NerdWallet: What to do about student loan payments if you lose your job

How the booming market for private loans has saddled millions of students with $136 billion in debt that can't be forgiven. Despite the political fight over student-loan forgiveness, people with private student debt are stuck with predatory loan terms they can't escape.Chelsea Jia Feng/InsiderWhen Brianne Jones graduated from Eastern Michigan University in 2013, she was overjoyed to have a college degree — despite her daunting $42,000 debt load.Jones figured if she worked hard and kept up with her payments, she would eventually be free of the financial burden. But after 10 years of consistent payments, she's still stuck with her debt, and it has actually grown — up to $57,000.She and her twin brother were first-generation college students, so the complexities of financial aid were foreign to their family. When they maxed out on the federal aid the government would give them, they turned to the private student-loan industry to complete their degrees. And that's when the real trouble began.Jones graduated with an initial $11,000 balance in private loans — which seemed manageable compared with her federal debt load of $31,000. But while she's seen the federal balance decline slightly, her private balance has ballooned to $27,000 — despite the $500 a month she pays toward the loan. The issue, Jones told me, is the 17.5% interest rate on the loans, which is nearly three times the rate on her federal loan. This astronomically high rate has made it impossible for her to make headway on the private part of her debt: She has accrued $42,000 in interest since she graduated. Jones has gotten some relief in the past few years with the federal student-loan payment pause, but she's worried that she'll fall even further behind on her private loans when those payments restart."We're struggling right now, especially with inflation," she said of her and her brother. "I mean, a gallon of milk is astronomical right now. Both of us work different jobs to make money on the side. We both do DoorDash, and probably when those federal student loans start up, it'll be more of a necessity to do that."While private debt makes up just about 10% of the $1.7 trillion student-debt mountain in the US — about $136 billion — the industry has exploded over the past decade: the amount of outstanding private debt has jumped an estimated 47% since 2014. And while data on the exact number of borrowers is difficult to come by, experts estimate as many as 6.4 million Americans could hold private loans. Despite the political furor over student-loan forgiveness, private-loan holders are not only left out of the federal-relief conversation but also forced to navigate a hard-to-regulate industry that sometimes leaves borrowers with predatory loan terms they can't escape. For Jones, the crushing weight of her loan has forced her to pick up side jobs and try to pay it off as fast as she can — a desperate race against the ever-soaring interest payments."It's not like we're trying to just have a debt wiped off," she said. "We are paying what we owe, but we're not fine with paying five times what we borrowed."'A Wild West for students'Private student loans have been around for decades, but since the Federal Direct Loan Program began in 1992, many student-loan borrowers have been able to obtain funds directly from the government. The federal loan program offered lower interest rates and standardized terms, which was immediately appealing to borrowers. But surging tuition costs and the shrinking amount of nonloan financial aid available to students have helped fuel the recent demand for private loans. In most cases, the Institute for College Access & Success' senior director of college affordability, Michele Shepard, told me, students take on private debt when they've tapped out the maximum amount of federal loans they can hold — $5,500 for a first-year student who is a tax dependent or $9,500 for independent students. Though that number rises for each year of education, it's often not enough."They just don't have the money out of pocket to cover their costs even after they've taken out all their federal loans," Shepard said. "And so that's often where you see someone will say, 'I need to find a way to get that extra money,' and they will turn to the private market."When students turn to the private market, they find a litany of lenders willing to help fund their education dreams. But despite lofty promises from private lenders, Shepard told me it's all about making a profit.In some cases, the loans are so expensive that they are destined to fail.Suzanne Martindale, the senior deputy commissioner for consumer protection at California's Department of Financial Protection and Innovation, told me that the issue with borrowers seeking out private lenders was "that there has not been a ton of federal oversight. She added: "And there really isn't much by way of federal regulation to govern those kinds of products and services." The ability for private lenders to have the freedom largely to set their own terms, Shepard said, has turned the market into "a Wild West for students."The variability with interest rates plays a large role in the "Wild West" setting. While rates on federal loans are fixed — meaning the rate that is set when a borrower takes out the loan will stay the same for the lifetime of the loan — some private student loans are variable, meaning the rate can increase or decrease as a borrower pays it off and lenders can set their own rates. With situations like Jones', when the rate is in the double digits, it can be hard to stay ahead of the mounting interest."In some cases, the loans are so expensive that they are destined to fail. In other cases, borrowers ran into unexpected life traumas such as disabilities or divorces that ruin their dreams of upward mobility," the National Consumer Law Center wrote in a 2008 paper. "Regardless, the student loan debt that was supposed to be an investment in their futures is dragging them down."A predatory lending trapIn between study sessions, exams, and campus parties, deciphering complex student-loan terms has become a standard part of students' higher-education experience. To improve their life prospects, 18- and 19-year-olds are expected to comb through pages of virtual paperwork and go "interest-rate shopping" to see which lender has the best terms. And complex terms can end up getting these students — and their families — in a financial bind.One of the more common and innocuous-sounding actions a borrower might take is bringing on a cosigner, Anna Anderson, a staff attorney with the National Consumer Law Center focusing primarily on student-loan issues, told me. While cosigners are necessary to help out borrowers who may not be able to afford the terms of their loan on their own, the agreement can end up leaving the cosigner in a hole that's tricky to escape."Someone who is just looking to help their loved one get the education that they think they deserve, those folks, when they sign up for these loans, they don't always understand the financial consequences and risks that come with these and how difficult it is to you remove yourself from that loan once you've agreed to be a cosigner," she said.It's going to be the low-income and more vulnerable populations that often get really aggressively targeted for these programsAnd once borrowers sign on the dotted line, they open themselves up to aggressive debt collection and misleading behavior, such as communications from the lenders that do not clearly disclose the terms of the loan. These tactics have started attracting the attention of federal and state regulators. For example, in January 2022, 39 state attorneys general announced they had reached a $1.85 billion settlement with Navient — a major servicer of private loans — over allegations of "widespread unfair, deceptive, and abusive student loan servicing practices," the press release said. They accused the company of offering private student loans to borrowers who went to for-profit schools regardless of their abilities to pay the loans back. Navient denied any wrongdoing.An official from the Consumer Financial Protection Bureau told me that private-loan originators, servicers, and collectors remained subject to a number of federal laws, including the Truth in Lending Act, that were designed to protect consumers from predatory behavior. And Martindale said the people targeted by predatory behavior were often "folks who don't have a lot of resources, maybe working a low-wage job and trying to better themselves and their future." Martindale added: "It's going to be the low-income and more vulnerable populations that often get really aggressively targeted for these programs." No federal benefits for private borrowersIn addition to being subjected to the sales tactics and pernicious whims of their private lender, once a borrower enters business with a private lender, they immediately lose the hope of getting any relief from the federal government. Ryan Moran, a nurse at an intensive-care unit in Florida, has about $75,000 in private student debt, along with a $38,000 federal balance. He wanted to further his education by going to grad school and hopefully boost his salary, but his private lender would not defer payments while he was in school — as federal loans allow a student to do — making the option unaffordable."It's put my life on pause for multiple years now," Moran said. "And it's kind of the push and pull between making the minimum payment for 20, 25 years and paying all that interest or just working overtime every week for five years to pay everything off and putting my entire life on hold."Moran isn't alone. While President Joe Biden pushed through targeted relief for thousands of federal borrowers in the past year, he does not have the jurisdiction to offer relief programs to people with private lenders. That means private borrowers didn't benefit from the student-loan-payment pause that began in March 2020 — and they wouldn't have been included in Biden's plan to cancel up to $20,000 in student debt per borrower had the Supreme Court upheld it. And now that federal student-loan payments are resuming in October after an almost four-year pause, it's even more pressing that borrowers know exactly what they could miss out on by shifting to private loans. Many lenders are taking advantage of this moment to offer people with federal loans refinancing services — which allows a borrower to move their loans to a new lender under different terms. Refinancing companies typically emphasize the monthly savings a borrower could receive by shifting to a new, lower-interest rate. But if a borrower with federal student loans refinances to a private lender, it will strip them of all of their federal benefits, including forgiveness and repayment plans.Since I started college, I've just had this black cloud looming over me knowing I would have to pay off this debt eventually.Shepard said refinancing could bring some benefits to borrowers, but for others, refinancing can be a trap. "What concerns me is that most people are put in a position where they don't really have a lot of other choices," she told me. Anderson of the National Consumer Law Center said she's "really concerned about refinancing."To be sure, some private servicers do disclose benefits private borrowers could lose should they choose to refinance. Navient, for example, has a disclosure on its website that says refinancing a federal student loan "means you will no longer have access to federal loan benefits" or "any other relief measures."SoFi, another refinancing company, sent letters in the mail to borrowers with the header: "Federal student loan forbearance is ending soon. Don't miss out on savings — start planning your refi today." Inside the mailer, there was a disclosure saying that borrowers should "still consider" Biden's plans for federal debt relief but "should also take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment."Hopes for regulationWhile federal lenders answer to the government, the best oversight for private lenders at the moment are complaints submitted to the Consumer Financial Protection Bureau, which can then investigate and fine lending firms. However, since the actions are confidential, the general public may not even realize a lender has been sanctioned. And despite the agency having a lot of responsibility, funding for the CFPB is "continuously starved," Shepard said.Still, some federal lawmakers have been working to expand relief for private borrowers. In January, Rep. Steve Cohen led the reintroduction of the Private Student Loan Bankruptcy Fairness Act, which would allow private student debt to be discharged in bankruptcy — a standard that existed before a 2005 change in the law. Some states are also taking up the fight. Martindale of California's Department of Financial Protection said: "We're doing our part here in California to clarify how our laws apply to these kinds of private entities." And some state governments have established a "bill of rights" for borrowers — Maryland, for example, outlined a list of protections at the end of 2022 that said borrowers "may not be subjected to conduct that is intended to mislead you or otherwise treat you in an unfair, abusive or deceptive way."Moran said he didn't regret taking out private student loans because it allowed him to pursue his desired nursing career. But he wishes turning to a private lender didn't come with such a high cost."My past couple of years have been paying down as much as I can and not really having any savings to show for it, despite having a decent-paying job. It's kind of impossible to get ahead right now," he said. "The prospect of ownership of a house is so unattainable at the moment it's almost laughable. Since I started college, I've just had this black cloud looming over me knowing I would have to pay off this debt eventually."Ayelet Sheffey is a senior economic policy reporter covering student debt on Insider's economy team.Read the original article on Business Insider.....»»

