of stimulus payments.

Negotiations will continue Monday between Treasury Secretary Steven Mnuchin and Speaker of the House Nancy Pelosi, D-California, according to CBS News.

The sticking point has been, Democrats are pushing for a broader package while Republicans are seeking a smaller bill. Republicans have compromised up to a $1.8 trillion package while Democrats have compromised down to a $2.2 trillion deal.

Potential aid being discussed includes a second $1,200 stimulus check for Americans earning less than $75,000, a second round of Paycheck Protection Program forgivable loans for businesses, aid for the airline industry, restoring the extra $600 per week (or a lesser, compromised amount) for unemployed workers and more.

Business funding can’t wait until after the election, Mata said. While her restaurant has pivoted because of the pandemic, it’s one of many Michigan businesses that need help to keep up payroll.

“Before the pandemic, we

Co-produced with Beyond Saving

The pullback we saw during March as a result of the pandemic turned out to be one of the best opportunities that the markets has offered investors. When prices were falling at the time, we were encouraging buying the dip through a series of articles. Unfortunately, some were met with hundreds of comments to the effect that the impact of COVID-19 was going to be far worse and that investors should “sit on the sidelines” to wait and see how bad it would be. Some were even saying everything should be sold because it would certainly get much worse.

Unfortunately again, many investors were doing just that. Share prices go down precisely because more people are trying to sell than are trying to buy. We get the temptation, when you are down 20%-30% or even more, it’s very easy to “cut your losses” and sell “before I lose more.” That’s a very natural response. And if you sell, and then manage to buy back at a lower price, that works. This is why we encourage investors to keep a long-term view.

In many cases, that isn’t what happens. Investors sell out of fear and then when the price bounces back up they have one of two options, try to buy back in, or sit on the sidelines. As a result, they sit on the sidelines and miss the most profitable part of a bear market – the recovery.

Going back to history, following each bear market there was a strong recovery, and this year was no different. At HDO, instead of trying to catch the peaks and valleys, we buy in small bites. With dividend income streaming into our accounts several times a month, we always have access to at least a little bit of

Given the Biden – Harris tickets previous statements regarding fracking and the fossil fuel industry combined with current poll numbers that indicate they have a solid lead, it seems prudent to consider what effects their win might have on our energy investments.

In doing so however we need to keep in mind that stock prices and underlying cash flows are not necessarily always well correlated, with a significant dichotomy between the two being a potential opportunity. At Cash Flow Kingdom, we attempt to take advantage of such dichotomies. Particularly when current investor sentiment differs from the expected longer-term underlying cash flows.

For instance, despite these previous statements to the contrary, I take Biden’s current statement that there will be no ban on fracking at face value. This is because a complete ban on fracking would almost certainly become a political disaster for the Democratic Party. Pennsylvania, Ohio, and other Midwestern Rust Belt swing states in the Marcellus and Utica regions would almost assuredly turn ‘Republican Red’ in response. An outright fracking ban could thus single handedly deliver to the Republicans both houses in the next midterm election and eliminate any chance of a second term in the White House for Biden or Harris.

Source: The New York Times, Upfront

Nevertheless, lip service is likely to be paid to such an idea to appease those on the left side of the party, and maybe even some sort of tax might be proposed or imposed. This could drive investor sentiment toward the energy sector even more negative than it already is. However, an outright ban, or even a tax substantial enough to prevent significant fracking, is a non-starter. The Democratic Party is not that stupid.

Likewise, retracting existing permits and stopping existing drilling on federal lands is a no-go. This would not

Federal banking regulators have slapped Citigroup (NYSE: C) with a $400 million civil penalty for what they call its its “long-standing” failure to address and enhance firmwide controls related to compliance, data, and risk management.

The fine came from the U.S. Office of the Comptroller of the Currency (OCC), which regulates national banks. The OCC also issued a cease-and-desist order, mandating that the bank receive the OCC’s “non-objection” before making important acquisitions such as portfolio or business acquisitions. The order also gives the OCC the right to implement further restrictions or prescribe changes regarding senior management or the bank’s board.

The OCC’s order was accompanied by a separate order from the Federal Reserve that is being issued in concurrence.


Image Source: Citigroup

Following the abrupt announcement in September that CEO Michael Corbat would retire sooner than expected, multiple media outlets reported that regulators were preparing to reprimand the bank for its failure to address long-standing issues.

The news also came after BuzzFeed dropped a big investigative report on the failure of the banking industry and regulators to prevent money laundering by criminals, terrorists, and Ponzi schemes through the global banking system.

But the last straw may have come earlier this year when Citigroup accidentally sent $900 million to several lenders of the cosmetics brand Revlon in a mistake that was ultimately caused by what the bank called a “clerical error” and “out-of-date” software.

The Fed in its order said Citigroup has failed to address issues raised in consent orders dating back to 2013 and 2015.

The bank will now have to come up with several plans for how to better manage its data, guard against risk, and improve its money laundering compliance program, among other improvements to internal controls.

The orders will likely result in more spending, adding to the

2020 has been a historical volatile year for high-yield bonds even more than equities. The high-yield bond market crashed 23% in a matter of days in March and saw yields rocket to over 6%. Since then, the Federal Reserve has increased support for recently downgraded “fallen-angel” bonds which has caused most to climb back to historically low dividend yields.

The Fed’s support of below-investment-grade bonds creates a bit of a conundrum in markets. On one hand, there is a supply of money that can support the market if it drops again. On the other, the promise of support has caused risk premia to decline tremendously, causing junk bonds to be priced like higher-quality bonds during a generally poor economic environment. If it were not for belief in this support, junk bond ETFs like (HYG) would likely be trading at least 10-20% lower.

Importantly, that support will phase out as the Fed’s aim was to purchase recently downgraded ‘fallen angels’. Today, they’re really not buying any high-yield bonds. If the bonds in HYG continue to downgrade, they are unlikely to see any Federal Reserve support as they are all already non-investment-grade. This means that if there is another market sell-off, HYG will likely decline far more than it had in March. Quite frankly, the fund could see a 20-40% decline as it had in 2008. See below:

Data by YCharts

As you can see, junk bond yields are at an all-time low today despite the highly uncertain economic and political environment. This makes the ETF very risky, and as I’ll demonstrate, a crash in junk bonds may be the most likely scenario.

Low Maturity is A Double-Edged Sword

HYG’s weighted-average maturity length is much lower than normal at 3.9 years. This means that, on average, bonds in HYG must be refinanced