Hudson On The United States' Financial Quandary: ZIRP's Only Exit Path Is A Crash Authored by Michael Hudson via NakedCapitalism.com Originally published in the Investigación Económica (Economic Research), produced by UNAM (Autonomous National University of Mexico) Abstract Interest-bearing debt grows exponentially, in an upsweep. The non-financial economy of production and consumption grows more slowly as income is diverted to carry the debt overhead. A crash occurs when a large part of the economy cannot pay its scheduled debt service. That point arrived for the U.S. economy in 2008, but was minimized by a bank bailout, followed by a 14-year boom as the Federal Reserve increased bank liquidity by its Zero Interest-Rate Policy (ZIRP). Flooding the capital markets with easy credit quintupled stock prices and engendered the largest bond market boom in U.S. history, but did not revive tangible capital investment, real wages or prosperity for the non-financial economy at large. Reversing the ZIRP in 2022 caused bond prices to fall and ended the runup of stock market and real estate prices. The great 14-year debt increase faced sharply rising interest charges, and by spring 2023 a number of banks failed, but all their depositors were bailed out by the FDIC and Federal Reserve. The open question is now whether the U.S. economy will face the financial crash that was postponed from 2009 onwards by the vast expansion of debt under ZIRP that has added to the economy’s debt burden. INTRODUCTION Throughout history the buildup of debt has tended to outstrip the ability of debtors to pay. Any rate of interest will double what is owed over time (e.g., at 3% the doubling time is almost 25 years, but 14 years at 5%). Paying carrying charges on the rising debt overhead slows the economy and hence its ability to pay. That is the dynamic of debt deflation: rising debt service as a proportion of income. Carrying charges may rise to reflect the growing risk of non-payment as arrears and defaults rise. The non-financial economy of production and consumption grows more slowly, tapering off in an S-curve as income is diverted away from new tangible investment to carry the debt (see graph 1). The crash usually occurs quickly. Graph 1. Financial Crisis Pattern vs. Business Cycle Governments may try to inflate their societies out of debt by creating yet more credit to postpone the inevitable crash, by bailing out lenders or debtors – mainly lenders, who have captured control of government policy. But the debt crisis ultimately must be resolved either by transferring property from debtors to creditors or by writing down debts. The National Income and Product Accounts (NIPA) count the financial sector as producing a product, and adds its interest income and other financial charges to the economy as “earnings,” not subtracting them as rentieroverhead. The rise in financial wealth, “capital gains,” interest and related creditor claims on the economy are held to reflect a productive contribution, not an extractive charge leaving the economy with less to spend on new consumption and investment. The problem gets worse as this financial extraction grows larger. As credit and debt expanded in the decade leading up to the 2008 junk mortgage crisis, banks found fewer credit-worthy projects available, and turned to less viable loan markets. Banks wrote mortgage loans with rising debt/income and debt/asset ratios. Racial and ethnic minorities were the most overstretched borrowers, falling into payment arrears and defaulting. Real estate prices crashed, causing the market value of bad mortgage loans to fall below what many banks owed their depositors. There is nothing “natural” or inevitable about how such bank insolvency and negative equity will be resolved. The solution always is political. At issue is who will absorb the loss: depositors, indebted borrowers, bank bondholders and stockholders, or the government via the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve bailouts? Less often asked is who will be the winners. Since 2009 it has been America’s biggest banks and the wealthiest One Percent – the very parties whose greed and short-sighted policies caused the crash. Having been deemed “systemically important,” meaning Too Big To Jail (TBTJ, sometimes cleaned up to read Too Big To Fail, TBTF), they were rescued. And today (2023), that special status is making them the beneficiaries of a flight to safety in the wake of the FDIC’s decision following the collapse of Silicon Valley Bank that even large depositors should not lose a penny, no matter how poorly their banks have coped with the Fed’s policy of rising interest rates that have reduced the market value of their banks’ assets, aggravated by falling post-Covid demand for office space lowering commercial rents and leading to mortgage defaults.  Once again, this time by protecting depositors, the Federal Reserve and Treasury are trying to save the economy’s debt overhead from crashing and wiping out the nominal bank loans and other financial assets that cannot be paid. The usual result of a crash is a wave of foreclosures transferring property from debtors to creditors, but leading banks also may become insolvent as their debtors default. That means that their bondholders lose and counterparties cannot be paid. The 2008 crash saw an estimated eight to ten million over-mortgaged home buyers lose their homes, but the banks were bailed out by the Federal Reserve and Treasury. Instead of the economy’s long buildup of debt being written down, the Federal Reserve increased bank liquidity by its Zero Interest-Rate Policy (ZIRP). This provided banks with enough liquidity to help the economy “borrow its way out of debt” by using low-interest credit to buy real estate, stocks and bonds yielding higher rates of return. The 14-year boom resulting from this debt leveraging featured an innovation in the economy’s ability to sustain growth in its debt overhead: Debt service was paid not only out of current income but largely out of asset-price gains – “capital” gains, meaning finance-capital gains engineered by fintech, financial technology. Lowering interest rates created opportunities to borrow to buy real estate, stocks and bonds yielding a higher return. This arbitrage quintupled stock prices and created the largest bond market boom in U.S. history, as well as fueling a real-estate boom marked especially by private capital firms as absentee owners of rental properties. But tangible capital investment did not recover, nor did real wages and prosperity for the non-financial economy at large. Ending the ZIRP in 2022 reversed this arbitrage dynamic. Rising interest rates caused bond prices to fall and ended the runup of stock market and real estate prices – in an economy whose debt overhead had risen sharply instead of being wiped out in the aftermath of 2008. In that sense, today’s debt deflation and its associated financial fragility that has already seen a number of banks fail are still part of the aftermath of trying to solve the debt crisis by creating a flood of debt to lend the economy enough credit to inflate asset prices and enable debts to be paid. That poses a basic question: can a debt crisis really be resolved by creating yet more debt? That is how Ponzi schemes are kept going. But when does the “long run” arrive in which, as Keynes once remarked, “we are all dead”? The remainder of the article is structured as follows. Section 2 discusses President Obama’s choice to bail out Wall Street, section 3 examines the inflation of asset prices brought about by the Fed’s ZIRP and section 4 analyzes the negative impact of the Fed ending its ZIRP. Section 5 delves into the future of the financialized U.S. economy. The Obama Administration’s decision to bail out Wall Street, not the economy The 2008-2009 crash was caused by U.S. banks writing fraudulent loans, packaging them and selling them to gullible pension funds, German state banks and other institutional buyers. The mainstream press popularized the term “junk mortgage,” meaning a loan far in excess of the reasonable ability to be paid by NINJA borrowers – those with No Income, No Jobs and no Assets. Stories spread of crooked mortgage brokers hiring appraisers to report fictitiously high property assessments to justify loans to buyers whom they coached to report fictitiously high income to make it appear that these junk mortgages could be carried. There was widespread awareness that an unsustainable debt overhead was building up. Even at the Federal Reserve Board, Ed Gramlich (1997-2005) warned about these fictitious valuations. But Chairman Alan Greenspan (1987-2006) announced his faith that banks would not find it good business to mislead people, so that was unthinkable. Embracing the libertarian anti-regulatory philosophy that led to his being appointed Fed Chairman in the first place, he refused to see that bank managers live in the short run, not caring about long-term relationships or how their financial operations may adversely affect the economy at large. This blind spot seems to be a requirement to rise in academia and the government’s regulatory club. The idea that a debt pyramid may be unsustainable makes no appearance in the models taught in today’s neoliberal economics departments and followed in government circles staffed by their graduates. So nothing was done to deter the financial pyramid of speculative packaged mortgage loans. Running up to the November 2008 election, President Obama promised voters to write down mortgage debts to realistic market price levels so that bank victims could keep their homes. But honoring that promise would have resulted in heavy bank losses, and the Democratic Party’s major campaign contributors were Wall Street giants. The largest banks where mortgage fraud was largely concentrated were the most insolvent, headed by Citigroup and Wells Fargo, followed by JP Morgan Chase. Yet these largest banks were classified as being “systemically important,” along with brokerage houses such as Goldman Sachs and other major financial institutions that the Obama Administration redefined as “banks” so that they could receive Federal Reserve largesse, in contrast to the hapless victims of predatory junk mortgages. FDIC Chair Sheila Bair wanted to take Citibank, the most reported offender, into government hands. But bank lobbyists claimed that the economy’s health and even survival required protecting the financial sector and keeping its most notorious failures from being taken over. Parroting the usual junk-economic logic given credentials by Nobel Prize awards and TV media appearances, bankers pointed out that making them bear the cost of writing down their fictitiously high mortgages to realistic market levels and the ability of debtors to pay would leave much of the financial sector insolvent, going on to claim that they needed to be rescued to save the economy. This remains the same logic used today in saving banks from the negative equity resulting from ending the Federal Reserve’s Zero Interest Rate Policy (ZIRP). Not acknowledged in 2009 was that failure to write down bad loans would lead millions of families to lose their homes. Today’s economic model-builders call such considerations “externalities.” The social and environmental dimensions, the widening of income and wealth inequality and the rising debt overhead, are dismissed as “external” to the financial sector’s tunnel vision and the NIPA and GDP accounting concepts that it sponsors. That willful blindness by economists, regulators and financial institutions, selfishly concerned with avoiding their own loss without caring for the rest of the economy, enabled the TBTJ/F excuse for not prosecuting bankers and writing down their fraudulent mortgage loans. Instead, the Fed provided banks with enough money to prevent their bondholders from absorbing the loss, and the FDIC’s deposit-insurance limit of $100,000 was raised to $250,000 in July 2010. Banks had great political leverage in the threat to cause widespread economic collapse if they did not get their way and were required to take responsibility for their financial mismanagement. So instead of being obliged to write down bad mortgage loans, these debts were kept on the books and an estimated eight to ten million U.S. families were evicted. The “real” economy was left to absorb the bad-loan loss. Homes under foreclosure were bought largely by private capital firms and turned into rental properties. The U.S. homeownership rate – the badge of membership in the middle class, enabling it to think of itself as property owners with a harmony of interest with rentiers instead of as wage-earners – fell from 69% in 2005 to 63.7% by 2015 (see Graph 2).   Home debt/equity rates soared from just 37% in 2000 to 55% in 2014 (see Graph 3). In other words, the equity of homeowners peaked at 63 percent in 2000 but then fell steadily to just 45% in 2014 – meaning that banks held most of the value of U.S. owner-occupied homes. On the broadest level we can see that the 19th century’s long fight by classical economists to free industrial capitalism from the landlord class and economic rent has given way to a resurgent rentier economy. The financial sector is the new rentier class, and it is turning economies back into rentier capitalism – with rent being paid as interest while absentee real estate companies seek their major returns in the form of “capital” gains, that is, financialized asset-price inflation. Inflating asset prices by flooding the financial markets with credit From the Federal Reserve’s vantage point, the economic problem after the 2008 crash was how to restore and even enhance the solvency of its member banks, not how to protect the “real” economy or its home ownership rate. The Fed orchestrated a vast “easing of credit” to raise prices for real estate, stocks and bonds. That not only revived the valuation of assets pledged as collateral against mortgages and other bank loans but has fueled a 15-year asset-price inflation. The Fed did this by raising its backing for bank reserves from $2 trillion in 2008 to $9 trillion today. This $7 trillion easy-credit policy lowered interest rates to 0.2 percent for short-term Treasury bills and what banks paid their savings depositors. The basic principle behind ZIRP was simple. The price of any asset is theoretically determined by dividing its income by the discount rate: Price = income/interest (P = Y/i ). As interest rates plunged to near-zero, the capitalized value of real estate, corporations, stocks and bonds rose inversely. Fed Chairman Ben Bernanke (2006-2014) was celebrated as the savior of Wall Street, which the popular media depicted as synonymous with the economy at large.  The result was the largest bond-market boom in history. Real estate prices recovered, enabling banks to avoid losses on mortgages as they auctioned off foreclosed homes in a “recovering” market, whose character was changing from owner-occupied housing to rental housing. Stock prices, which had fallen to 6,594 in March 2009, far surpassed their pre-crash high of 14,165 in October 2007 to more than quintuple to over 35,000 by 2020. The lion’s share of gains accrued to the economy’s wealthiest ten percent, mostly to the One Percent who own most bonds and stocks. Artificially low interest rates enabled private finance capital and corporations to borrow low-cost bank credit to bid up prices for real estate, stocks and bonds whose rents, profits and fixed interest yields exceeded the lowered borrowing costs. The ZIRP’s higher debt ratios inflated real estate and stock prices to bail out the banks and other creditors by creating a bonanza of financial gains. But only asset prices were inflated, not wages or disposable personal income after paying debt service. Housing prices soared, but so did the economy’s debt overhead. The ZIRP thus planted a financial depth charge: what to do if and when interest rates were allowed to return to more normal levels. A recent report by McKinsey (2023) calculates that asset price inflation over the two decades from 2000 to 2021 “created about $160 trillion in ‘paper wealth,’” despite the fact that “economic growth was sluggish and inequality rose,” so that “Valuations of assets like equity and real estate grew faster than real economic output. … In aggregate, the global balance sheet grew 1.3 times faster than GDP. It quadrupled to reach $1.6 quintillion in assets, consisting of $610 trillion in real assets, $520 trillion in financial assets outside the financial sector, and $500 trillion within the financial sector.” This enormous “capital gain” or “paper wealth” was debt-financed. “Globally, for every $1.00 of net investment, $1.90 of additional debt was created. Much of this debt financed new purchases of existing assets. Rising real estate values and low interest rates meant that households could borrow more against existing homes. Rising equity values meant that corporates could use leverage to reduce their cost of capital, finance mergers and acquisitions, conduct share buybacks, or increase cash buffers. Governments also added debt, particularly in response to the global financial crisis and the pandemic.” The Fed reverses ZIRP to cause a recession and prevent wages from rising In March 2022 the Fed announced that it intended to cope with rising wage levels (“inflation”) by raising interest rates. Fed Chairman Jerome Powell (2018-present) explained that it was necessary to slow the economy to create enough unemployment to hold down wages. His right-wing illusion was that the inflation was caused by rising wages (or by government spending too much money into the economy, increasing the demand for labor and thereby raising wage and price levels). In reality, of course, the inflation was caused largely by U.S.-NATO sanctions against Russian exports in 2022, causing a spike in world energy and food prices, while corporate “greedflation” raised prices where there was enough monopoly power to do so. Rents also increased sharply, following the rise in housing prices encouraged by the flood of mortgage credit to absentee owners. Ending ZIRP reversed the Fed’s asset-price inflation policy The Fed’s announcement of its intention to raise interest rates warned investors that this would reverse the asset-price inflation that ZIRP had fueled. Rising interest rates lower the capitalization rate for bonds, stocks and real estate. To avoid taking a price loss for these assets, “smart money” (meaning wealthy investors) sold long-term bonds and other securities and replaced them with short-term Treasury bills and high-liquidity money-market funds. Their aim was simply to conserve the remarkable runup in financial wealth subsidized during the 2009-2022 ZIRP. The Fed’s aim in rising interest rates was to hurt labor by bringing on a recession, not to hurt its bank clients. But ending ZIRP caused a systemic problem for banks: Collectively they were too large to have the maneuverability that private investors enjoyed. If banks tried en masse to move out of long-term bonds and mortgages by selling their portfolios of 30-year mortgages and government bonds, prices for these securities would plunge – to a level reflecting the Fed’s targeted 4 percent interest rate. There was little by way of an escape route for banks to buy hedge contracts to protect themselves against the prospective price decline of the assets backing their loans and deposits. Any reasonable hedge seller would have calculated how much to charge for guaranteeing securities in the face of rising interest rates causing securities with a face value of, say, $1,000 to fall to, say, $700. A hedge contract promising to pay the bank $1,000 would have had to be priced at least at $300 to cover the expected price decline. So the banking system as a whole was locked into holding loans and securities whose market price would fall as the Federal Reserve tightened credit. Rising interest rates threatened to push many banks into negative equity – the problem that banks had faced in 2008-2009. Federal and state regulators ignored this interest-rate threat to bank solvency. They focused narrowly on whether the banking system’s debtors and bond issuers could pay what they owed. It was obvious that the Treasury could keep paying interest on government bonds, because it can always simply print the money to do so. And housing mortgages were secure, given the housing-price boom. Outright fraud thus was no longer a major worry. The new problem, seemingly unanticipated by regulators, was that capitalization rates would fall as interest rates rose, causing asset prices to decline, leaving banks with insufficient reserves to cover their deposit liabilities. Bank reporting rules do not require them to report the actual market value of their assets. They are allowed to keep them on their books at their original acquisition price, even when that initial “book value” no longer is realistic. If banks were obliged to report the evolving market reality, it would have been obvious that the financial system had been turned into an unsustainable Ponzi scheme, kept afloat only by the Fed flooding the market with liquidity. Such bubble economies have been blamed on “popular delusions” ever since the Mississippi and South Sea bubbles of the 1710s in France and England. But all financial bubbles have been sponsored by governments. To escape from their public debt burden, France and England engineered debt-for-equity swaps of shares in companies with a monopoly in the slave trade and plantation agriculture – the growth sectors of the early 18th century – with payment made in government bonds. But the 2009-2023 stock market bubble has been engineered to rescue the private sector, largely at government expense instead of it being the beneficiary. That is a major characteristic of today’s finance capitalism. The essence of “wealth creation” under finance capitalism is to create asset-price “capital” gains. But the economic reality that such financialized gains cannot be sustained led to the term “fictitious capital” being used already in the 19th century. The idea that inflating asset prices can enable economies to pay their debts out of finance-capital gains for more than just a short period has been promoted by an unrealistic economic theory that depicts any asset price as reflecting intrinsic value, not puffery or financial manipulation of stock, bond and real estate prices. Today’s bank assets are estimated to be $2 trillion less than their nominal book value. But banks were able to ignore this reality as long as they did not have to start selling off their real-estate mortgages and government bonds. All that they had to fear was that depositors would start withdrawing their money when they saw the widening disparity between the typical 0.2 percent interest that banks were paying on savings deposits and what the government was paying on safe U.S. Treasury securities. That interest-rate disparity is what led to the eruption of bank failures in spring 2023. At first that seemed to be an isolated problem unique to each local bank failure. When Sam Bankman-Fried’s FTX fraud showed the problems of cryptocurrency as an investment, holders began to sell. What was said to be “peer to peer” lending turned out to be mutual funds in which cryptocurrency buyers withdrew money from banks and turned them over to the cryptofund managers, with no regulation. The “peers” at the other end turned out to be the managers behind an opaque balance sheet. That realization led customers to withdraw, and crypto sites met these withdrawals by drawing down their own bank deposits. Many bankruptcies ensued from what turned out to be Ponzi schemes. Two banks failed as a result of heavy loans to the cryptocurrency sector and reliance on deposits from it: Silvergate Bank on March 8 and Signature Bank in New York on March 12. The other set of failed banks were those with a high proportion of large depositors: Silicon Valley Bank (SVB) on March 10 and neighboring First Republic Bank in San Francisco on May 1. Their major customers were private capital backers of local information-technology startups. These large financially savvy depositors were substantially above the $250,000 FDIC-insured limit and also were the most willing to move their money into government bonds and notes that paid higher interest than the 0.2 percent that SVB and other banks were paying.  Another set of high-risk banks are community banks with a high proportion of long-term mortgage loans against commercial real estate. Office prices are plunging as occupancy rates decline now that employers have found that they need much less space for their on-site work force since Covid has led many workers to work from home. As a recent Wall Street Journal report explains: “Around one-third of all commercial real-estate lending in the U.S. is floating rate … Most lenders of variable-rate debt require borrowers to buy an interest-rate cap that limits their exposure to rising rates. … Replacing these hedges once they expire is now very expensive. A three-year cap at 3% for a $100 million loan cost $23,000 in 2020. A one-year extension now costs $2.3 million.” It is cheaper to default on heavily debt-leveraged properties. Large real estate companies, such as Brookfield Asset Management (with assets of $825 billion) which saw its mortgage payments rise by 47 percent in the past year, are walking away as commercial rents fall short of the carrying charges on their floating-rate mortgages. Blackstone and other firms are also bailing out. Stock-market prices for real-estate investment trusts (REITs) have fallen by more than half since the Covid pandemic began in 2020, reflecting office-building price declines by about a third so far, and still plunging. Many banks are now offering depositors interest in the 5 percent range to deter a deposit drain, especially as a “flight to safety” is concentrating deposits in the large “systemically critical banks” blessed with FDIC guarantees that customers will not lose their money even when their deposits exceed the nominal FDIC limit. These are precisely the banks whose behavior has been the most outright reckless. As Pam Martens has documented on her e-site “Wall Street on Parade,” JP Morgan Chase, Citigroup and Wells Fargo are serial offenders, the most responsible for the reckless lending that contributed to the financial system’s negative equity in the first place. Yet they have been made the winners, the new havens in today’s debt-ridden economy. It turns out that being “systematically important” means that one belongs to the group of banks that control government policy of the financial sector in their own favor. It means being important enough to oppose the appointment of any Federal Reserve officials, bank regulators and Treasury officers who would not protect these banks from regulation, from prosecution for fraud, and from being taken over by the FDIC and government when their asset-price losses exceed their equity and leave them as zombie banks. Where will the financialized U.S. economy go from here? Rising interest rates are winding the clock back to the same negative-equity condition that the banking system faced in 2008-2009. When Silicon Valley Bank’s “unrealized loss” of $163 billion on falling prices for its government bondholdings and mortgages exceeded its equity base, that was merely a scale model of the condition of many big U.S. banks in late 2008. The problem this time is not bank-mortgage fraud but falling asset-prices resulting from the Fed raising interest rates. And behind that is the most basic underlying problem: The banking system’s product is debt, which is extracting a rising share of national income. The economics profession, the Federal Reserve, bank regulators and the Treasury share a blind spot when it comes to confronting the degree to which debt is a burden draining income from the “real” economy of production and consumption. The trillions of dollars in nominal financial wealth registered by the bond, stock and real estate markets since ZIRP was initiated has been plowed back with yet more credit into more asset purchases to keep the price-rise going with rising debt leverage, bidding up financial claims on property rights, especially rent-yielding claims. All this financialization was given tax advantages over ‘real” capital investment. The $7 trillion of Fed support for the banking system to lend out and bid up prices for real estate, stocks and bonds could have been used to reduce carrying charges on homes and other real estate. That could have helped the economy lower its housing, living and employment costs and become more competitive. Instead, the role of the Federal Reserve and privatized banking system has been to create yet more credit to keep bidding up asset prices. The beneficiaries have been mainly the wealthiest One Percent, not the economy at large. Inflation-adjusted wages have remained in the doldrums, enabling corporate profits and cash flow to increase – but over 90 percent of this corporate revenue has been paid out as dividends or spent on corporate stock buyback programs, not invested in tangible new means of production or employment. Many corporate managers have even borrowed to raise their stock prices by buying back their own shares. Today’s financial system has not managed its credit creation and wealth to help the economy grow. Debt-inflated housing prices have increased the economy’s cost structure, and debt deflation is blocking recovery. The household sector, corporate sector, and state and local budgets are fully loaned up, and default rates are rising for auto loans, student loans, credit-card loans, and mortgage loans, especially for commercial office buildings as noted above. Looking back over recent decades, the Federal Reserve and Treasury have created a banking crisis of immense proportions by protecting commercial banks and now even brokerage houses and the shadow banking system as clients to be served instead of shaping financial markets to promote overall economic growth. Behind this financial crisis is a crisis in economic theory that is largely a product of academic and media lobbying by the Finance, Insurance and Real Estate (FIRE) sector to depict rentier income and property claims as being part of the production-and-consumption economy, not external to it as an extractive layer. And behind this neoliberal theory that has replaced classical political economy is the rentier dynamic of finance capitalism. Its essence has been to financialize industry, not to industrialize finance. The monetary and credit system has been increasingly privatized and financial regulatory agencies have been captured by the sectors that they are supposed to regulate in the economy’s long-term interest. The financial sector notoriously has lived in the short run, and tried to free itself from any constraint on its extractive and outright predatory behavior that burdens the non-financial economy. The exponentially rising debt overhead is the financial equivalent of environmental pollution causing global warming, disabling the economy’s health much as long Covid incapacitates humans. The result today is an economic quandary – something more serious than just a “problem.” A problem can be solved, but a quandary has no solution. Any move will make the situation even worse. Mathematicians express this as being in an “optimum position”: one from which any move will make matters worse.  That is the kind of optimum position in which the U.S. economy finds itself today. If the Fed and other central banks keep interest rates high to bring about a recession to lower wages, the economy will shrink and its ability to carry its debt overhead – and to make further stock-market and real-estate price gains – will be eroded. The debt arrears that already are mounting up will lead to defaults, which already are occurring in the commercial real estate sector. Trying to return to a ZIRP to sustain asset prices is much harder in the face of today’s legacy of post-2009 debt – not to mention the pre-2009 debt that crashed. Bank reserves have shrunk, and in any case the economy is largely “loaned up” and can hardly take on any more debt. So one path or another, the end-result of ZIRP – and the Obama Administration’s failure to write down the economy’s bad-debt overhead – must be a crash.  But a crash would not mean that the economy’s debt problem will be “solved.” As long as the guiding policy principle remains “Big fish eats little fish,” the economy will polarize and the concentration of financial wealth will accelerate as debt-burdened assets will pass into the hands of creditors whose wealth has been so vastly increased since 2009. *  *  * Michael Hudson, is a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization.  Tyler Durden Sat, 07/08/2023 - 21:10.....»»

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) Q3 2023 Earnings Call Transcript June 27, 2023 Walgreens Boots Alliance, Inc. misses on earnings expectations. Reported EPS is $1 EPS, expectations were $1.07. Operator: Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the […] Walgreens Boots Alliance, Inc. (NASDAQ:WBA) Q3 2023 Earnings Call Transcript June 27, 2023 Walgreens Boots Alliance, Inc. misses on earnings expectations. Reported EPS is $1 EPS, expectations were $1.07. Operator: Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Walgreens Boots Alliance Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Tiffany Kanaga, Vice President of Global Investor Relations, you may begin your conference. Tiffany Kanaga: Good morning. Thank you for joining us for the Walgreens Boots Alliance earnings call for the third quarter of fiscal year 2023. I’m Tiffany Kanaga, Vice President of Global Investor Relations. Joining me on today’s call are Roz Brewer, our Chief Executive Officer; James Kehoe, our Chief Financial Officer; and John Driscoll, President of U.S. Healthcare; Rick Gates, Senior Vice President and Chief Pharmacy Officer at Walgreens will participate in Q&A. All references to the COVID-19 headwind on today’s call include U.S. vaccines, drive-through tests, and OTC tests. As always, during the conference call, we anticipate making projections and forward-looking statements based on our current expectations. Our actual results could differ materially due to a number of factors, including those listed on slide two and those outlined in our latest forms 10-K and 10-Q filed with the Securities and Exchange Commission. We undertake no obligation to publicly update any forward-looking statement after this presentation, whether as a result of new information, future events, changes in assumptions or otherwise. You can find our press release and the slides referenced on this call in the Investors section of the Walgreens Boots Alliance website. The slides in the press release also contain further information about the non-GAAP financial measures that we will discuss during this call. I’ll now turn the call over to Roz. Roz Brewer: Thanks, Tiffany, and good morning, everyone. I’d like to start today’s call with an acknowledgment that our performance in the third quarter did not meet our overall expectations, and we are disappointed to have to change our fiscal 2023 guidance. While we achieved good sales growth and return to adjusted earnings growth in the quarter, several dynamics created margin pressures that we are factoring into our full-year outlook, We have seen changing market trends that have consumers prioritizing value in response to a more uncertain and challenging economic environment. There has been a steeper drop off in COVID vaccines and testing with the end of the public health emergency. We are also experiencing a slower profit ramp for U.S. Healthcare. Importantly, we remain committed to our strategy through immediate actions to accelerate our path to profitability and unlock long-term value. I remain confident in the long-term trajectory of our transformation, which is underpinned by significant progress against each of our four strategic priorities. We are continuing to transform and align our core business with advancements in our tech enabled pharmacy operating model. Today, we are announcing a scalable partnership with TelePharm to expand telepharmacy services; improve access to care; and provide flexibility for how and when patients engage with our pharmacists. Our model is also supported by our micro fulfillment centers, covering over 40% of our Walgreens store footprint. In U.S. retail, our flat year-to-date comp sales have successfully lapped last year’s record 8.8% growth and retail gross margin is up over 100 basis points yet again. We have also made significant progress on building our next growth engine in healthcare, rapidly establishing our portfolio of assets across the care continuum. VillageMD acquired Summit to create a leading independent care delivery platform, and we accelerated the full acquisition of Shield and CareCentrix. This segment has gone from zero sales contribution just two years ago to a run rate of $8 billion in the third quarter of 2023. To fund our transformation and focus the portfolio, we have realized $4.1 billion in proceeds from the sale of ABC shares this fiscal year and also exited our Option Care Health position for $800 million in proceeds. Finally, we have continued to invest in strategic talent and capabilities, most recently, strengthening VillageMD’s bench to welcome CFO, Rich Rubino. Turning to the third quarter, WBA returned to adjusted EPS growth, up nearly 4%. Third quarter sales were solid, growing almost 9% in constant currency. U.S. comp sales were up 7%. Let me call out U.S. retail digital sales, up 19% on top of a 25% gain last year with 3.7 million same day pickup orders. International was also notable, up 6.9% in the quarter. It is clear that consumers continue to appreciate the value, convenience and range of services delivered by Walgreens and Boots. Our increased expense discipline in the quarter only partly offset outsized margin pressure, and earnings growth was held back by three external factors. First, we saw lower-than-expected COVID-related demand, we had called out COVID as a wildcard heading into the quarter and have unfortunately seen less patient willingness to vaccinate. Walgreens administered 800,000 COVID-19 vaccines in the quarter, down 83% year-on-year and testing volumes are also down sharply. We are in turn taking the prudent [Indiscernible] of further reducing our expectations for COVID contributions going forward. We are currently projecting to administer 9 million to 10 million COVID vaccines next year in line with the typical flu season and compared to 12.5 million COVID vaccines expected in fiscal 2023. Second and similar to other retailers, we’ve been impacted by the rapid softening of the macro environment and a more cautious and value-driven consumer. Our customer is feeling the strain of higher inflation and interest rates, lower SNAP benefits and tax refunds, and an uncertain economic outlook. They are pulling back on discretionary and seasonal spend and responding strongly to promotional activity. For example, promotional unit is running up 10% in the retail channel, including a sharp increase over just a five-week period, while non-promotional units fell 8%. Let me add that we see the retail pricing environment as remaining rational. We have also seen some pressure on industry script volume excluding COVID, which may be related to these broader consumer headwinds. [Day fall] (ph) adjusted market growth excluding immunizations has slowed almost 2 percentage points from February to May. Our core retail pharmacy business is resilient and relatively well positioned in times of volatile consumer confidence. However, we’re not immune to these external pressures and have trimmed our expectations accordingly, while at the same time ramping up our efforts around cost savings. Third, we’ve experienced a drag from a recent weaker respiratory season. We are feeling the effects through our script volume through our front of store sales, especially in the higher margin cough cold flu category and in CityMD’s traffic trends. These trends are likely to persist into the fourth quarter against last year’s category strength. Importantly, we achieved strong quality of earnings considering a 4.7% adverse net impact to adjusted EPS from COVID the sale of ABC shares, sell in leaseback, incentive accruals, and tax. This trend gives us line of sight to accelerating adjusted operating income growth in the fourth quarter. Let me turn to our updated guidance. We now expect fiscal 2023 adjusted EPS at $4.00 to $4.05, reflecting consumer and category trends, lower COVID-19 contribution, and a more cautious macroeconomic forward view. This guidance represents core earnings to be flat to up 1%, excluding COVID and currency. We are also providing preliminary fiscal 2024 commentary. Let me be clear, there are some factors impacting us today that are likely to extend into next year, namely the macroeconomic-driven consumer pressure and COVID headwinds. We are closely watching emerging challenges to consumer spending and sentiment, such as the end of fiscal stimulus and the resumption of student loan payments. There are other factors that are more specific to our business today and should not be annualized into fiscal 2024, such as the weaker respiratory season. Most importantly, we have undertaken several aggressive initiatives to enhance profitability and cash flow into next year, especially in our Healthcare business. We expect low-to-mid-single-digit adjusted operating growth in fiscal 2024 with the U.S. Retail Pharmacy and U.S. Healthcare Businesses more than offsetting headwinds from COVID, sale and leaseback and ABC. AOI growth should outpace adjusted EPS, due to offsets from higher tax and non-controlling interest. We will provide a more detailed discussion of 2024 guidance when we report fourth quarter and full-year 2023 results. The positive operating growth trends with improving quality of earnings support our continued confidence in building to sustainable long-term low-teens adjusted EPS growth over time. To drive shareholder value, we are taking the following immediate actions to enhance profitability and accelerate our journey. First, we are raising our transformational cost management program savings goal to $4.1 billion, this includes $800 million of savings in fiscal 2024. Second, we have implemented capital and project spend reductions, and we’ve launched a working capital optimization program. Third, we are pursuing portfolio simplification at an even faster pace. Fourth, we are announcing several specific actions to accelerate U.S. Healthcare’s path to profitability focused on VillageMD and Summit Health. We are also accelerating the synergies between our U.S. Healthcare segment and our core Walgreens business. We have a unique opportunity to improve local healthcare and wellbeing in this country. The flywheel of healthcare and retail pharmacy working together will deliver more affordable, accessible, quality healthcare to our communities and will also deliver sustainable shareholder value. It starts with our trusted brand and pharmacist, national footprint, and digital offerings. 58% of Americans are likely to visit their local pharmacy as a first step when faced with a non-emergency medical issue. Add to that, our leading assets across the care continuum. VillageMD, Summit, Shield, and CareCentrix and our early work with health corners and clinical trials. We’ve created a platform at scale that is absolutely proving to help health plans and patients improve outcomes and lower cost. Our teams are expanding partnerships and driving greater market access, which is the next step to getting our will to turn. As healthcare and retail pharmacy jointly serve consumers, we will deepen engagement and reinforce our trusted brand. Let’s look at a few tangible examples of how we’re driving that value through our integrated portfolio. In partnering with VillageMD, our team based healthcare delivery enhances adherence. We are building digital connections and standalone clinics. More than 30 in Arizona and Texas are now supported by Walgreens pharmacies virtually with more coming online in Georgia this summer. To make the virtual experience seamless, we’re piloting a healthcare concierge program to provide extra care coordination. We are also exploring an integrated pharmacist ambulatory care model. The pilot has driven over 40% reduction in hospital readmissions over 30-days and a material A1C reduction in diabetic patients. Remember also that roughly 50% of patients have co-located VillageMD clinics opt to get their prescription filled at Walgreens. VillageMD co-located sites that have been open for over [Technical Difficulty] per day. CareCentrix and a leading national healthcare services provider are partnering to offer a turnkey durable medical equipment benefit management solution and point-of-care platform for health plans. This should drive medical and administrative savings, while improving the overall member experience. Shields and Walgreens are working together to establish Walgreens as the single contract pharmacy for health systems. Walgreens is also converting existing specialty pharmacy locations to Shield partners to increase access to specialty drugs and services. Finally, at Walgreens Health, we are exploring new healthcare service lines such as additional diagnostic services and data analytics and insights. We’ve already seen strong results with our at-home testing programs such as the one we conducted last fall with Blue Shield of California to boost patient access to colorectal cancer screening. Members due for screening had the opportunity to visit Walgreens Pharmacy locations across the state to pick up an at-home kit. The test completion rate was 50 percentage points higher when members chose pharmacy pickup, compared to those that received a kit in the mail. Based on these successful results, we are launching similar at-home testing programs with other payer partners. In summary, our healthcare and retail pharmacy businesses are working together to improved outcomes and lower cost as only Walgreens can do. I’m not satisfied by today’s headline guidance revisions. However, I see the enterprise approach coming together to deliver sustainable value to consumers, to our partners and to shareholders. We have the right strategy. We are driving good progress across each of our strategic priorities and we are taking appropriate measures to account for the recent macroeconomic challenges and uncertainty. Through the necessary actions discussed today, we are pushing harder toward profitability with a strong sense of urgency, while continuing to reimagine local healthcare and wellness for all. With that, I’ll hand it over to James to provide more color on our results and our outlook. Photo by freestocks on Unsplash James Kehoe: Thank you, Roz, and good morning. In summary, while we returned to adjusted EPS growth in the third quarter, earnings were below our expectations. As we encountered lower COVID contributions, shifting consumer behaviors, and a recent slowdown in respiratory incidences. Overall, we delivered 8.9% sales growth on a constant currency basis ahead of our plan, led by our U.S. pharmacy business, up 10%. Our Boots U.K. retail business, which delivered a solid 13% comp and our scaling healthcare business, which added $1.4 billion in sales versus the prior year. Adjusted EPS increased 3.6% on a constant currency basis despite a 19 percentage point headwind due to a lower COVID-19 contribution and 8 percentage points from reduced ownership of AmerisourceBergen. These were partly offset by favorability’s from sale and leaseback, incentive accruals, and tax. All of these items net out to be a 4.7 percentage point headwind to EPS growth and this demonstrates overall good quality of earnings in the quarter. As Roz discussed, we are lowering our fiscal ‘23 adjusted EPS guidance to $4.00 to $4.05. This updated outlook reflects consumer and category trends, a lower contribution from COVID and an overall more cautious forward view given the continued macroeconomic uncertainty. Later, I will provide more color around the key assumptions underpinning our revised guidance. But first, let’s look at the third quarter results in more detail. Adjusted operating income increased 0.6% on a constant currency basis. This included a 22 percentage point headwind from COVID-19 and a 7% drag from reduced AmerisourceBergen ownership, partly offset by sale and leaseback gains and incentive accruals. All of these items net out to an approximately 6% headwind to AOI growth. GAAP net earnings of $118 million declined a $171 million, compared to prior year. The current quarter included a $323 million after tax impairment charge related to pharmacy licenses in the U.K. Adjusted net earnings increased 3.4% on a constant currency basis to $860 million. Now let’s move to the year-to-date highlights. Year-to-date sales increased 4.8% on a constant currency basis. Adjusted EPS was down 20.7%, reflecting a lower COVID-19 contribution of 20 percentage points and reduced AmerisourceBergen ownership of 3 percentage points. GAAP earnings were a loss of $2.9 billion, compared to net earnings of $4.8 billion in 2022. With the current year including a $5.5 billion after tax charge for opioid related claims and lawsuits. Now let’s move to the U.S. Retail Pharmacy segment. Sales increased 4.4% in the quarter with comp sales up 7%. Adjusted gross profit declined 3.2% year-on-year, reflecting a 5 percentage point negative impact from COVID-19, a 5% reduction in SG&A expense more than offset the gross profit decline and led to AOI growth of 8.4% before the inclusion of AmerisourceBergen equity income. The sell down of our ABC stake led to a slight AOI decline of 0.4%. Let me now turn to U.S. Pharmacy. Pharmacy sales increased 6.3% and advanced 9.8% on a comparable basis, driven by both script growth and brand inflation. Excluding immunizations, comp scripts grew 2.8%, a slight deceleration from the prior quarter and reflecting broader prescription market trends. As expected, adjusted gross profit declined year-on-year, although excluding COVID, gross profit increased as script growth and lower cost of goods sold more than offset reimbursement pressure. Turning next to our U.S. retail business. Following several quarters of very good performance, the retail business encountered some headwinds in the third quarter as the consumer navigated through a difficult macroeconomic backdrop. Excluding tobacco, comp sales grew 0.2%, held back by 90 basis points due to holiday seasonal weakness as consumers pulled back on discretionary spending and 80 basis points due to lower sales of COVID-19 OTC test kits. We saw solid growth in grocery and household, up 4.7% and beauty, up 3.7%. Cough cold flu sales were flat, but slowed significantly in May, due to a decline in respiratory incidences. IQVIA fan data shows flu, cold and respiratory activity, down 8% in the third quarter, versus a 15% increase in the second quarter with May down in the mid-20% range. Following several consecutive quarters of year-on-year margin expansion, retail gross margin came under modest pressure in the third quarter. We’ve seen similar trends as the broader market with our promotional units, up around 7% in the most recent 13-week period. However, on a year-to-date basis, gross margin has increased by more than 100 basis points, driven by effective margin management. Turning next to the International segment and as always, I’ll talk to constant currency numbers. The international segment continues to perform very well. Sales increased 7% with good growth across all international markets. Boots U.K. was up 10%, and Germany wholesale grew 4%. Adjusted operating income of $208 million increased 21%, despite a $40 million year-on-year headwind from sale and leaseback transactions. Let’s now look in more detail at Boots U.K. Boots U.K. sales advanced 10%, pharmacy comp sales increased 6%, and comp retail sales grew 13%. And this comes on top of a 24% comp in the same quarter last year. Boots grew market share for the ninth consecutive quarter with gains across all categories. We successfully launched Future Renew, a range of innovative new skincare with very positive consumer response. This product line was recently launched in Walgreens. Boots.com sales grew 25% year-on-year, and have more than doubled versus the equivalent pre-COVID quarter. Over 14% of our U.K. retail sales now comes from Boots.com. Turning next to U.S. Healthcare. The U.S. Healthcare business continues to rapidly scale with sales reaching $2 billion more than doubling from the prior year, pro forma sales growth was 22%. VillageMD sales were $1.5 billion, up 22% on a pro forma basis. Legacy VillageMD growth was driven by expansion of the clinic footprint, with an additional 93 clinics opened in the past year and the ongoing maturation of existing clinics. Summit Health was, however, impacted by a weaker respiratory season that led to fewer CityMD visits and fewer referrals across the Summit Health Network. Shields delivered another strong quarter, up 35% and driven by contract wins, including the addition of six new health system partners and further expansion of existing partnerships. CareCentrix sales were approximately $360 million with pro forma sales growth of 15%. Adjusted EBITDA reflects weaker-than-expected results at VillageMD and Summit Health, partly offset by continued growth at Shields. CityMD has been impacted by lower visit volume, whereas the VillageMD EBITDA loss reflects new clinic expansions. We anticipate improvement in the fourth quarter as we build patient [tunnels] (ph) and traffic and align the cost profile with sales. Let’s now look at some of the key metrics for the U.S. Healthcare Business. VillageMD managed 850,000 value based lives at quarter end, reflecting year-over-year growth of approximately 27% in the legacy VillageMD business and the addition of 309,000 value based lives from Summit. Total value based lives include 179,000 full risk lives. Our clinical trials business continues to expand with eight contracts signed and a robust pipeline. Turning next to cash flow. We generated $1.2 billion of operating cash flow, with free cash flow of $116 million. The year-over-year decline reflected lower earnings due to COVID-19, a lower contribution from working capital and increased capital expenditures related to growth initiatives. Looking ahead, we are reprioritizing capital projects to reduce plan spend and are rolling out of comprehensive set of working capital optimization initiatives to enhance our cash generation. Turning now to guidance. We are updating our full-year ‘23 adjusted EPS guidance $4.00 to $4.05, a constant currency decline of around 20%. Excluding the impact of COVID-19 and ForEx core adjusted EPS is flat to up 1%. The EPS contribution from COVID-19 is $0.23 lower than our original assumptions at the start of the year. At the beginning of the fiscal year, we expected 16 million vaccinations. And despite the spring booster recommendation, we have reduced our full-year expectations to 12.5 million vaccinations. COVID testing has decelerated at an even faster pace. Additionally, we have incorporated the impacts of a more cautious consumer outlook, leading to a $0.20 to $0.25 impact as we realign our fourth quarter sales and margin goals to reflect recent trends. Finally, while reducing our ownership stake in AmerisourceBergen has improved our debt position. It has, however, led to a $0.05 headwind. Let me now walk you through our assumptions for each of our business segments. Starting with U.S. Retail Pharmacy, we now project sales of around $110 billion, up low-single-digits year-on-year. AOI is projected at $3.8 billion to $3.9 billion, a decline of 22% to 24%, reflecting a 23 percentage point headwind from COVID-19 and 3 percentage points from our reduced ownership stake in AmerisourceBergen. Excluding these two impacts, AOI growth is up 2% to 4%. Turning next to the International segment, which is performing well this year. Sales are projected to grow 6% to 8% on a constant currency basis, reflecting strong execution, especially in the U.K. Adjusted operating income of around $900 million, represents constant currency growth of approximately 30%. This performance is towards the top end of our original expectations. Our revised outlook for U.S. Healthcare reflects lower visits at CityMD, the continued ramp up of new VillageMD sites and the slower integration of prior acquisitions into Summit’s multi-specialty business. We expect sales of $6.3 billion to $6.8 billion, an increase of $4.8 billion versus prior year and growing approximately 25% on a pro form a basis. We are projecting an adjusted EBITDA loss of $340 million to $380 million, including the factors I mentioned earlier. While the profit performance so far this year has been below plan, rapid correction actions are underway, and we expect to drive sequential adjusted EBITDA improvement in the fourth quarter and beyond. Turning now to our corporate assumptions, our full-year tax rate is now expected to be around 12% and this basically reflects the favorability we have seen so far in fiscal ‘23, with some of the benefits reversing in the fourth quarter. More specifically, we expect the fourth quarter tax rate of around 23%. Full-year guidance of $4.00 to $4.05 implies fourth quarter EPS of approximately $0.70 to $0.75. The result is weighed down by a much higher average tax rate and the fourth quarter typically is the lowest to extrapolate the quarter. As such it would be incorrect to extrapolate the quarter as a proxy for 2024. First, normalizing for the tax rate would result in an additional $0.08 in the quarter. Second, seasonality impacts all of our businesses. Looking back over the past five years, and excluding the impact from COVID-19 and ABC, approximately 20% of our adjusted operating income comes in the fourth quarter. To conclude, adjusting the fourth quarter for tax rate, an accounting for seasonality would result in annual adjusted EPS of around $4 per share. Next, I would like to cover the key factors that will influence 2024 performance. Overall, we expect the long-term tailwinds to outweigh the near-term pressures. Some of the challenges we faced in fiscal ‘23 are expected to continue into ‘24. We do expect to see some continued weakness in consumer spending, together with moderate increases in labor costs. While reimbursement pressure has eased somewhat over the past 18 months, it is not going away and we will continue to identify way to offset the pressure. In addition we expect lower sale and leaseback activity in fiscal ‘24, and the tax rate will be higher as we lap a very favorable fiscal ‘23 performance and higher statutory tax rates are introduced in both the U.K. and Switzerland. However, we have multiple profit drivers and initiatives that will drive sustainable profit growth Our U.S. Healthcare business will be a significant profit driver, including the first full-year of Summit Health, a maturing VillageMD clinic profile and strong actions to accelerate their path to profitability. We expect continued script volume growth and strong contribution from front of store initiatives. These include own brand penetration gains and the further expansion of our successful category performance improvement program. Lastly, the transformational cost management program will deliver at least $800 million of savings next year. Next, let’s take a deeper look into 2024. We expect fiscal 2024 adjusted operating income to grow low-to-mid-single-digits, led by the U.S. Healthcare segment and solid execution in U.S. Retail Pharmacy. We are expecting U.S. Healthcare to be the largest driver of total company AOI growth, as the business is rapidly gaining scale, and we will now accelerate the path to profitability. John Driscoll will provide much more color on the immediate actions we are taking to accelerate EBITDA delivery. We expect U.S. Retail Pharmacy AOI to be flat to down slightly, due to lower COVID contributions of approximately $290 million and a $260 million step down in sale and leaseback gains. Absent these items, we anticipate solid core growth led by transformational cost management program savings and expanding gross profit. Finally, we expect international AOI to decline year-on-year as we lap sizable real estate gains and lose the relatively small AOI contribution from the sale of our business in Chile. Core profit growth will be flat as the business manages through high levels of cost and labor inflation. That being said, our International business is well positioned for long-term success with market share gains and an advantaged and growing e-commerce presence. We do expect AOI growth to outpace EPS, due to a higher tax rate and non-controlling interest. Next, we’ll look at U.S. Pharmacy in more detail. Excluding COVID, we expect to grow pharmacy gross profit. Underpinning the growth is our differentiated tech enabled operating model, which frees up capacity for pharmacists to spend more time on clinical programs and supporting our expanding pharmacy service offerings. We are projecting solid script growth benefiting from improved operating hours, increased access to lives and growth in specialty. We are integrating AllianceRx community-based specialty pharmacies and Shields under a new go-to-market strategy with a payer agnostic provider-centric approach. In addition, we have launched multiple programs across our pharmacy and U.S. healthcare business and continue to see engagement from payers and partners for clinical quality initiatives that leverage our integrated assets. Moving now to our U.S. Retail business. Gross profit growth will be driven by low-single-digit comp growth and continued margin improvement. We are creating significant value through category performance management, where assortment decisions should deliver at least $200 million of savings in fiscal 2024. We are accelerating our own brand penetration through innovation and increased points of distribution and display, our own brands have margins that are significantly higher than national brands. We are creating more value for consumers as we scale our e-commerce platform and evolve our store formats, including a new digital forward store concept and a health and wellness focused store with favorable early feedback on both concepts. Let me now hand it over to John to discuss our U.S. Healthcare strategy and profit growth drivers. John Driscoll: Good morning. As Roz and James outlined, while we’re confident in the range and scale of our healthcare business, we are disappointed with the pace of our path to profitability. U.S. Healthcare missed targets due to VillageMD and CityMD underperformance. Directly related to reduce COVID, cold and flu season and softer market demand. We’re taking immediate actions to drive improved profitability. We anticipate this year will remain a transition year as we take action to deliver value and drive profitability. We’re rightsizing our cost structure, through optimizing overhead and revenue synergies to better match market demand. We’re raising and accelerating synergy capture goals. We believe that we can enhance Village growth and value by focusing on gaining density in existing markets to accelerate VillageMD’s path to profitability and supporting the integration of our digital assets with our VillageMD platform, and we continue to enhance our Village management team. We’ve recruited Rich Rubino, a seasoned healthcare CFO, to be the Chief Financial Officer of the combined VillageMD Summit Business. Longer term, we’re implementing a high impact three-year plan to improve performance through an intense focus on operational excellence and cost optimization. Achieving our healthcare vision depends on each of our companies, delivering on their respective plans, and relentless execution of harvesting growth synergies across the Walgreens portfolio. We’re building a differentiated value-based care delivery model that successfully integrates pharmacy and medical care for a value-based care market that will more than double by 2027. Walgreens has a unique right to win, with our reach, consumer engagement, and enterprise investments in primary care, specialty, and care to the home. We continue to see the enhanced value of our individual healthcare assets connected to our core Walgreens pharmacy to create value for patients, providers, and plans. A great example of that is our quickly scaling clinical trials recruiting business. Next, let me turn to Summit Health, where we see opportunity to drive meaningful AOI in U.S. Healthcare. While we are obviously disappointed with the pace of unlocking the full value of Summit and CityMD, we expect Summit to contribute materially to profit growth in fiscal year ‘24. Leveraging WBA, we will invest in targeted marketing campaigns to increase the patient base at CityMD sites. Our continued focus on operational excellence and cost optimization should continue to improve growth and synergies from prior acquisitions. Finally, we are raising and accelerating the synergy capture goal from $150 million in 2027 to $200 million in calendar year 2026. Turning to VillageMD. Over the last few months, we’ve slowed the pace of clinic openings in new markets. As we’ve studied their performance, we have refocused our growth plans to leverage regional density to support more profitable growth. To achieve our strategic objectives of better engagement and lower cost of care in a more cost effective manner, we are launching new virtual and asset light models. We’ve expanded our marketing efforts to support patient panel growth in our clinics and are working with new leadership to accelerate cost control. We continue to be impressed by the performance of our more mature VillageMD markets risk performance and are focused on continuing to accelerate the conversion of our fee for service lives to our proven risk based model. VillageMD is a high quality care delivery model. As James mentioned, most of our newer VillageMD clinics are at an early stage of development. But if we focus on the performance of our more mature Medicare Advantage markets, where we have achieved an appropriate level of market density, including Arizona, Georgia, and Houston, VillageMD has demonstrated the ability to bend the cost curve. We will focus on replicating this performance in other markets, as we convert fee for service volume to our risk based model. And we will also leverage our integrated care models with pharmacy and our other healthcare assets across the U.S. healthcare business. As part of our refocused U.S. healthcare approach, we aligned our go-to-market products for health systems and health plans under one team of seasoned healthcare executives with some encouraging short-term sales results noted on the slide. In summary, Walgreens remains the independent partner of choice for health plans and health systems through the combination of our legacy pharmacy platform with our portfolio of health assets. Our portfolio consistently delivers better outcomes at lower costs for plans, systems, and patients, which we believe is well suited to meet the demands of a healthcare market that is quickly moving from fee for service to fee for value. While there is clearly work to be done, we now have the leadership, plans, an organizational structure in place to rapidly advance our priorities. Now let me turn it back over to James. James Kehoe: Thanks, John. Capital allocation priorities remain focused on core business investments, debt pay down, and our dividend. We will continue to pursue disciplined returns-based organic investment in our core business. And we are simplifying our portfolio to unlock value and provide financial flexibility. We are very committed to maintaining our investment grade rating and our dividend. Now, let’s take a quick look at the transformational cost management program. We are raising the cumulative 2024 savings target $4.1 billion and this is the sixth target increase since the program began. With $3.3 billion saved by the end of this year, we are projecting at least $800 million of savings in ‘24. Let me talk to a couple of the cost saving initiatives. We just completed an organization restructuring, which included transforming our headquarters to better align our resources with our strategic priorities. This led to the elimination of more than 500 roles, representing around 10% of our corporate and U.S. support office workforce. Our pharmacy of the future operating model will drive significant savings we’re optimizing the model through our micro fulfillment centers, tech enabled centralization of in-store activities and telepharmacy solutions. These initiatives will also elevate the role of the pharmacists and improve patient engagement. Finally, we will continue to optimize our locations and opening hours and expect to close an additional 300 locations in the U.K. and 150 locations in the U.S. As you have seen, we are accelerating our portfolio optimization to further simplify the business, we have fully exited from our Option Care Health position with overall proceeds of $1.2 billion since August 2022. Let me also highlight our recent monetization of AmerisourceBergen shares using a variable prepaid forward structure. Under the VPF approach, there is no EPS dilution until the contracts mature. We continue to receive dividends and we retain some share price upside. Please note that the remaining stake in AmerisourceBergen is worth approximately $5 billion. With that, let me now pass it back to Roz for her closing comments. Roz Brewer: Thank you, James. Before we kick off Q&A, let me sum up what you’ve heard. WBA has the right to win through our differentiated model and we have the right strategy in place. We are now entering the next phase of our healthcare transformation with aggressive actions in motion to improve profitability. We are addressing current challenges head on and moving at a pace to deliver long-term shareholder value. We have the scale. We have the skills. We have the sense of urgency. And we have the right plans to drive sustainable profit growth ahead. Now I’d like to open the line for questions. Operator? See also 15 Best Places to Retire in South Carolina and 16 Easiest Second Languages To Learn For English Speakers. Q&A Session Follow Walgreens Boots Alliance Inc. (NASDAQ:WBA) Follow Walgreens Boots Alliance Inc. (NASDAQ:WBA) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] And your first question comes from the line of Lisa Gill from JP Morgan. Your line is open. Lisa Gill: Thanks very much, and thanks for all the detail. But the first area I just want to focus on is around your U.S. Healthcare Business, there’s substantial growth as we think about going both into the fourth quarter and then into next year. John commented on the miss by both VillageMD and CityMD around performance, but also talked about utilization. We’ve heard on the opposite end where manage care is talking about utilization from a negative side. So can you help me to square that? One, when we think about VillageMD and we think about you know, your Medicare Advantage lives and what you’re seeing for utilization there? Is that a current headwind? And then, secondly, when you think about things like CityMD that’s not seeing respiratory or COVID visits, what do you think are the opportunities there? And is that part of the synergy pull forward that you’re talking about for the $200 million as we think about 2026? John Driscoll: Thanks, Lisa. You know, I think it’s utilization is actually, sort of, a mixed blessing for us. We’re seeing consistently solid performance in terms of bending the cost curve at Village. I think that positions us better and better as a managed care partner. We were hit with the CityMD utilization, I think that there we’re at the early stages of harvesting the embedded profitability of Summit and City, and the City hit on utilization in this quarter also hit our lab and ancillary business a bit. But we think that there’s an opportunity on both the value-based side to integrate some of the lessons from Village at Summit and City, because both of them have very high NPS. They are demonstrating the ability to reduce cost over time. And as we get at some of the cost synergies, I think you’re going to see a significant improvement, I mean, we are expecting a quarter-over-quarter improvement in healthcare EBITDA of 70% looking at Q4. So I think we’ve got opportunities on the cost side, but also on the value side to optimize our model. Operator: Your next question comes from the line of George Hill from Deutsche Bank. Your line is open. George Hill: Yes. Good morning, guys, and thanks for taking the question. James, I guess, a couple targeted at you with OCF running below the dividend through three quarters. And there’s lots of moving pieces that OP not expected to grow meaningfully next year. And then we know there’s the cash flow ABC. I guess, so can you talk A, how the company is thinking about the dividend? And B, as it relates to Rx reimbursement pressure, I guess, can you talk about what the early expectations are for calendar ‘24? And are we expecting, kind of, the leg down in pharmacy reimbursement pressure to look like prior years? Thank you. James Kehoe: Okay. Let me cover dividend first, and just — I want to emphasize in ’24, we are giving commentary that operating income will grow low-to-mid-single-digit. And we clearly have a lot of work to do on cash flow. And first one is EBITDA, so we see strong growth next year. And the second one is we’re building out incremental working capital programs and we’re significantly curtailing our capital expenditures. So I want to make it crystal clear, we are absolutely committed to the dividend, absolutely committed, both to the dividend and to our investment grade rating. And I would point out we did highlight specifically in the prepared comments that our stake in ABC is still worth $5 billion. So we — while we’re going through the short-term transformation, we do have plenty of firepower going forward......»»

Consumers with looming student debt repayments currently spend a large chunk of their discretionary dollars at Amazon, Walmart, and Target. Walmart is second only to Amazon in exposure to consumers who owe student loan debt, according to a Jefferies report.Julio Cortez/AP The student-loan repayment pause could finally end this fall.  That means consumers will have to direct more money away from retailers and toward repaying their loans. Jefferies analysts said that this could be a headwind for companies like Amazon, Walmart, and Target. Student loan repayments could be resuming as soon as this fall, and that means consumers will have less money for discretionary spending, whether that's eating out, taking in entertainment – or shopping.Amazon, Walmart, and Target stand to lose the most as consumers with student-loan debt cut back on spending, according to a new research note from analysts at Jefferies. The investment banking firm found that more than a third of student debt holders' discretionary dollars go to the three retail giants."The impending resumption of student loan payments could be a headwind to consumer spending ahead," the note said. Consumers with student debt spend around 18.58% of their discretionary spending at Amazon alone, according to consumer data company Numerator.The restart of student loan repayments could increase delinquencies and hit consumers' wallets just as the holiday shopping season begins this year, according to Retail Dive.Here are the 12 retailers that Jefferies says have the most exposure to consumers with looming student debt repayments, and what percentage of shoppers' discretionary spending goes to each company:Amazon — 18.58% Walmart — 11.76% Target — 5.96% Costco — 4.24% TJX Companies — 2.23% Sam's Club — 1.16% Dollar Tree — 0.82% Dollar General — 0.50% BJ's — 0.13% Five Below — 0.12% Ross — 0.09% Ollie's — 0.02%  In a separate report this month, UBS analysts said apparel sales, in particular, could take a big hit as borrowers pull back.Interest on student loan debt will start to accrue again in September, after a long pause that started at early in the pandemic. Payments would then resume the following month. Meanwhile, the US Supreme Court is expected to rule this week on President Joe Biden's plan to cancel up to $20,000 in student debt. Borrowers can prepare for the monthly repayments by looking into different payment options or adjusting their budgets.Read the original article on Business Insider.....»»

"We're going to see people not being able to buy food, not being able to pay the rent," a Social Security expert said of a potential default. US President Joe Biden.BRENDAN SMIALOWSKI/AFP via Getty Images The US could default on its debt as soon as June 5 if the debt ceiling isn't raised by then. Social Security, Medicaid, and SNAP could be among the first programs to go unpaid. That means retirees who rely on those programs could be the first to experience the consequences. The US could default on its debt in a matter of days — and retirees will be the among the first to experience the consequences.Treasury Secretary Janet Yellen warned Speaker of the House Kevin McCarthy on Friday that it's highly likely the government could run out of money to pay its bills by June 5. If McCarthy cannot reach an agreement with President Joe Biden to raise the debt ceiling — and get that agreement passed through Congress and signed into law — before that deadline, the aftermath could be catastrophic for millions of Americans. Moody's Analytics, for example, has previously estimated that even a short default could cause Americans to lose millions of jobs, and a Joint Economic Committee analysis found that a failure to raise the debt ceiling could cause mortgage and private student-loan payments to surge, along with costing workers $20,000 in retirement savings. And while a default is unprecedented, meaning it's impossible to predict exactly what could happen, the think-tank Bipartisan Policy Center released an analysis illustrating which federal programs could be the first to go unpaid in the event of a default, based on daily Treasury statements. At the top of the list are Social Security, Medicare, Medicaid, and SNAP, along with Supplemental Security Income (SSI) payments — all programs that retirees heavily rely upon.Missed payments from those programs could quickly lead to hardship for retirees. "The maximum from SSI that you can get is $914 a month. It will be really hard to get through a month with that much money, and then those who are able to get Social Security as well get a few hundred more dollars on average. It's really hard to stretch that money through a month. So at the end of the month, people are already often struggling to get by," Kathleen Romig, the Center on Budget and Policy Priority's director of Social Security and disability policy, told Insider."They may be putting off going grocery shopping, putting off picking up their prescriptions, waiting for that check to come the third of the month, and if it doesn't come, we're going to see real hardship," Romig continued. "We're going to see people foregoing medical care, we're going to see people not being able to buy food, not being able to pay the rent. They are truly living from check to check. And then something like this would be extraordinarily disruptive and harmful for this particular group of people."Social Security is the biggest federal program, with over 67 million Americans relying on payments. And, as Romig noted, oftentimes older Social Security recipients are not only relying on benefits from that specific program — they're relying on Medicare, SSI, and Medicaid, which are all programs that keep low-income seniors afloat and ensure they can afford healthcare, nutrition benefits, and other day-to-day expenses. "They're going to really suffer without those benefits," Romig said. "And if the stock market and bond market are roiling even before we hit default, then that means their retirement savings are also going to be declining. So even if it is possible to prioritize Social Security benefits, we can't insulate Social Security beneficiaries from some serious harm."'They're worried about how they're going to make ends meet'Even going into Memorial Day weekend without a debt-ceiling agreement, McCarthy indicated he still thinks it's possible to reach a deal. "Whenever you're able to get to an agreement, you got to make sure you print it, post it, then you got three days before you vote," McCarthy told reporters on Thursday. "We've got time, we're going to get this done."But lawmakers on both sides of the aisle aren't thrilled with the reports coming out of negotiations between McCarthy and the White House. GOP Rep. Garrett Graves, one of McCarthy's top negotiators, told reporters on Thursday that progress is "slow," and that "the White House continues to prioritize paying people to not work over paying Social Security benefits and Medicare benefits," referring to Democrats' unwillingness to bolster work requirements on federal programs.Meanwhile, the conservative House Freedom Caucus released a memo on Monday urging McCarthy to hold the line on GOP demands, like banning student-loan forgiveness and strengthening work requirements on federal programs — provisions Biden and Democrats are highly unlikely to accept.Still, every day without an agreement is a day closer to a default on the nation's debt — and older Americans could be the first to suffer the consequences. Yellen wrote in her Friday letter that "we will make more than $130 billion of scheduled payments in the first two days of June, including payments to veterans and Social Security and Medicare recipients." But after that, "our projected resources would be inadequate to satisfy all of these obligations.""They're worried about how they're going to make ends meet. I think there's just a lot of anxiety out there," Romig said. "A lot of people don't have emergency savings, an those people are going to feel this very acutely."Read the original article on Business Insider.....»»

Republicans have rejected Democratic proposals to lower the deficit. Democrats will blame them if the US defaults on the debt. U.S. Rep. Pramila Jayapal (D-WA), joined by Rep. Alexandria Ocasio-Cortez (D-NY), speaks at a news conference on banning stock trades for members of Congress, on Capitol Hill, April 07, 2022.Kevin Dietsch/Getty Images Republicans have refused to raise the debt ceiling without reducing the deficit. The US could default on its debt in less than a week unless Congress raises the debt ceiling. House Democrats blame this "reckless hostage taking" on Republicans. Republicans say Democrats are unwilling to negotiate spending cuts. House Democrats have flipped the switch.The US could have only until June 1 to raise the debt ceiling to avoid a default that would rock the global economy, Republicans have refused to raise the debt limit unless they can cut spending. House Democrats are blaming their Republican colleagues for rejecting Democratic proposals to reduce the deficit."The Republicans rejected $3 trillion worth of policies that could have gone towards deficit reduction," Rep. Pramila Jayapal, chair of the House Progressive Caucus, said at a Wednesday press conference after speaking with President Biden Tuesday night. On Tuesday, Rep. Matt Gaetz of the Freedom Caucus told Joseph Zeballos-Roig, a Semafor reporter, that he and his conservative colleagues "don't feel like we should negotiate with our hostage.""Who exactly is that hostage?" Jayapal asked. "It's the American economy. It's seniors, parents, kids, veterans, people with disabilities, teachers, the poorest Americans." "We will continue to reject and call out this reckless hostage-taking from extreme MAGA Republicans," she emphasized.The proposals the GOP rejected included ending oil subsidies, closing tax loopholes, negotiating down more Medicare drug prices a billionaire minimum tax, a corporate global minimum tax, and "raising taxes on large corporations from the outrageous cut that Trump instituted — all together $3 trillion in savings," Jayapal said.The GOP-controlled House narrowly passed a bill in late April that would raise the debt ceiling by $1.5 trillion, slash $4.5 trillion from the federal budget, increase work requirements on social welfare programs, ban student loan-forgiveness programs, and roll back earmarked pandemic spending. President Joe Biden has vowed to veto the bill, and McCarthy has refused any short-term debt-limit increase to give negotiations more time. Despite so-called "productive" meetings, the two have failed to negotiate deficit reductions that would satisfy Republicans.If they can't come to an agreement about how to lower the deficit and get Republicans to raise the debt ceiling, 2.6 million Americans could lose their jobs. Americans could each lose $20,000 in retirement savings and see their mortgage, small business, and private student-loan payments surge."Republicans want you to believe that there are only two choices: their extreme bill that would make you pay for tax cuts for the wealthiest, or default that pushes our economy into catastrophe," Jayapal added."Don't buy it. There are other options," she insisted, from Republicans joining Democrats in a discharge petition to force a vote to raise the debt ceiling, Biden invoking the 14th Amendment to override the debt ceiling, to Republicans agreeing to "any—any—revenue-raising policies so that it's the wealthiest and big corporations reducing the deficit by paying their fair share."With Republicans rejecting Democratic proposals, Jayapal said, "If we default and if we crash the economy, there is only one person to blame and that is the Speaker of the House Kevin McCarthy."Read the original article on Business Insider.....»»

A new report estimated that if passed, the bill to overturn Biden's student-debt relief could reinstate forgiven loans for 260,000 public servants. Rep. Virginia FoxxBill Clark/CQ-Roll Call, Inc via Getty Image The SBPC and AFT released a report analyzing the impacts of a GOP bill to overturn student-debt relief. The report said the bill would reinstate loans forgiven over the past year under PSLF. GOP Rep. Virginia Foxx rejected that idea during a hearing last week as Democrats said loans would be reinstated under the bill. Some advocates are sounding the alarm on possible consequences of a Republican bill to overturn President Joe Biden's student-debt relief.The House is scheduled to vote on Wednesday on a bill, first introduced in March, that would overturn Biden's plan to cancel up to $20,000 in student debt, along with immediately ending the recent payment pause. The bill was introduced using the Congressional Review Act — a fast-track tool that lawmakers can use to overturn final rules put in place by government agencies.However, the text of the CRA statute could suggest the GOP bill might do far more than block Biden's broad debt relief and the student-loan payment pauses. On Monday, the Student Borrower Protection Center and American Federation of Teachers released a report analyzing the impacts of the CRA — should it pass — on borrowers who received relief through, or are currently making payments toward, the Public Service Loan Forgiveness program, which forgives student debt for government and nonprofit workers after ten years of qualifying payments.That's because, as SBPC's Executive Director Mike Pierce said on a Tuesday press call, the text of the CRA itself  is "retroactive," meaning millions of borrowers who received debt relief through PSLF during the payment pauses risk having their loans reinstated.Specifically, a clause in the CRA states that "a rule that does not take effect (or does not continue) may not be reissued in substantially the same form," which Pierce said means that "any subsequent executive action that mirrors the policy rebuked via the CRA is also invalid.""This resolution will unwind debt relief already delivered to hundreds of thousands of public service workers across the country. This will happen because the seventh and eighth payment pauses also give credit towards Public Service Loan Forgiveness for each paused month covered by these executive actions," Pierce said, referring to Federal Student Aid guidelines that state paused payments will count toward PSLF progress as long as the borrower meets all other qualifications.SBPC and AFT's report estimates that as a result of that clause, as many as 268,660 borrowers in public service who received debt relief from September 2022 through March 2023 could have $19 billion in debt reinstated, based on PSLF data from Federal Student Aid. The report also estimates that two million public servants making progress toward payments in PSLF could lose "at least some progress toward relief."Still, while Democratic lawmakers said during a House education committee markup of the bill last week that payments would be reinstated under the legislation, chair of the committee Virginia Foxx rejected those statements."Unfortunately, radical advocacy groups whose sole mission is to see every last student loan transferred to taxpayers have put out untruthful claims about this legislation, scares student-loan borrowers, with zero evidence or historical precedent to rely upon," Foxx said during the markup. "These left-wing advocates are misleading borrowers by, among other things, telling them that they will have to make payments retroactively for the time student-loan payment was paused. That's just not true.""My Democratic colleagues are unfortunately amplifying this deceitful claim," she continued. "However, I want to be clear, nothing in this bill requires the Department of Education to break down the doors of borrowers like Biden's IRS army and forced borrowers to make retroactive payments, and nothing in this bill directs the department to take away the months spent in forbearance that count towards programs like Public Service Loan Forgiveness."Foxx's office did not immediately respond to Insider's request for comment on the topic.The legislation will likely pass the House due to the Republican majority, but it faces a trickier path ahead in the Democratic-controlled Senate and White House. The Office of Management and Budget said in a Monday statement that Biden will veto the bill if it makes it to his desk.Read the original article on Business Insider.....»»

The Biden administration said the President would cut his upcoming trip to Asia short and come home early to ensure a deal gets done in Congress. Traders work the floor of the New York Stock Exchange during morning trading on May 05, 2022 in New York City.Michael M. Santiago/GettyUS stocks dropped on Tuesday as the debt ceiling deadline quickly approaches with no deal yet to be had.President Joe Biden and House Speaker Kevin McCarthy were scheduled to continue their negotiations.Treasury Secretary Janet Yellen warned that "time is running out" on a debt ceiling agreement. US stocks traded lower on Tuesday as investor stress about the ongoing debt ceiling showdown outweighed the strength seen in mega-cap tech stocks.Alphabet and Amazon both surged more than 2%, while Microsoft jumped 1%. Apple stock was up about 0.5%. President Joe Biden and House Speaker Kevin McCarthy met at 3 p.m. today to further negotiate on a potential debt ceiling deal, and time is running out as Biden prepares to travel to Asia for a foreign policy trip. The Biden administration said the President would cut his trip short and come home early to ensure a deal gets done in Congress.Meanwhile, Treasury Secretary Janet Yellen warned that "time is running out" and that the debt ceiling showdown is already impacting Americans."Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the US economy," Yellen said in prepared remarks to a banking conference on Tuesday. "We are already seeing the impacts of brinksmanship: investors have become more reluctant to hold government debt that matures in early June."Also weighing on stocks on Tuesday were earnings results from Home Depot, which revealed weaker-than-expected guidance as consumers focus on smaller home improvement projects. Here's where US indexes stood at the 4:00 p.m. ET close on Tuesday:S&P 500: 4,109.90, down 0.64% Dow Jones Industrial Average: 33,012.14, down 1.01% (336.46 points)Nasdaq Composite: 12,343.05, down 0.18%Here's what else happened today:Quarterly 13F filings from top investment managers were filed on Monday. Here's what Warren Buffett, Michael Burry, Bill Ackman, Stanley Druckenmiller, and the Mormon church did with their money last quarter.Morgan Stanley's Mike Wilson warned that the debt-ceiling deadlock in Congress could be a "lose-lose event" for the stock market as volatility heats up. A slew of Wall Street banks warned that the eye-popping rally in tech stocks this year may be about to end as the potential for an economic downturn increases.RH stock plunged 8% after Berkshire Hathaway dumped its entire stake in the home furnishings company.Bank of America said the expected resumption of student loan payments would weaken the consumer later this year.In commodities, bonds and crypto:West Texas Intermediate crude oil fell 0.63% to $70.66 per barrel. Brent crude, oil's international benchmark, dropped 0.66% to $74.73.Gold fell 1.42% to $1,993.90 per ounce.The yield on the 10-year Treasury jumped 3 basis points to 3.54%.Bitcoin dropped 0.83% to $26,948, while ether rose 0.03% to $1,817. Read the original article on Business Insider.....»»

The US is hurtling toward the debt ceiling. Economic catastrophe could strike as soon as June 1, and Congress may not stop it. President Joe Biden walking past House Speaker Kevin McCarthy at a luncheon in March.AP Photo/Alex Brandon The US could breach the debt ceiling and run out of money to pay its debts as soon as June 1. Other debt-ceiling crises have been solved through bipartisan deals, but this one is tense. Republicans want major spending cuts, and Democrats want a no-strings-attached increase. When it comes to raising the debt ceiling and averting an entirely preventable economic catastrophe, the US is on a road to nowhere — and time isn't on Congress's side.Treasury Secretary Janet Yellen has said the country could run out of money as soon as June 1. The White House has said that breaching the debt ceiling could lead to a recession on par with the Great Recession — but unlike with the 2008 downturn, this time the government wouldn't have any money to help soften the blow.Republicans want to use the debt ceiling as an avenue to cut spending; House Republicans narrowly passed a bill that would slash housing and environmental programs, strengthen work requirements for accessing welfare, and ban student-loan forgiveness. Democrats have said that plan is dead on arrival in the Senate. But alternative routes of averting a crisis — like minting and cashing a trillion-dollar coin or using a constitutional amendment — haven't caught traction.Republican lawmakers have insisted that reducing federal spending is necessary to control inflation, even as data has suggested that inflation has cooled throughout the pandemic.The clock is ticking, and every day without an agreement to raise the debt ceiling brings millions of Americans closer to a catastrophic — and unprecedented — default on the nation's debt. The Joint Economic Committee has estimated that a default could cost Americans $20,000 in retirement savings as well as increase mortgage payments and private student-loan payments.On Tuesday, the president is set to meet with House Speaker Kevin McCarthy, Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, and House Minority Leader Hakeem Jeffries. A White House official previously told Insider that Biden would stress that Congress "must take action to avoid default without conditions.""If we go into recession, we can't count on fiscal policy to help us out here," said Mark Zandi, the chief economist at Moody's Analytics. "That makes it more likely that whatever downturn we suffer is going to be more severe and more prolonged. So we desperately want to avoid that."Moody's Analytics has estimated that even a short-term default could lead to a loss of 2.6 million jobs. It found that if the House GOP's plan were signed into law, the attached spending cuts could lead to a loss of 780,000 jobs.This might be the closest the US has gotten to a breach.This debt-ceiling debate is different from 2011's in a few waysIf the chaos surrounding the debt ceiling sounds familiar, that's because Congress experienced a similar debacle in 2011. House Republicans, who held the majority under President Barack Obama, demanded spending cuts in exchange for a bill that would raise the debt ceiling and avoid a default.Two days before the US was set to run out of money to pay its bills, Republicans agreed to raise the debt ceiling in exchange for a promise of future spending cuts, as seen in the Budget Control Act of 2011.Though that Congress came to an agreement at the last minute, dynamics in Congress now are quite different. The House speaker in 2011, John Boehner, united his party behind an approach to raising the debt ceiling, but McCarthy doesn't have the same support. McCarthy, who become the speaker after 15 votes in January, spent late nights persuading members of his own party to get on board with his legislation to raise the debt ceiling. He ended up changing his bill to appease some holdouts.His next major hurdle is getting the bill past the Senate, where some Republicans are working to defend the cuts."The way this is being treated is that if we pass this budget, people are going to lose their healthcare, people are going to lose their housing, and it's being positioned as congressional Republicans are heartless," Sen. JD Vance, an Ohio Republican, told Insider. "The more heartless thing to do would be to do nothing, to allow the inflation to continue to spiral out of control."Sen. Ron Johnson, a Wisconsin Republican, challenged the definition of spending cuts, suggesting that proposing "a little less of an increase" in spending didn't amount to a cut."What the House is doing in general is the minimum of what we need to do to get our fiscal house in order," he said of the legislation.Sen. Ted Cruz, a Republican from Texas, said on Wednesday: "The House bill reduces spending to the levels we had in 2022. The last I checked, 2022 was not a horrid apocalypse sweeping across our country." He added, "The astonishing proposition the Democrats want everyone to believe is that if we don't keep spending like it's a pandemic, there will be suffering and misery and cats and dogs will live together in sin."Additionally, Wall Street's response to the debt-ceiling crisis is different this time around. A New York Times report on Monday said that while the S&P 500 fell during the crisis in 2011, stocks haven't had a similar slide recently, likely because investors are banking on a last-minute deal in Congress.Some banks, like Goldman Sachs, have moved up the date they anticipate a default, suggesting that concerns about the lack of a debt-ceiling agreement could become amplified."I get it, the guys who day-trade may get a little skittish, but we have got to make the hard decisions that drive us toward fiscal responsibility," GOP Rep. Dusty Johnson told The Washington Post, adding, "We cannot avoid a crisis without a deal, and we cannot cut a deal without a partner."Daniel Pfeiffer, who served as a senior advisor to Obama, argued in a New York Times op-ed article published on Monday that Biden was right not to negotiate. The 2011 situation, he said, "left both sides angry about the result and was damaging for the country." He said that Obama's approval rating plummeted and that when a similar situation arose in 2013, the GOP's own approval ratings tanked."Allowing the Republicans to use the threat of default as extortion could cripple the remainder of Mr. Biden's presidency," Pfeiffer said. Even so, he added, this debt-ceiling crisis "seems much more dangerous" than the ones from the Obama years.Biden has options to avoid a debt-ceiling crisis that don't involve CongressTuesday's meeting between Biden and congressional leadership aims to break through the logjam.As the deadline grows closer and neither Democrats nor Republicans back down, the odds that one side will get its way dwindle."Ultimately, both sides are going to have to save face," Brian Riedl, a senior fellow and economist at the conservative-leaning Manhattan Institute, told Insider. "The president wants to be able to say that he beat back most of the Republican proposals, but Republicans need to come away having said they got something. And so the idea of a clean debt-limit increase is just not tenable. Everybody needs something to save face and say they won."Biden doesn't necessarily need Congress to solve this debt-ceiling crisis. Some options on the table include minting a $1 trillion platinum coin or invoking a clause in the 14th Amendment to declare the debt ceiling unconstitutional.While those two options would allow the Biden administration to avoid congressional drama and avert an economic catastrophe on its own, some officials haven't seemed thrilled with them. Yellen told ABC News on Sunday that "there is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills.""We should not get to the point where we need to consider whether the president can go on issuing debt," she continued. "This would be a constitutional crisis."Read the original article on Business Insider.....»»

Interested in simplifying your financial life? You’re not alone. After all, most people’s finances are too complicated. As a result, ... Read more Interested in simplifying your financial life? You’re not alone. After all, most people’s finances are too complicated. As a result, other parts of their lives get affected. Procrastination and stress are the results of a messy financial life. Your financial security, independence, and peace of mind can increase when you simplify your finances. In order to spend more time and energy on what truly matters in life, here are 26 tips for simplifying your financial life. 1. Make the switch to paperless billing. Like frosted tips and Beanie Babies, paper bills should be relegated to the 1990s. By going paperless with your bills, you can reduce clutter around the house — and even save some trees All the companies that you do business with make it easy for you to opt for electronic billing. This includes banks, credit card companies, cable TV providers, cellphone companies, and insurance companies. As a result, they sometimes offer bonuses, gift certificates, sweepstakes prizes, and other incentives to customers who opt for paperless billing to save money on stationery and postage. On the other hand, some companies charge you for paper statements. If you receive bills via snail mail, you could be paying between $2 and $10 for the unnecessary privilege. If you would like to opt out of receiving paper statements, you can log into your online account and go to the settings menu. Instead of receiving paper bills, enter an email address where you’d like to receive e-bills. That’s all it takes, and if you ever need a hard copy, just print it out. 2. Automate your bills. When possible, set up auto payments to simplify your finances. All of your monthly bills, from credit cards to utilities to insurance to loans, mortgages, and even rent, can be put on autopilot. Moreover, late fees and late payments won’t be an issue. That might seem like a priority. However, late fees typically range between $25 and $50. In addition to increasing account balances, late fees can negatively affect consumers’ credit scores as well. By entering your bank account information on the website of the service provider, you can often set up automatic payments for your bills. What happens if a business does not offer automatic payments? In your checking account or via your bank’s mobile app, you can set up recurring payments. 3. Bank and retirement accounts should be consolidated. Having one checking account and one savings account is sufficient for most people. It is a good idea to consolidate your various accounts into one checking account and one savings account if you have more. After all, do you really need 2 savings, 3 checking, and 4 separate retirement accounts? Your banking will be simplified without sacrificing service levels. Similarly, retirement accounts are subject to the same rules. As a result of previous jobs with 401(k) plans, you may have several 401(k) plans you would like to roll over into a self-directed IRA account. Besides reducing paperwork, this will also eliminate account fees, and make managing your retirement assets more convenient. 4. Create a 50/30/20 budget. The purpose of a budget is to show how you can spend your money from month to month. Creating a budget will help you keep your finances in check every month. You can also save money with a budget for your goals or emergency expenses. Thankfully, you don’t have to create an overly complicated budget. Case in point, the 50/30/20 budget. This simple budget rule, popularized by Senator Elizabeth Warren, is a great place to start for those just beginning to learn how to budget. The plan appeals to everyone who wants to pay their current bills, pay down debt, and start saving for the future at the same time. Simply divide your income into these categories; 50% is spent on necessities 30% for wants 20% goes to debt repayment and savings Another benefit? It’s flexible enough to allow you to use different variations to meet your specific needs. The 80/20 rule, for instance, can be tweaked for a stripped-down version. 80% of your income goes toward essentials and luxuries, while 20% is saved. 5. Redefine “enough.” Do you have everything you need or want? Does your life have “enough”? As a society, we are taught to believe that we deserve more because we are socially persuaded that we need it. In order to keep a possession current, relevant, and functional, you need to upgrade or update it regularly. It’s assumed that the more you spend, the more comfortable you are. But are you really comfortable? Is it enough for you? You can keep yourself sane by defining enough for yourself on a financial, physical, psychological, and moral level. Forget what everyone else thinks is “enough.” Stop keeping up with the Kardashians. Repeat after me. You are enough. 6. Combine your insurance. A single insurance company can provide you with both home and auto insurance, which can save you time and money. “It’s easier to review your policies with one insurer and see at a glance if your limits and deductibles are appropriate for your needs,” Penny Gusner, consumer analyst at Insurance.com, told Kiplinger. Esurance, Progressive, and Safeco, for example, impose only one deductible for claims involving both your car and home if a storm results in a tree falling and damaging both. According to Insurance.com, customers save 11.4% off the auto premium when they bundle their auto and home insurance together (9.6% if they bundle their auto and condo insurance, and 5% if they bundle their auto and renters insurance). There is usually a split between the two policies when it comes to the overall discount. Bundling two or more policies, like life insurance or coverage for an RV, motorcycle, or boat, can result in a bigger discount. Insurers may partner with one another to offer bundled discounts and coverage they don’t underwrite. It’s important to keep in mind that bundling doesn’t always result in savings, so you should look for policies separately as well as bundled. 7. Maintain a one-in-one-out policy. When you follow this policy, you will be able to control your spending, borrow (if possible) before you buy, and put an emphasis on experiences rather than possessions. As an example, you need to get rid of one shirt when you purchase a new shirt. If you want to control your consumption habits, this rule of thumb is helpful. You should donate your old jacket if you purchase a new one. Try borrowing an occasional or seasonal tool instead of buying it if you need to buy a new one. 8. Knock down debt. Eliminating high-interest debt is one of the best ways to reduce financial stress. If you pay off even one large credit card or loan, it can ease your worries, as well as reduce your monthly financial obligations. Furthermore, you can use the money you would otherwise spend on debt to pay off additional debt or take that dream vacation. Paying off debt can be accomplished by using a debt snowball or debt avalanche strategy. By using the debt snowball method, you list your debts by size and then pay the minimum on any debt with the smallest balance while paying extra on the rest. You start with the smallest debt, then move on to the next. Your life can become simpler, and you may feel accomplished if you are able to pay off your debts in full. In the debt avalanche method, you prioritize debts by interest rate, then pay extra money for the debt with the highest interest rate first, after which you pay the minimum on the remaining debts. As soon as that debt is paid off, you put extra money toward the next-highest debt. Using this method may take more time, but over time you will pay less interest on your loans. 9.  Reduce your credit card usage to just one. Credit cards are one of the best ways to earn rewards and take advantage of zero-interest rate promotions. As soon as the rewards and zero interest disappear, though, the cards are worthless. Focus on one credit card for credit scoring purposes, but keep them open for other purposes. Put away the rest of them and choose the one that offers you the most benefits. A single credit card makes managing spending and payments much easier than five or ten. 10.  Expenses should be paid annually or semiannually. While some bills are recurring, you can eliminate some by paying them annually or semiannually. Paying bills such as car and homeowner’s insurance every six months or once a year is an option. It is likely that you will qualify for a discount for setting up this kind of payment method. With just two bills, you will have two fewer monthly payments to worry about. It is likely that you will have to adjust your monthly and annual budgets in order to accomplish this. Even so, it’s always a good idea to review and adjust your budget. Additionally, if you pay in advance for your home and car insurance, you will receive a discount. Most insurance companies offer discounts that range from 6% to 14% if you pay in full instead of breaking your bill up into monthly payments. By spreading out your payments, you will also avoid paying a monthly finance or service fee that some companies charge. 11. You can reclaim your time by unplugging. As you know, getting rid of cable and your landline will save you money. In response, a growing number of people are streaming TV shows directly from television networks online and subscribing to more affordable services like Hulu or Netflix. When you watch only a few shows anyway, or want to cut down on TV time, this is the way to go. In addition, landlines are becoming increasingly irrelevant as people use their smartphones to communicate and entertain themselves. Consider this question: Which services aren’t necessary? By cutting the cord, you’ll be able to reclaim your time, while saving some money. 12. Hide your emergency fund. Savings and checking accounts are typically held at the same bank. This may work for rotating savings goals like that expensive smartphone you’ve been eyeing or your vacation. However, it won’t help your emergency fund. Emergency funds should not be easily accessible. Whenever you log into your online banking, you don’t want to see that large sum tempting you to use it “just once” for a non-emergency. Don’t put it at your bank; put it elsewhere. An online bank or taxable brokerage account may offer money market accounts or high-interest savings accounts. In an ideal world, it would earn maximum interest while being available whenever needed. Despite the rule that you should consolidate your accounts, your emergency fund is the exception. Don’t forget it, but keep it out of sight and mind. 13. Put your savings on autopilot. Saving money can be highly effective when you set it and forget it. It’s convenient because you never have to remember to transfer money from your checking account to your savings account. In addition, you won’t have a chance to spend the money before it disappears from your checking account. Setting up a recurring transfer from your checking account to your savings account each month — perhaps the day after your paycheck clears — is the easiest way to automate savings in just a few minutes. It can be worth automating this task even if you are only able to handle a small amount each month. Regardless of what happens, your savings will accumulate over time since you will save every month. 14. Instead of investing in individual stocks, invest in funds You can get rich investing in individual stocks, but it’s complicated too. Each stock in your portfolio needs research, purchase, tracking, and selling. In fact, the more you own, the more this resembles a part-time job. If you invest in mutual funds or exchange-traded funds, you will avoid all that hassle. Actively managed funds rarely outperform index funds since they are very rarely diversified across asset classes. The tax return process for funds is also much simpler. It can also be costly to prepare taxes for individual stocks, since they require a lot of tax-related documentation. 15. Don’t spend money you don’t have. This might sound harsh. Buying now, paying later and 12-month financing are scams. As The Motley Fool points out, BNPL can lead to overspending on items people could not afford otherwise if they had to pay upfront. For some people, this can lead to excessive debt. Close to a third of BNPL users had difficulty making payments, resulting in them skipping a bill to avoid defaulting on their plans, according to the Consumer Financial Protection Bureau (CFPB). One in four Americans (22%) who use BNPL regrets their decision immediately and wishes they hadn’t signed up, as a result. What’s the best way to get something you can’t afford right now? Save. As you save and wait, you can research all of your purchasing options and find the best deal. As a result, I either discover a better alternative or realize that I don’t actually need the item. 16. Go used. Don’t be afraid to buy used cars. New, fancy cars are often associated with prosperity, so this is a tough one for many people. Getting rid of your car as an object of status is a very liberating experience. In addition to the money you’ll save on monthly payments, you’ll also save money on the cost of premium gas, repair and maintenance parts, and insurance premiums. 17. Streamline lifestyle practices. What is the origin of your food? Do you gag at the smell of commercial cleaning products? Are you reusing and repurposing items, or do you toss them out? Life should be made easier by convenience. The result is that you end up wasting money and damaging the environment as well as your own health by replacing products frequently. Get back to life basics by growing your own food and making your own cleaning products, for instance. In the end, you’ll be able to provide for your family in a way that’s rewarding and fulfilling, and it won’t take you much time. 18. Spend only with cash or debit cards. Whether you’re looking for cash back or travel rewards, credit cards have tons of perks to offer. At the same time, credit cards provide plenty of temptation to overspend. According to USA Today, over 60% of credit card holders experience this issue. As a result, these cardholders are unable to pay off their credit card debt on time with their normal income, which leads to interest charges and increasing balances. Putting your credit cards away in a drawer and spending only the money you have is the best way to pay off your credit card debt each month. For spending and budgeting, you could use the envelope system. Alternatively, you could set up a checking account for discretionary spending and use your debit card only. 19. Set fewer goals. Having financial goals can be a great thing. Most of us plan to buy a home, pay for our children’s college, and retire. When you set too many goals at once, you can lose focus, and you won’t make any progress. Focusing on just a few objectives at a time can be more effective. In order to achieve your retirement goals, you should start saving early. The sooner you start saving, the easier it will be. Saving for a down payment on a house, paying off your credit card debt, or putting money aside to help pay for your children’s college may also be goals. Your best chance of making progress may come from focusing your attention on just one or two specific goals. Best of all? After you achieve your first goal, you’ll likely be inspired to set and accomplish new ones. 20. Focus on what brings in the most income. Multiple streams of income sound great in theory. But pursuing too many income streams can actually complicate matters. To me, having one primary and one secondary source at the same time is the best strategy. As an example, let’s say you work a demanding full-time job, run a blog, dabble with freelancing, and drive for Lyft on the weekends. Decide which of these side hustles best fits your lifestyle, and focus on it. It is likely that you will achieve more success if you simplify your financial life. 21. Reduce the number of subscriptions. There’s no denying the popularity of subscription boxes right now. The monthly subscription is like receiving a present every month, and who doesn’t like receiving gifts? But, here’s the catch. This is an impulse purchase disguised as a box. Most people don’t return the items, so they make it easy for you to do so. Keeping something you don’t need is easier than sending it back. So, while it may seem like a small amount, that $12 here and $25 there quickly adds up to an entire closet full of stuff we don’t actually need. Don’t stop there, though. If you rarely use any subscription or service, cancel it. This could be a streaming service you never watch or that gym membership you never use. By removing them, you’ll simplify your life and save money. And, it is easier to manage your finances if you have fewer payments to make. Thanks to tools like Trim, Rocket Money, and the Bobby App can can these subscriptions for you. 22. Don’t go big, go small. Relocate or downsize if housing expenses are causing financial stress for you. After all, it might be possible to improve your financial situation by taking a similar job in a less expensive area. In general, if your total housing expenses, including rent or mortgage, insurance, taxes, maintenance, and utilities, exceed 40 percent of your income, then you may be in financial hardship. Also, it’s easy to overbuy a house with credit if we leverage it to purchase a home. Buying a larger home means paying a higher mortgage, insurance, utility, and maintenance costs. Moreover, you’ll have to fill it with more junk. Take a look at a smaller vehicle as another example. Even though this is a big move, you may not need something that big if you own a large car or SUV. Besides being more expensive, it uses more gas, is harder to maintain, and is more difficult to park. If you have a family, you don’t need to go tiny. But try to find the smallest car that your family can comfortably fit in. 23. Invest automatically. In the process of paying off your high-interest debt, you might start thinking more about investing to build wealth. But what should you invest in? Getting help from friends and family might not be as easy as you think. It is possible that they will tell you to invest in stocks or real estate, but not how to choose a fund or allocate your assets. If you’re willing to accept algorithmic advice, anyone can now get free investment advice as well as automated investments and portfolio rebalancing. A robo-advisor may seem scary to novice investors, but the fact is that robo-advisors know more about investing than you do. You should find a robo-advisor that fits your budget and wealth. Many offer free options, and all automate your investments. 24. Start a fitness plan. Don’t mistake me for saying you need to join a gym. Exercise builds up over time. So, each step you take, every walk you take, every sit-up you do contributes to your overall well-being. Furthermore, physical health contributes to financial health. With a clearer, more mindful outlook, you’ll make better decisions, stay healthier (with fewer medical bills), and make better decisions. “One study showed that medical reasons may account for two-thirds of bankruptcies in the U.S. Even if that stat is skewed, we all know that medical costs can be really tough for the average family to handle,” Kate Underwood wrote in a previous Due article. “Keeping yourself healthy can prevent a ton of extra costs.” 25. Pay someone else. Making money sometimes requires spending money. You can save a lot of money in the long run by hiring a professional in a few areas of life. In the case of real estate or a side business, or if you have a lot of assets, a good accountant is invaluable. Ultimately, a good financial planner can help you create a budget, an investing plan, and a plan to deal with your student loans. You might consider hiring an electrician, plumber, or professional organizer to assist you with home repairs and decluttering, depending on your situation. 26. Say no sometimes. Whenever someone asks you to do something that is not in line with your values, priorities, or time constraints, say no! Ultimately, it’s up to you how you spend your time and money. However, if you say no to something, it doesn’t necessarily mean it’s for life. It could simply mean ‘not today.’ Keep in mind that every time you say ‘yes’ to one thing, you’re also saying ‘no’ to another. Think about what’s most important to you at the moment. FAQs Why simplify your financial life? Being intentional with your money begins with decluttering and simplifying. You should also be more mindful of what you consume. When you declutter and simplify your home, you’re likely to be motivated to buy fewer items. This will help you maintain a clutter-free home. The more you buy, the more money you save, the more debt you pay off, and the more money you spend on purpose. You can also keep track of what you have and find things more easily when you clear the clutter. If you avoid buying duplicate items or replacing things you cannot locate, you will save money. As you simplify, you are able to spend your money more wisely. It also reduces financial stress by giving you a greater sense of control over your finances. What are the benefits of clear financial life goals? Oftentimes, people feel rudderless when their financial life goals are unclear, which leads to feelings of insecurity, anxiety, and scattered thinking, especially when planning for retirement. Changing your mind through goal-setting is proven to change your brain. Furthermore, when highly motivated to achieve something, you begin to perceive obstacles as less important. The science also suggests you’re more likely to succeed if you keep regular track of your progress. Are you ever done saving? Simply put, no. Expenses such as home maintenance, vacations, and special occasions gifts should be easily covered by your savings account from time to time, but not unexpectedly. As well as regular savings, you need to pay off debt and replace your car’s tires in case of an emergency. Despite knowing these things will happen at some point, you should still prepare for them even though they may not happen at the right time. What is the best way to evolve your financial strategy as your needs change? There is no guarantee that everything will go according to plan, even with the best planning. It is natural for your life stage, preferences, and needs to change. Your financial plan should change when they do. At one moment, you prepare to launch your children into adulthood at another. Then you’re taking care of your aging parents. As your journey evolves, your financial plan must adapt as well. In order to avoid decisions that would jeopardize your most important previous or new goals, you can repeat scenarios that you conducted early in your planning. The best financial plans and processes adapt to you, not the other way around. The post 26 Ways to Simplify Your Financial Life – While Saving Astronomical Amounts of Money appeared first on Due......»»

Macleod: How Quickly Will The Dollar Collapse? Authored by Alasdair Macleod via GoldMoney.com, This article looks at the factors behind the growing rejection of the dollar for trade settlement purposes by non-aligned nations around the world. They no longer fear political or economic reprisals from America. The dollar’s monopoly was notably challenged by Saudi Arabia, which removed itself from the US’s sphere of influence to that of China and Russia. Consequently, peace has broken out throughout the Arab lands. But rising interest rates have destabilised western banking systems, which have added to the attractions of payment in China’s renminbi relative to maintaining bank deposits and investments in the currencies of the western alliance — particularly of the dollar. Foreigners hold $7 trillion of deposits and short-term bills and $24.5 trillion in bonds and equities. These balances are becoming surplus to their needs. The outlook is for US bank credit to contract further, which will drive interest rates even higher. More banks can be expected to fail. Foreigners are bound to become increasingly reluctant to hold dollars, which they will sell. Therefore, the question now is not how much will the dollar decline, but how rapidly.  Introduction We know that the Russia and China’s desire to do away with the dollar is coming true, due to factors beyond their immediate control. Increasing numbers of nations are now committing to accepting payment for cross border trade in currencies other than the dollar, despite US insistence that the only currency for pricing commodities, settling international trade, and therefore the reserve currency must be its own. We also know that since the Second World War, the US Government has acted robustly against dissenters to enforce its currency monopoly. Libya’s Ghaddafi and Iraq’s Saddam Hussein both proposed new currencies to free themselves from the dollar and came to a sticky end. But all monopolies eventually fail. Encouraged by signs that the dollar’s has now run its course, increasing numbers of nations are abandoning it. When the US was the world’s policeman, very few countries would have dared to challenge the mighty dollar. American foreign policy was driven by its battle against communism, protecting economic freedom for nations in its sphere of influence. But for the ruling elites around the world, America created distrust and resentment. These are the world policeman’s legacy. A seminal event, which westerners have mostly forgotten about, was the Asian crisis of 1998. China believes it was planned by the Americans for their own benefit. Here is an extract from an important speech by Major General Qiao Liang, strategist for the Peoples’ Liberation Army, to the Chinese Communist Party’s Central Committee in April 2016, when he laid down what has become China’s version of events: “What was the hottest investment concept in 1980s? It was the “Asian Tigers.” Many people thought it was due to Asians’ hard work and how smart they were. Actually, the big reason was the ample investment of U.S. dollars. “When the Asian economy started to prosper, the Americans felt it was time to harvest. Thus, in 1997, after ten years of a weak dollar, the Americans reduced the money supply to Asia and created a strong dollar. Many Asian companies and industries faced an insufficient money supply. The area showed signs of being on the verge of a recession and a financial crisis. “A last straw was needed to break the camel’s back. What was that straw? It was a regional crisis. Should there be a war like the Argentines had? Not necessarily. War is not the only way to create a regional crisis. “Thus, we saw that a financial investor called “Soros” took his Quantum Fund, as well as over one hundred other hedge funds in the world, and started a wolf attack on Asia’s weakest economy, Thailand. They attacked Thailand’s currency Thai Baht for a week. This created the Baht crisis. Then it spread south to Malaysia, Singapore, Indonesia, and the Philippines. Then it moved north to Taiwan, Hong Kong, Japan, South Korea, and even Russia. Thus, the East Asia financial crisis fully exploded. “The camel fell to the ground. The world’s investors concluded that the Asian investment environment had gone south and withdrew their money. The U.S. Federal Reserve promptly blew the horn and increased the dollar’s interest rate. The capital coming out of Asia flew to the U.S.’s three big markets, creating the second big bull market in the U.S. “When the Americans made ample money, they followed the same approach they did in Latin America: they took the money that they made from the Asian financial crisis back to Asia to buy Asia’s good assets which, by then, were at their bottom price. The Asian economy had no capacity to fight back. “The only lucky survivor in this crisis was China.” Whether Qiao was right in his assessment is not the point: this is what the Chinese leadership believes. And in early 2014, they became aware of US plans to stoke up dissent in Hong Kong, which led to student riots later that year. While America has tried several times to provoke China since then (trade tariffs, technology bans, the Huawei saga, Taiwan…), the only action China has taken is to defensively impose greater control over Hong Kong which was demonstrated by American action to be her weak point. Finally, China’s patience over the dollar appears to be paying off. It has not interfered with America’s global plans, beyond ensuring with Russia that the Asian continent is their joint fiefdom. But China’s economic tentacles are not confined to Asia. It trades everywhere, and its business and investment plans offer better prospects for all Africa, South America, and even Mexico. If it wasn’t for fear of American reprisals, their support for China and willingness to take its currency in payment would have already happened. But then America took a step too far in sanctioning Russia and leaning on Brussels-based SWIFT to cut Russia out of the dollar-based global payments system. NATO and the EU fell in line with the Americans, while Asia, numerically far larger in population, backed Russia. The Americans had miscalculated, and for Russia it was business almost as normal while the western alliance suffered soaring energy, commodity, and food prices. This triggered rising interest rates and now credit contraction, leading to an initial banking crisis six weeks ago with the failure of Silicon Valley Bank and Credit Suisse in Europe. In the last six months, the dollar’s trade weighted index has fallen 11%. Not only has America now demonstrated to every non-aligned nation that its dollar’s power is overrated, but by imposing sanctions on Russia it ended up destabilising its own financial system. And now, non-aligned nations have a free choice: stick with America, its dollar, and its discredited financial system, or deepen ties with China with her credible economic plan and whose economy is now growing. While there is an element of short-termism in this choice, for the longer-term China offers something which America, its World Bank, and regional network cannot. The World Bank dishes out some charity, which allows it to fill its glossy handouts with tales of doing good. But any emerging nation seeking credit gets it in dollars (which it has to repay, thereby maintaining demand for it) and has to satisfy a business-cum-political case for the loan. Dealing with China is different. Because her commercial interests align with those of her trading partners, China invests in infrastructure directly on its own or in partnership, building railways, highways, and communications. China can afford to do this because she has a savings driven economy. Furthermore, there are two currencies, onshore and offshore keeping offshore credit from migrating onshore. Therefore, the consequences for consumer price inflation of credit expansion are minimised. Arguably, a shaky banking system is proving to be the dollar’s final undoing. Nations who hesitated before settling trade in renminbi are no longer doing so, understanding that their dollar reserves and balances are now at risk. There is additional safety in their numbers, because there are too many of them to be picked off by America individually. And if the US banking system continues to crumble, the interconnectedness with the other western alliance currencies is also at risk. Other than those in the American camp, central banks are also re-evaluating their reserve policies. We have seen them add to their gold reserves, which is the same thing as selling dollars. According to the IMF, total foreign reserves fell by the equivalent of one trillion dollars in 2022, with the dollar content alone falling by $600bn. Renminbi in reserves at the year-end were only $298bn equivalent, so presumably they will be added to. But is there really a need for currency reserves? The only case that can be made is for exchange rate and crisis management. Extending swap lines is inflationary, and a tool deployed only between the six major central banks — the Fed, Bank of Canada, Bank of England, the ECB, Bank of Japan, and the Swiss National Bank. It’s an elite arrangement that excludes the other 149 central banks. They only need credit liquidity to settle their trade in other currencies. Therefore, a large proportion of dollar reserves held by central banks, which the IMF puts at $6.471 trillion, is becoming available for sale. To this must be added dollars held by private sector actors in the nostro/vostro correspondent banking system. The end of the petrodollar’s monopoly In so far as the public is aware, the dollar’s hiatus kicked off last December, when President Biden visited Saudi Arabia, followed by President Xi. The difference in their reception said it all, with Biden accorded a low-key welcome while Xi was honoured with all the Arab pomp and ceremony Muhammad bin Salman could muster. It was at Xi’s meeting that the Saudis agreed to accept payment for oil in renminbi. These were merely the latest in a long line of developments. In 2014, a director of one of the major Swiss gold refiners told me that they were working round the clock recasting LBMA 400-ounce bars into the new 99.99 Chinese kilo standard. Bars from the Middle East, many of which appeared to have come out of long-term storage, were being returned to their owners recast to the new kilo standard. The only conclusion is that nine years ago the Arab world saw the future for their wealth being bound up more with China and Asia than with the Europeans and Americans. Coincidently, that was when America was believed by China to be stoking up trouble in Hong Kong, and provoking Russia into taking Crimea. Further confirmation of how the geopolitical plates were shifting came in 2018 when President Putin and MBS high-fived at the G20 conference in Buenos Aires. From their body language it was clear that there was a confidential understanding between the two leaders and that they were working together. And in the five years since, the determination of Europe and North America to ban fossil fuels entirely has confirmed the foresight of the Arabs who nine years ago were recasting their gold bars into the Chinese standard. By promising to do away with oil and gas on a rapidly shortening timescale, the West has offered the two Asian hegemons an open goal. Russia, Iran, and Saudi Arabia between them have nearly all the cheap cost oil and have a high degree of price control over global energy markets. You can tell that America has now lost its influence over the Middle East because peace has returned to the region. Saudi Arabia is mending fences with Iran, Assad of Syria is expected to visit Riyadh shortly, Qatar and Bahrain are resuming diplomatic relations, and the first round of Yemeni peace talks have been successfully concluded. But America is not happy. William Burns from the CIA recently flew to Riyadh seeking a meeting with MBS, presumably to see where the CIA stood in the light of developments and to reconnoitre the situation. The nuclear attack submarine USS Florida transited Suez, in support of the Fifth Fleet and is presumed to be on its way into the Gulf. Clearly, America’s intention is to escalate tensions, with a threat to attack Iran, whose nuclear programme is well advanced as the excuse. But realistically, the Americans are powerless. And if they do decide to attack Iran, they would also make enemies of the entire region — as MBS surely made clear to William Burns. Other than security matters, the big issue is over currencies. Of course, the Gulf Cooperation Council members will still accept dollars. But America now has a banking crisis, the Fed itself is deeply in negative equity along with the other major central banks, and foreign holders of dollars have too many for future trade conditions. The alternative is China and renminbi It was reported this week that China’s GDP grew by 4.5% in the first quarter of this year, headlined by a recovery in consumer spending with retail sales growing by 10.6% in March alone. And while the west’s financial analysts’ attention is usually directed towards consumer activity first and foremost, everyone else knows that China has a savings driven economy, which allows credit to drive industrial investment without consumer prices inflating.  There is an understandable fear that China’s demand for commodities will keep prices high at a time when America and Europe will enter recession on the back of contracting bank credit. Furthermore, there has been a lack of new mine discoveries and capital investment in commodity extraction, suggesting that commodity and energy supplies will remain tight. But as yet, in China statistical evidence that credit is driving capital formation is yet to emerge.  Indeed, the pause in overall capital investment is consistent with China switching its strategic emphasis from its export trade to America and Europe to developing Asian markets. Furthermore, American manufacturers are reassessing their supply chain arrangements in the current geopolitical atmosphere. But when it comes to choosing currencies, all the non-aligned nations supplying China know that her plans go far beyond domestic manufacturing with an ambition to bring about an industrial revolution throughout Asia. That is in their minds when they contrast receiving payment for exports in dollars to be lodged in the unsafe US banking system, compared with renminbi lodged in a state-guaranteed Chinese bank. And it is also in their minds when they compare the economic prospects for China compared with those of America and its close allies. Even America’s allies are becoming unsure of their commitment to dollars. France recently accepted payment in renminbi for liquid natural gas. Other members of the European Union are plainly sitting on the fence, aware that to cut themselves off from the largest economy in the world which is growing while America’s is not, is ill-advised. Furthermore, Europe has direct rail links across the Eurasian continent not just to China, but also to the entire continent. Shortly, they will connect directly to the Indian sub-continent as well, which is now officially the world’s most populous nation. Even the British cannot afford to follow Washington’s lead and restrain trade relations with China. Trade imbalances are set to increase for America and much of Europe anyway. National accounting identities tell us that in the absence of changes in savings behaviour, a budget deficit leads to a matching trade deficit — the twin deficits syndrome. As contracting bank credit undermines the US economy, the US Government will face declining tax revenues, increasing welfare costs, and soaring borrowing costs. The deficit on trade will increase in lockstep with the budget deficit— only this time, the balance of payments will almost certainly increase with the trade deficit because foreign exporters are unlikely to retain their dollar payments. For the US Government and us all, it is likely to become a two-pronged headache. The first is that foreign demand for US Treasuries will not only disappear, but they will turn sellers when the funding requirement is rising. Secondly, with global trade payments migrating to renminbi and China’s export trade continuing to thrive on filling America’s increasing trade gap, she will be cast as the villain of the peace. And any attempt by the US Government to introduce yet higher trade tariffs and bans on Chinese technology will not remedy the situation. It must be acknowledged that a consequence of China’s economy expanding while America’s slumps could turn America’s current sabre-rattling over Taiwan into outright conflict. Assessing the impact of dollar liquidation There are two elements of dollar liquidation to consider, commencing with liquid bank deposits, certificates of deposit, Treasury, and commercial bills etc. with maturities of less than one year. According to the US’s Treasury International Capital statistics, at end-December these amounted to $7,074bn in credit liabilities due to all foreigners. This is the immediate amount that potentially hangs over foreign exchange markets. At the same time, US residents have liabilities to them in foreign currencies of the equivalent of only $384bn. The ratio of foreign owned dollars to US owned foreign currency is 18.4 times. Put another way, this is the approximate imbalance between potential dollar selling by all foreigners and the ability of US buyers to absorb it by selling their foreign currency in return for dollars. On the face of it, this differential could fuel a rapid fall in the dollar’s exchange rate against foreign currencies. It is also possible that a bank will buy in dollars for its own book and creates credit in a foreign currency in favour of the dollar seller. But that activity is likely to be limited to branches of foreign banks in New York with access to the relevant foreign wholesale credit markets and assumes they would wish to buy dollars. But the most likely method to stop a sliding dollar would be either for the exchange stabilisation fund to intervene, which would reduce broad money supply when the Fed would be struggling to stop it contracting further; or for the Fed to seek cooperation from its swap line partners to buy dollars and sell their own currencies in return, which is highly inflationary. This leads us to consider the outlook for interest rates and how foreign perceptions of financial risks might change, particularly with regard to systemic risk in the US banking system. We know that a weakening currency tends to lead to higher interest rates. And that rising interest rates might be expected to support the dollar’s exchange rate. But there is the danger of a negative feed-back loop, whereby risks to the dollar’s exchange rate increases along with interest rates. This is because rising interest rates will destabilise the US economy and government finances, leading to higher budget and trade deficits. And portfolio assets, defined as being of more than one year’s maturity will fall in value. The chart above shows how foreign holdings of long-term securities have been inflating in recent years on a quarter-to-quarter basis, mainly due to an increase in foreign private holdings. In January, private and public sector holdings totalled $24,548bn. And though choppy, there now appears to be a declining trend. These figures are in addition to foreign owned non-financial assets, such as real estate, farmland, factories, and offices. US ownership of foreign long-term securities totals $14.263 trillion, of which $10,875bn is in corporate stocks. It should be noted that in the majority of cases, foreign securities are held in dollar-priced American Depository Receipts (ADRs), so that their disposal does not result in foreign exchange transactions, unlike a foreign disposal of a dollar-based asset which does. But commercial bank credit in major jurisdictions has stopped growing or is even contracting while demand for credit continues to increase. The consequence is that interest rates will continue to rise, due to this imbalance of supply over demand. There is little that central banks can do about it without debasing their currencies. And because they are under pressure to ensure the funding of their governments’ increasing deficits, they will be forced to accept the market’s pricing of credit. That was the experience of the 1970s. While everyone’s attention is being misdirected to forecasts of CPI inflation, they appear to be unaware that inflation is not the immediate issue. It is the shortage of bank credit, which is now driving interest rates, not inflation expectations. Accordingly, the outlook is for yet higher bond yields which means that all financial asset values will fall further. And as they fall, the highly financialised US banking system will be undermined by both investments held on their balance sheet and by collateral held against loans. But this outlook is not confined to dollar markets and is shared by all other western financial centres. As these dynamics become obvious to investors, a global liquidation of financial assets is bound to accelerate, with the exception perhaps of China’s financial markets which are set on a completely different course, and Russia’s which have been completely cut off from global investment flows. In a general portfolio liquidation, the imbalance between foreign investment in long-term assets and the US ownership of foreign investments will drive relative currency outcomes. In dollars, it is a ratio of $24,548bn to $14,263bn, or approximately 1.72 times. But for foreign exchange purposes, probably less than a trillion dollars are being held denominated in foreign currencies, with the balance in ADRs. When an ADR is sold, there is no foreign exchange transaction involved, unlike selling of foreign owned US securities. Therefore, a general portfolio liquidation would see an overwhelming excess of dollar selling by foreigners compared with foreign currency liquidation by Americans. Assuming that foreign holders reduce their dollar exposure and at the margin buy renminbi, the fall in the dollar relative to the renminbi could be unexpectedly sudden and substantial. At least some of the dollar liquidation is likely to fuel energy and commodity prices, whose supply is in many cases too limited to support stockpiling on any scale. Gold which is likely to be bought because it is still legal money in nearly all foreign jurisdictions. It would mark a foreigner-driven flight out of unanchored credit into physical commodities due to increasing counterparty risk. The only offset to these negative implications for the dollar’s future is likely to come from other members of the western alliance. As major foreign holders of US Government debt, they can be relied upon to attempt mutual currency support. Doubtless, the Fed and its five partner central banks will increase their swaps to that end as well as to shore up the dollar itself. But these actors are in the minority measured by the quantities of dollars held, and their attempts to rig foreign exchange markets will only make things worse. We must therefore conclude that with the evidence pointing to foreign selling of the dollar, that this selling could quickly escalate. Consequently, dollar liquidation by foreigners will lead to significantly higher interest rates which can only be lessened by the expansion of central bank credit. And that expansion can only come from the Fed because commercial banks are tapped out, seeking to contain their losses and reduce their balance sheet leverage. And if the Fed resorts to the printing press through currency swaps or by other means, the dollar will have had it anyway. Russia’s position The Russian economy appears to be doing remarkably well during the current conflict with Ukraine. Taxation and government debt are lower than in any other major economy, and with a few workarounds, the export trade continues in surplus. The conflict in Ukraine has been a financial burden, but not enough to destabilise Russia’s economy. Payment flows have been diverted from dollars into Chinese yuan, permitting Russian ex-pats around the world to continue to use their credit cards. And Bangladesh has been paying Russia for its Rooppur nuclear power plant construction in yuan via a Chinese bank with access to China’s cross-border interbank payment system. As we have seen so many times in previous cases, sanctions against Russia are proving to be utterly pointless. While the yuan payments route deals with the current situation, we can be sure that Russia will want to have a payment medium under its own control. It is to that end that on Putin’s behalf Sergey Glazyev is working on a proposal for a new trade settlement currency for the Eurasian Economic Union. The indications are that it will be based on gold, and it is likely from what Glazyev has publicly written that the rouble will move onto a gold standard of sorts as well. The immediate benefit to Russia’s business community is that current interest rates of over 10% will fall substantially. It compares with a consumer price inflation rate of 3.5%, but that is heavily distorted by previously high CPI inflation rates. Nevertheless, anything that reduces interest rates in this lower inflation environment will encourage the growth in credit to maximise economic potential. The key to it is for the value of credit to be anchored to gold to introduce permanent price stability. Only then can rouble interest rates decline to a few per cent permanently.  The rouble would then be in a position to challenge a fiat yuan as a payment medium. And with Russia’s new relationship with the Gulf Cooperation Council members, no doubt a gold-backed rouble would be readily accepted by the Saudis and others for energy payments, even in preference to yuan. The negotiations between Russia and China on this point are likely to be tricky. But given that we know China has massive undeclared gold stocks anyway, talks can be resolved in the interests of a stable monetary relationship between the two hegemons. Of more importance perhaps, is the question of at what gold value the rouble will be exchangeable for notionally or actually, given that Putin’s unfriendlies face a financial, banking, and fiat currency crisis likely to drive fiat values for gold considerably higher as they rapidly lose purchasing power. Tyler Durden Fri, 04/21/2023 - 16:20.....»»

Speaker of the House Kevin McCarthy said on Monday that a debt ceiling vote is imminent, and Republicans are still demanding cuts. House Speaker Kevin McCarthy holds the speaker's gavel high after winning election as speaker of the House early Saturday morning.Win McNamee/Getty Images House Speaker Kevin McCarthy said a debt ceiling vote will come in weeks in Monday remarks. McCarthy said if Biden doesn't come to an agreement with the GOP, it could lead to the first default. Republicans want to attach spending cuts to a debt ceiling package, while Biden wants a clean raise. House Speaker Kevin McCarthy has laid down the debt ceiling gauntlet, following months of Democrats and Republicans circling the looming crisis.In Monday remarks at the New York Stock Exchange, McCarthy hammered in on his desire to meet with President Joe Biden to negotiate a deal to raise the debt ceiling. While the speaker met with Biden in February on the issue, Biden has remained adamant since then that he will not use raising the debt ceiling — and avoiding a catastrophic default on the nation's debt — as a bargaining chip. But McCarthy has refused to sign off on a clean debt ceiling deal — one that doesn't also include spending cuts — and he said during his remarks that Biden will be responsible should the country default on its debt this summer."The longer President Biden waits to be sensible to find an agreement, the more likely it becomes that this administration will bumble into the first default in our nation's history," McCarthy said. "Let me be clear, defaulting on our debt is not an option," he added. "But neither is a future of higher taxes, higher interest rates, more dependency on China, an economy that doesn't work for working Americans. Let me be clear. A no-strings attached debt limit increase will not pass."The Biden administration has maintained that it wants a clean debt limit raise, with no addendums or further cuts attached to the package. Treasury Secretary Janet Yellen told Reuters that she was open to looking at ways to reduce the deficit alongside Republicans, "but it can't be a condition or precondition for raising the debt ceiling."But that seems to be exactly the GOP's plan, as Republicans reportedly prepare a package proposal that would ban student loan forgiveness and put stricter work requirements on food stamps.The stakes are high: Even a short default would result in 1 million Americans suddenly jobless, alongside a mild recession, according to estimates from Moody's Analytics. The Joint Economic Committee has found that, if a default occurs, Americans might see their private student-loan payments skyrocket up and monthly mortgage payments surge by $150 a month — as well as lose out on $20,000 in retirement savings. McCarthy confirmed during his remarks that the House will vote on a bill to raise the debt ceiling through next year "in the coming weeks," which will keep the government at 2022 spending levels and limit spending growth over the next ten years to 1% annual growth. Still, Republicans are on a tight deadline to get a bill to the floor before they go on recess again in May — especially with Democrats unwilling to budge on their stance that raising the debt ceiling should be clean and bipartisan.Massachusetts Sen. Elizabeth Warren said in a statement following McCarthy's speech that he "went to Wall Street to spread Republicans' message to billionaires and corporate executives: they want hardworking families to pay the cost of keeping the government up and running, while corporations get away with paying as little as possible in taxes – and they're willing to hold our entire economy hostage to get it done.""House Republicans' proposed budget cuts threaten economic disaster and American jobs, all to protect billionaires and giant corporations. Independent analysis from Moody's shows congressional Republicans' budget cuts could throw 720,000 to over 2.5 million Americans out of work. That's a non-starter," she said. "President Biden must hold firm on behalf of working families, and insist Republicans raise the debt limit swiftly and cleanly as they did time and time again under President Trump."Read the original article on Business Insider.....»»

With federal student loan debt totaling about $1.75 trillion in America, people are spending more than ever on debt payments. ... Read more With federal student loan debt totaling about $1.75 trillion in America, people are spending more than ever on debt payments. This kind of debt has forced many to delay major purchases and significant life changes like starting a family. With so many people struggling to pay off their debt, nervous about what an inflationary economy or medical emergency could mean for their finances, the question of student loan forgiveness is especially relevant. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2023 hedge fund letters, conferences and more Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. One consideration of a student loan forgiveness plan is its effect on the stock market. We’ll explore that question in this article. Key takeaways The student loan forgiveness program is unlikely to be like the stimulus money during the COVID-19 pandemic. Some experts viewed the stimulus checks as an indirect cause of the meme stock rallies and increased investment in speculative assets. President Biden’s student loan forgiveness program would help poor and middle-class families who could use financial relief. It’s believed that young people will benefit from the plan because student debt payments have held many back from investing in real estate and starting a family. The Most Recent News on Student Loan Forgiveness In August of 2022, President Biden announced he was ready to deliver on a $300 billion student loan forgiveness plan. Biden outlined how the program would cancel up to $10,000 of federal student debt for most borrowers and up to $20,000 for Pell Grant recipients. The press release from the White House estimated the program would provide aid to over 43 million borrowers. That figure included an estimated 20 million borrowers who could see the remaining balance of their federal student loans canceled. According to the same press release, 87% of the funds allocated through the program would go to those earning less than $75,000 per year. The White House designed the program to aid those who need it most, so individuals with an annual income over $125,000 and households making over $250,000 are not currently eligible. However, through a series of lawsuits, the program has yet to go into effect. Appeals have taken Biden’s loan forgiveness plan all the way to the Supreme Court, which heard oral arguments for the case in February 2023. Analysts expect the court to reach a decision by June of this year. How Will The Student Loan Program Impact The Economy? One rationale for student loan forgiveness is that it will put more money into the economy by canceling people’s debt. Some people will have their debt eliminated, while others will benefit from lower monthly payments. Biden’s plan includes provisions to cap monthly payments for undergraduate loans at 5% of borrowers’ discretionary income. The White House estimated this would lower the average annual student loan payment by over $1,000 for current and future borrowers. Student loan debt has negatively impacted many young folks for years. College graduates with student loans have had to delay home ownership, deal with a lower net worth when applying for credit, and have less money overall to spend. Freeing up a few hundred dollars would mean those who benefit from the program have more to spend, which could stimulate the economy. Increased spending could mean anything from getting into real estate to finally going on that big trip. We can’t ignore the investment boom we’ve seen in recent years, as apps like Robinhood make it easier than ever to trade stocks. It will be worth paying attention to trading platforms to see if they attempt to target younger demographics, especially if the Supreme Court upholds Biden’s plan. How Will Student Loan Forgiveness Impact The Stock Market? Many experts wonder how student loan forgiveness will impact the stock market. During the pandemic, stimulus money partially funded the meme stock rallies. However, that doesn’t mean we should automatically assume student loan forgiveness will impact the stock market similarly. How student loan forgiveness could help the stock market With less money needed to repay debt, households could spend more on discretionary purchases. This could improve earnings for companies and boost investor confidence. Another positive for the stock market could be that those who felt they couldn’t afford to invest due to monthly debt payments may have some freed-up money to put towards investing and planning for the future. Why student loan forgiveness could have a minimal impact Student loan forgiveness is different than receiving a stimulus paycheck. Having less debt doesn’t necessarily motivate someone to invest their money in the stock market like receiving a check might. Financial relief could mean folks no longer have to scrape by or stress when paying for groceries and utilities. But whether they’d start putting money toward speculative assets doesn’t track for everyone. Many who will benefit from the program may have paused debt payments since the pandemic. This could suggest spending habits won’t change significantly if a debt forgiveness plan goes into effect. It’s also worth pointing out that the bottom 50% of American adults, in terms of income, own less than 1% of stocks. Theoretically, loan forgiveness could lead to poorer Americans having the financial bandwidth to invest in stocks, but whether they’d do so in practice remains to be seen. Spending habits can be challenging to adjust. Whether a loan forgiveness program would make stock ownership in America more equitable is a question many have posed, but for which we’ll likely have to wait for an answer. Student Loan Forgiveness vs. Stimulus According to research from the Harvard Business School, an estimated $100 billion of the roughly $800 billion from the stimulus checks made it to the stock market. Though this may seem inconsequential within the capitalization of the whole stock market, it still represents small and unexpected shocks. The government sent three rounds of stimulus checks where individuals received a total of $3,200 through a check or direct deposit into their bank accounts. Student loan forgiveness would be different from stimulus money because it would relieve many Americans in dire need of financial assistance. President Biden’s plan currently targets poor and middle-class Americans, suggesting the money would mostly be used for necessities rather than investing in speculative assets. The stimulus checks contributed to a surge in cryptocurrency and meme stock rallies. There was much more money in the markets, and predicting what would take off next was impossible. Student loan forgiveness would likely be more limited in its impact. What’s Impacting The Stock Market Right Now? Despite the potential positive impact of student loan forgiveness, we can’t ignore other factors that impact the stock market more. The biggest issue that has loomed over the stock market this past year is inflation, which has only recently subsided after the Fed’s most aggressive rate hike campaign in decades. These rate hikes undoubtedly hurt the stock market, as every announcement led to sell-offs and panic. Even companies with solid financials have felt pain since the rate hikes started. Consumer spending habits are also changing as mass lay-offs in the tech industry and fear of recession encourage people to save. Where Could The Student Loan Forgiveness Money Go? With fewer debt payments, people will have more money to spend. This begs the question, what will people do with their extra money? Some estimates suggest that those with student debt forgiven will have an additional $150 to $300 in their monthly budgets. Here are some possible options for where the student loan forgiveness money could go: Managing soaring inflation. Inflation is a natural part of the economic cycle and impacts the prices of everything from rent to utilities. A student loan forgiveness plan could offset the burden of higher prices caused by inflation, which will inevitably happen in the future. Paying off other debts. As helpful as the federal loan relief program would be, it’s important to remember that folks still have other types of debt (credit cards, car loans, and so on). Starting planning for retirement. For some, loan forgiveness could be the perfect opportunity to start planning for retirement. Investing. Many people felt like they couldn’t invest while still having student loans. Traveling. Some financial relief could lead to an increase in travel and international tourism. Purchasing real estate. Many recent college graduates have put off investing in real estate to first deal with making their student loan payments. Starting a family and settling down. Many young people have hesitated about starting families and settling down because of debt holding them back. Only time will tell how borrowers would handle this kind of opportunity. How Should You Be Investing? If you benefit from the student loan forgiveness program, you may wonder how to invest your money to take advantage of this unique opportunity. If you’re new to investing, then it’s understandable you may have some concerns about the stock market right now. Check out some of our other articles on investing and different financial products. Have a sense of your time horizon and risk tolerance, as well as how much money you’re ready to put into investing. Remember not to invest more than you’re prepared to lose. Final Words Federal student loan forgiveness would mean some borrowers can become debt-free and no longer be restricted by monthly payments. In other words, more money could enter the economy if people put aside less money to repay debt. We won’t fully know how people invest their new money until a student loan forgiveness program is made active, but we can guess it would positively impact the stock market. The post Will Student Loan Forgiveness Help the Stock Market? appeared first on Due......»»

Americans could lose retirement savings and see mortgage payments surge if the US defaults on its debt. But Congress still isn't acting. House Speaker Kevin McCarthy.Win McNamee/Getty Images The US could default on its debt this summer if Congress doesn't raise the debt ceiling. But Democrats are accusing the GOP of holding the debt ceiling "hostage," as they have yet to put forth a concrete plan. Republicans have floated a range of areas in which they would support cutting spending to raise the debt ceiling. Americans could lose millions of jobs and be plunged into a recession as soon as this summer if Congress doesn't step up to finally address the debt ceiling. And right now, there seems to be no viable movement towards fixing the looming crisis. It's been over three months since Republicans took over a majority in the House, and from the start, they vowed to use raising the debt ceiling as leverage to achieve spending cuts on Democratic priorities. Meanwhile, Democrats want a clean raise, with no spending cuts attached.While some members and factions in the GOP have released wish lists for cuts, party leadership has yet to come out with a unified plan.The House Freedom Caucus and GOP budget committee, for example, put forth a series of items in which they would support cutting spending to raise the debt ceiling, and GOP lawmakers even released the names of over 500 bills last week, each of which highlighted an area to cut funding, like environmental and racial equity programs.Texas Rep. Chip Roy also highlighted some spending cut possibilities on Twitter on Monday, like "ending the silliness of bankrolling the World Health Organization."—Chip Roy (@chiproytx) April 3, 2023 But Democrats are still waiting for a concrete plan to save the US from defaulting on its debt. "Republicans are STILL holding the debt ceiling hostage," Congressional Progressive Caucus Chair Pramila Jayapal wrote on Twitter. "Their obstruction could result in millions of jobs lost, paychecks missed for workers across the country, and a stop on loans for small businesses. They must stop playing games with people's livelihoods."At the same time, some centrists are reportedly formulating a secret plan to address the crisis on their own — to the chagrin of the White House. Politico reported that a "rogue band" of Democratic moderates have begun a crafting an emergency plan with centrist Republicans, although it doesn't have clear specifications yet. However, that plan does not have the seal of approval from the Biden administration or Democratic leaders, per Politico, since it could undermine Democrats' messaging around inaction on raising the limit and their push to raise it without conditions. Democratic lawmakers have previously highlighted the catastrophe for Americans that will likely result should Congress fail to raise the debt ceiling. A report from the Joint Economic Committee in March said that Americans could lose $20,000 in retirement savings and private student-loan borrowers could see their monthly payments surge if the country defaults on its debt.Republicans have also floated prioritizing what bills the country will pay should it reach that point. Treasury Secretary Janet Yellen has said that that approach is "just default by another name." But Speaker of the House Kevin McCarthy and his GOP colleagues are adamant that President Joe Biden meet with them to negotiate an agreement. In a letter to the president last week, McCarthy wrote that he is "incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out-of-control government spending alongside an increase of the debt limit.""Mr. President, simply put: you are on the clock," McCarthy wrote. "It's time to drop the partisanship, roll up our sleeves, and find common ground on this urgent challenge."Read the original article on Business Insider.....»»

The US could potentially default on its debt in a few months, plunging the country into recession and causing millions to lose their jobs. House Speaker Kevin McCarthy.OLIVIER DOULIERY/Getty Images House Speaker Kevin McCarthy sent a letter to President Joe Biden saying it's time to tackle the debt ceiling. The US faces a potentially disastrous default in just a few months, and the GOP wants major spending cuts. Biden has insisted that raising the debt ceiling should be bipartisan and not tied to cuts. As the US inches closer to a default on its debt, Kevin McCarthy has some stern words for the president on how to avoid that outcome.On Tuesday, the Republican speaker of the House sent a letter to President Joe Biden urging him to negotiate spending cuts to raise the debt ceiling. McCarthy and Biden met to discuss the topic in February, but since then, Biden has remained adamant that raising the debt ceiling, and keeping the US on top of paying its bills, should be a clean — and bipartisan — deal. McCarthy and his colleagues disagree. They have vowed to use raising the debt ceiling as leverage to achieve their own priorities, like major spending cuts, and they want Biden to come to the bargaining table before the country defaults. The White House did not immediately respond to Insider's request for comment on the letter. "With each passing day, I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out-of-control government spending alongside an increase of the debt limit," McCarthy wrote in his letter."Your position—if maintained—could prevent America from meeting its obligations and hold dire ramifications for the entire nation," he continued.—Kevin McCarthy (@SpeakerMcCarthy) March 28, 2023Democrats are still waiting for a concrete plan from Republicans on what exactly they want to cut to raise the debt ceiling. Republicans have floated using debt prioritization — where the government would prioritize what payments they would make or not make should default come — as one route to avert a widespread crisis. But Treasury Secretary Janet Yellen has said that approach is just default by a different name."What's critical is that we maintain our commitment to pay the government's bills — all the government's bills — when they come due," Yellen said at a House Ways and Means committee meeting. "And if we don't do that and think that there is some shortcut around it that will avoid economic chaos, we're kidding ourselves — because not paying the government's bills will produce economic and financial collapse."The conservative House Freedom Caucus has also put forth a plan to raise the debt ceiling only if Congress passes legislation to, among other things, block student-debt relief and cut spending for environmental programs. The White House attacked components of the plan last week.A report last week from the Joint Economic Committee detailed the range of consequences for Americans should the US default on its debt. For example, the report said Americans could lose $20,000 in retirement savings, new homeowners could see their monthly mortgages increase $150 a month, and private student-loan borrowers could experience a $23 monthly increase to their payments.A Moody's analysis found that even enacting the GOP's spending cuts to avert a crisis could cost the economy 2.6 million jobs, and lead to a recession in 2024. A short default would lead to 1 million jobs lost, and a recession by the end of the year; a longer one means 7 million Americans out of work. "Mr. President, simply put: you are on the clock," McCarthy wrote. "It's time to drop the partisanship, roll up our sleeves, and find common ground on this urgent challenge. Please have your team reach out to mine by the end of this week to set a date for our next meeting."Read the original article on Business Insider.....»»

Millennials Dominate Insolvencies In Canada As Credit Card, Student Loan And Other Debts Pile Up As US millennials distinguish themselves as the 'buy now, pay later' generation, their Canadian counterparts are leading the way when it comes to insolvencies, according to Ontario-based insolvency trustee firm, Hoyes Michalos, which performs an annual "Joe Debtor" analysis. According to Doug Hoyes, millennial Canadians have been dealt a generational losing hand, as debts from credit cards, high-interest loans and tax debt, and debt owed from the country's taxable financial support during the pandemic known as the Canada Emergency Response Benefit (CERB). "I think there’s a whole bunch of whammies that have hit millennials," said Hoyes. "The CERB was the final straw that broke the camel’s back." The 2022 Joe Debtor study examined 2,700 personal insolvencies filed in Ontario. Hoyes Michalos says 49 per cent were filed by millennials aged 26 to 41, even though they make up 27 per cent of adult Canadians. The study found that on a per−population basis, millennials were 1.4 times more likely to file for insolvency than people in generation X aged 42 to 56, and 1.7 times more likely than baby boomers aged 57 to 76. Insolvent millennials were on average 33 years old and owed an average of $47,283 in unsecured debt. -Canadian Press According to Hoyes, many people didn't set aside taxes when they received CERB and other pandemic-related relief funds. Now, a flood of young Canadians have found themselves insolvent and unable to continue paying down their various debts.  Hoyes says the millennials have been given a bum rap, and didn't enjoy the same societal benefits as older generations - whose wages kept up (better) with inflation, and went to college when tuition didn't require student loans - allowing graduates the ability to enter the workforce and start saving and investing right away, as opposed to having to service large debts in addition to pulling off a house. He also says there's no 'safety valve' like there use to be. "Anything goes wrong like a pandemic, or you lose your job or you get sick or you get divorced and boom, there is no safety valve there," said Hoyes, who added that filing for bankruptcy is an option to eliminate debts, however most people end up working with insolvency trustees to file proposals to manage their debt. "It becomes an affordable way to eliminate the debt, and that’s why we’re seeing more and more millennials resorting to consumer proposals," he said. "They really have no other choice." According to Winnipeg-based credit counselor Sandra Fry, many young people are looking for ways to manage debt without declaring bankruptcy. "Unfortunately, a lot of people out there are living on the edge of their affordability," she said, adding that inflation is "really squeezing Canadians in general from all sides." Millennial clients she’s dealt with lately have often had variable interest rate mortgages, and rate hikes “caused huge strain on their budget because their payments just went up like crazy.” Dave Locke, 31, lives with his wife in Coquitlam, B.C., east of Vancouver, and the couple sought Fry’s help when their mortgage payments jumped dramatically in the middle of a costly renovation. Locke, who works for a real estate brokerage, got into the housing market at a young age having worked in the oil and gas industry after high school. He ended up buying a home in Coquitlam with his wife Tara, who works in labour relations, and the Bank of Canada’s rate hikes eventually saw their monthly mortgage payments jump 40 per cent. The couple had a construction loan with their bank to fund the renovations, and as interest rates climbed and the price of construction materials ballooned, Locke realized something had to give, even with their relatively high combined incomes. -Canadian Press "I’m still paying the full balance," said Locke. "I’m just not paying any additional interest." He says that while it's embarrassing to be in so much debt, "it's just the way it goes." "You have to kind of swallow your pride." Tyler Durden Mon, 03/27/2023 - 19:20.....»»

Student Loan Lender SoFi Sues Biden Admin To End Payment Pause Extension Authored by Katabella Roberts via The Epoch Times, A major banking institution and federal student loan refinancing company has called on a federal court to end the Biden administration’s pause on student loan payments, arguing that the moratorium has no legal basis. San Francisco-based SoFi Bank and SoFi Lending Corp.—a student loan refinancing company—sued the Department of Education (DOE) on Friday, according to a complaint (pdf) filed in the District Court for the District of Columbia. That complaint asked that President Joe Biden’s latest extension of the student-loan payment pause be deemed “invalidated and set aside” or, at a minimum, that the DOE be ordered to require repayment by borrowers who are not eligible for student-debt cancellation. It also asked that the court issue a permanent injunction preventing the administration from “enforcing, applying, or implementing the eighth extension of the loan moratorium.” Biden announced in November that his administration would extend its moratorium on student loan repayments, interest, and collections through June 30, 2023, marking the eighth extension. In its filing with the court, SoFi Bank argued that the moratorium has no legal basis and has cost the bank, along with its refinancing business, millions of dollars in profits. Specifically, SoFi Bank and SoFi Lending Corp. said the pause violates the Administrative Procedure Act (APA) because the department failed to follow notice-and-comment procedures, through which the administration should have first sought the public’s input or comment on the program. Headquarters of the American online personal finance company SoFi Technologies Inc. in San Francisco in June 2021. (Google Maps/Screenshot via The Epoch Times) SoFi Says Loan Refinancing Business Declining Additionally, they argued that Biden does not have the authority to continue extending the moratorium under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 because it provides “limited authority to relieve transitory burdens for federal student borrowers who are temporarily unable to make payments on their loans due to active military service or national emergencies.” The HEROES act allows the DOE to grant waivers or relief to recipients of student financial aid programs under Title IV of the Higher Education Act of 1965 in connection with a war or other military operation or national emergency. “But the eighth extension applies to all federal borrowers in the country, not just those suffering hardship as a result of the current phase of the pandemic,” the SoFi complaint says. “Indeed, the eighth extension does not even attempt to redress harm from the pandemic at all, but rather to alleviate ‘uncertainty’ caused by the debt-cancellation litigation—a justification that the Act does not recognize or allow.” SoFi claimed that the loan moratorium has caused its federal student loan refinancing business to “decline dramatically” by approximately $9 million to $11 million in total revenues and $6 million to $8 million in profits since the eighth extension went into effect. SoFi expects to lose $40 million to $45 million in total revenues and approximately $25 million to $30 million in total profits if the latest extension remains in effect through August, the company said. ... Read more here...   Tyler Durden Tue, 03/07/2023 - 15:10.....»»

No matter how long you have been married or how many anniversaries you’ve celebrated, you’re sure to know that you’re stronger together than you are apart. Retirement savings are no different. When it comes to retirement planning specifically, they still need to keep an eye out for ways to manage it as a couple — […] No matter how long you have been married or how many anniversaries you’ve celebrated, you’re sure to know that you’re stronger together than you are apart. Retirement savings are no different. When it comes to retirement planning specifically, they still need to keep an eye out for ways to manage it as a couple — even if a couple keeps some aspects of their finances separate. In order to make retirement as enjoyable as possible for you and your spouse, here are some things to consider. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. A Couple’s Guide to Combining Retirement Accounts Your retirement accounts cannot be combined with your spouse like your joint checking account. The reason? 401(k) accounts are linked to an individual’s employment at a company. Therefore, only those individuals can enroll and contribute. What IRAs? As the name implies, these are “individual retirement accounts.” In other words, the account only has one owner. There is, however, a caveat. Retirement accounts allow spouses to designate the other as a beneficiary. Your spouse cannot contribute to your plan if he or she was named a beneficiary. However, if something were to happen to you, your account and funds would be accessible to them. When one spouse passes away, the other spouse would inherit the account and could roll it into their own 401(k) or IRA. In short, both of you are taken care of in the future by making each other the beneficiaries of your retirement accounts. Spousal IRAs are also available. Despite sounding like joint retirement accounts, they aren’t. The purpose of spousal IRAs is more for unemployed or low-income partners. Basically, spousal IRAs are traditional or Roth IRAs that a working spouse contributes to in the name of their non-working spouse with the intention of using the funds for their retirement. Individuals can typically contribute to IRAs only if they have earned income. Also, spousal IRAs can only be applied for by couples filing joint tax returns. The Benefits of Opening a Separate IRA for Each Spouse The best way to receive the highest tax benefits is to maximize your contribution to both IRAs while you can. There is no difference in contribution limits between traditional IRAs and Roth IRAs: Individually, you can contribute $6,500 to your IRA in 2023 if you’re younger than 50, and $7,500 if you’re older than 50. If you both open accounts, you can contribute a total of $13,000 each year. You can also contribute $1,000 each per year as a “catch-up” contribution if either of you is over 50, bringing your combined contribution to $15,000. There is an income limit for Roth IRAs, so people earning above this threshold can make reduced contributions. In turn, those making above that threshold are ineligible. Those whose income falls between $138,000 and $153,000 will be phased out starting in 2023. In the case of married couples filing jointly, the amount is $218,000 and $228,000. IRAs can be opened at brokerages such as Charles Schwab or Fidelity. If you prefer robo-advisors, check out Wealthfront, SoFi, and Betterment, which construct and manage customized portfolios for investors based on their age, risk tolerance, and investment goals. Besides traditional and Roth IRAs, each offers retirement planning tools to help you and your spouse prepare for retirement. How Couples Can Plan Together for Retirement Managing retirement plans as a couple may not be straightforward, but there are ways to make it work. Here are a few tips for combining retirement forces to make your golden years as fulfilling as possible. As a couple, discuss your retirement goals. To build a healthy financial plan, you need to talk openly and honestly about your finances. Getting your significant other to understand your retirement goals is a great first step. During your retirement years, do you plan to stay in the same house? Perhaps you would like to travel internationally once a year or travel across the country in a camper. You should also decide how much you want to retire with. The retirement number for each couple depends on their standard of living, but a Retirement Calculator can give you an idea. To find your target number today, subtract your current income from your estimated Social Security benefits, and divide the result by 0.04. Based on your numbers, you can calculate how much you can withdraw safely to make your retirement last as long as possible. Establish a retirement date for both of you. When will you and your partner retire? If you are under age 59 ½, you cannot withdraw penalty-free from retirement plans like 401(k)s and IRAs. With that in mind, putting some of your retirement funds into a taxable brokerage account that you can access at any time might make sense if you or your partner plan to retire earlier than 59 ½. You might think it would be best if both of you retired at the same time. But depending on your circumstances, you might want to retire separately. The size of Social Security benefits can be also affected considerably by being able to earn for a few more years during your peak earning years. By retiring early, you could lose out on this money. It is also important to consider whether both of you are eligible for Medicare. You might want to consider holding on to your job until you are eligible for Medicare if one of you is eligible and the other is not. Additionally, a 2019 study by Boston College’s Center for Retirement Research found that households with two incomes don’t save more for retirement. In most dual-earner households, only one member has a 401(k). The study suggests that dual-earner households with only one saver are saving less than they should. You shouldn’t assume that saving money through work is enough just because one of you does it. Consider making bigger 401(k) contributions if one of you does not have access to an employer’s plan. Choose an investment option and determine your contribution amount. Your retirement plans, goals, and needs need to be discussed as a couple. At the same time, couples disagree over how much to save for retirement and when to retire their partners. When these issues are not addressed, retirement plans can be derailed. It is particularly true if savings amounts are not calculated together. The only way to make sure you and your partner can enjoy your retirement is to talk with each other and come up with a plan. Ideally, you should decide on a budget amount that you both can afford and stick to consistently. However, there is no need for both of you to follow the same set of rules. But, if your company offers 401(k) plans with company matching, you should contribute the minimum. Each account is unique, so you should keep this in mind. As such, compare them carefully to see which one offers the most advantages. For instance, lower management fees and a greater variety of investment options. The better of the two should be prioritized. And don’t copy each other’s investments. You can better diversify your overall portfolio if you know what your partner invests in. Having trouble choosing a retirement plan? Well, here are some joint retirement accounts worth exploring. However, before moving on to a different retirement vehicle, it is ideal to maximize one type of retirement account first. By doing so, you will get the maximum benefit from the retirement account. Also, making the most of individual retirement accounts can be done in a variety of ways. From Roth IRAs to 401(k)s, here are the specific benefits and strategies for each. 401(k) plans Retirement plans sponsored by employers are available only to employees, so you are the only one eligible to enroll. You can make your spouse a beneficiary, but they won’t be able to make contributions. When both of your 401(k) plans are maxed out, you can defer taxes as a couple. The money you contribute to a 401(k) account is tax-deferred until you retire and begin withdrawing it. Contributions to 401(k)s, 403(b)s, most 457 plans, and Thrift Savings Plans will be limited to $22,500 in 2023, up from $20,500 in 2022. Roth IRAs and Traditional IRAs Whether a traditional or Roth IRA is right for you depends on your personal circumstances. However, there is one universal truth. An individual retirement account, such as a traditional or Roth IRA, can only be owned by one person. Although you cannot have a joint IRA account, you can designate your partner as a beneficiary, so that if you pass away, their funds would be distributed to them. Is it possible for married couples to combine their IRAs? Unfortunately, no. However, if both of you are interested in making the most use of IRAs, each of you can open an IRA and contribute up to $6,500 annually, for a combined $13,000. It’s important to note that some couples may not be able to deduct the full amount of their traditional IRA. The amount depends on their income and whether they are covered by a retirement plan at work. Those filing as singles will have an income phase-out range of $138,000 to $153,000 in 2023. For married couples filing jointly, it’s $218,000 and $228,000. If only one is covered by a retirement plan, the deduction is reduced if their modified AGI is more than $198,000; the deduction phases out at a modified AGI of $208,000. Spousal IRAs In IRS rules, a spouse without income or employment can fund an individual retirement account called a spousal IRA. Be aware that IRAs are not specifically designed for spouses. Instead, the rule permits nonworking spouses to contribute to a traditional IRA or Roth IRA as long as their spouse is working. Under spousal IRA rules, individual retirement accounts are not co-owned. The working spouse owns an IRA under his or her own name, and the non-working spouse owns an IRA under her or his name. The accounts may have been opened before they got married, while they were married and both working, or by the non-working spouse. In 2021 and 2022, spouses contributed the same amount to an IRA as any other individual: $6,000 per year. The the limit increased to $6,500 in 2023. In 2021 and 2022, the annual contribution limit for people 50 and older was $7,000 and increased to $7,500 in 2023. As per the IRS, “Each spouse can make a contribution up to the current limit.” For 2023, spousal IRA contributions will be limited to $13,000 for couples where one spouse works and $15,000 for couples over 50. Each account’s contribution limit is determined by its individual annual IRA contribution limit. Brokerage Accounts A brokerage account is not technically a retirement-only vehicle. However, you can surely use one (or several) to fund a joint retirement. In brokerage accounts, you can use the same funds as in 401(k)s and IRAs. Despite not offering tax benefits, these accounts offer the following benefits: When you withdraw your investment earnings in retirement, you will not be taxed on them. The money can be accessed or withdrawn at any time without additional penalties. Also, you can own a joint brokerage account with your partner equally. So, if money is moved or sold among some accounts, the other owner must also approve any transactions. In other accounts, though, one account holder can make a decision without the other’s approval. Choose the best health coverage. For families, health insurance is expensive. Based on a survey by the Kaiser Family Foundation, the average annual premiums for employer-sponsored health insurance in 2022 were $22,463. In the event that you and your spouse have access to health insurance through your work, you’ll need to decide whether to keep your own individual plans or join together under one plan. What if you have children? They can be covered under just one parent’s plan or under a family plan. In fact, a growing number of employers are tiering their coverage options. “Employees plus children,” for example, is often a cheaper category than “employees plus spouses” or “employees plus family.” The annual premiums for each option can be reduced by your employer’s incentives, such as HSA deposits for high-deductible plans. Large companies generally charge a $100 spousal surcharge per month. Ensure that you know the deductible and out-of-pocket maximum. If one spouse has better dental and vision coverage than the other, consider those options as well. Be sure to check for niche benefits, such as fertility treatments, mental health treatment, and special needs therapies. You should also make sure your preferred doctors are included in the Finally, consider your family’s frequency of seeking treatment. The best choice for your family may be a high-deductible policy that is eligible for an HSA if your family has a few ongoing medical issues. In general, these policies have lower premiums than preferred provider organizations (PPOs). Those who are eligible for a family HSA-eligible high-deductible plan will have to meet the deductible before the plan begins paying out benefits. For 2023, self-only HSA contribution limits are $3,850 and family contribution limits are $7,750. Pay attention to taxes. A married couple may file their federal income tax return jointly or separately. By extending several tax breaks to couples who file jointly, the IRS strongly encourages most couples to file joint tax returns. While most married couples should file jointly, there may be a few instances in which it is better to file separately. Advantages of filing jointly. Filing a joint tax return with your spouse has many advantages. When calculating their taxable income, joint filers receive one of the largest standard deductions each year. A couple filing jointly can usually qualify for multiple tax credits, including: Earned Income Tax Credit American Opportunity and Lifetime Learning Education Tax Credits Exclusion or credit for adoption expenses Child and Dependent Care Tax Credit Tax deductions and taxes are generally higher for joint filers, which allows them to earn more income and still be eligible for certain benefits. Consequences of filing your tax returns separately. Tax benefits are typically reduced for couples who file separately, on the other hand. It is possible that filing separate tax returns will result in more taxes. The standard deduction for married taxpayers filing separately in 2022 will be $12,950, compared to $25,900 for those filing jointly. As of 2023, single filers and married persons filing separate returns will have a standard deduction of $13,850, joint filers will have a standard deduction of $27,700, and heads of households will have a standard deduction of $20,800. Many of the tax deductions and credits mentioned above are automatically disqualified if you file a separate return from your spouse. In addition, separate filers usually have a smaller deduction for IRA contributions. They also cannot take the deduction for student loan interest. When filing separately, capital loss deductions are limited to $1,500, instead of $3,000 when filing jointly. When you might file separately. You may be able to save on your tax return by filing separately in rare circumstances. You and your spouse may not be able to claim most of your expenses in 2022 if you or your spouse have a large amount of out-of-pocket medical expenses to claim. Because the IRS only lets you deduct costs that exceed 7.5% of your adjusted gross income (AGI), if you and your spouse have high AGIs, it can be difficult to claim most of your expenses. Suppose you have $10,000 in medical expenses and $50,000 in income. This would be in compliance with the 7.5% threshold ($10,000 ÷ $50,000 = 20% of your income). In contrast, if both of you make $135,000, you cannot claim these medical expenses ($10,000 ÷ $135,000 = 7.4% of your income). If your incomes are not the same, filing separate returns may allow you to claim more medical deductions by applying the threshold to only one income. The standard deduction must be taken by both spouses when filing separately, or itemized deductions must be claimed by both spouses. The standard deduction cannot be taken by one spouse while the itemized deduction is taken by the other. If both spouses paid for the expense, each deduction can only be used by one spouse when itemizing deductions. If the total deduction claimed by both spouses does not exceed the total deduction, deductions can be split between spouses filing separately. Make your spouse a beneficiary. Unfortunately, there are no options that automatically operate as joint retirement accounts, despite the fact that there are many ways to start saving for retirement. The best way to prevent this is to make your spouse the beneficiary of your retirement account or make him/her the power of attorney for your account. That means your accounts and the money in them would be accessible to the other person even if one of you died.   FAQs What is the average retirement income for a couple? There is no simple answer to this question. In order to determine how much money you will need in retirement, many factors need to be considered. Among these factors are your age, health, lifestyle, and where you intend to reside. People who are young and healthy may be able to make do with less money than those who are older and have health problems. Nevertheless, the amount of money you need will also depend on your lifestyle. The amount of money you will need depends on your lifestyle, for example, if you plan to travel the world or enjoy a luxurious lifestyle. You should speak with a financial advisor to determine how much you will need for retirement. In order to create an effective retirement plan for you, they will take into account all the unique circumstances that you face. For a couple, what is a good monthly retirement income? This is another question that cannot be answered in a one-size-fits-all manner. A person’s age, health, lifestyle, and where they intend to live all play a role in what is a good monthly retirement income. A few general guidelines can, however, be followed. To be able to retire comfortably, you should aim to have at least 70% of your pre-retirement income each month. You would need at least $3500 per month in retirement income if you bring in a combined income of $5000 each month with your spouse. It is important to note that this is just a general guideline. There is a possibility that you will need more or less money based on your exact circumstances. Is it possible for both spouses to contribute to a 401(k)? A 401(k) account can only be contributed to by one spouse. The employee’s 401(k) plan is tied to his or her employment with the company offering the plan. It is possible, however, for a spouse to be a beneficiary of the plan. An inherited 401(k) can be rolled into an IRA or 401(k) of the spouse if the original plan holder passes away. Furthermore, 401(k) plans are individual plans, with each account being contributed to by only one individual – along with their employer, in some cases. In 2023, the maximum 401(k) contribution is $22,500 ($30,000 for those age 50 or older). Based on those numbers, a married couple can each contribute $22,500 a year to a 401(k) plan, for a total contribution of $45,000. How many IRAs can a married couple have? IRAs can be contributed to by each partner of a married couple filing jointly. However, there is a limit. Both IRA contributions “may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less,” according to the IRS. The annual contribution limit is $6,500, so the total limit is $13,000.A $1000 “catch-up” contribution is available to those over age 50. In addition, Spousal IRAs can be traditional or Roth IRAs. Roth IRAs do not offer tax-free investments. Instead, the money comes from taxable income but can grow tax-free, so when you retire, you don’t have to pay taxes on the money taken out of the account. Although contribution limits vary depending on your tax filing status and income, they are typically the same as with traditional IRAs. What are the best ways to provide an income for a couple that will last their entire lives? There is only one guaranteed option: purchasing an annuity. You will receive an income for the rest of your life from an annuity or insurance company. And, with a guaranteed lifetime income rider will provide payments for as long as you both live, no matter how long that may be. For example, a couple aged 60 who wants to retire at 65 buys an annuity for $500,000 with a lifetime income rider. For the rest of their lives, they would receive $3,300 a month, or about $40,000. The remaining surviving spouse will receive a $3,300 monthly payment after the first spouse dies. Beneficiaries will receive a lump sum after both spouses pass away. It is also possible for lifetime payments to increase each year as inflation increases. Article by John Rampton, Due About the Author John Rampton is an entrepreneur and connector. When he was 23 years old, while attending the University of Utah, he was hurt in a construction accident. His leg was snapped in half. He was told by 13 doctors he would never walk again. Over the next 12 months, he had several surgeries, stem cell injections and learned how to walk again. During this time, he studied and mastered how to make money work for you, not against you. He has since taught thousands through books, courses and written over 5000 articles online about finance, entrepreneurship and productivity. He has been recognized as the Top Online Influencers in the World by Entrepreneur Magazine and Finance Expert by Time. He is the Founder and CEO of Due......»»

Like it or not, financial pitfalls are a part of life. Financial mistakes can happen even with the best of intentions. However, it is not all about making mistakes. It’s also about the opportunities you don’t take advantage of. Even so, it’s never too late to learn from these mistakes, and it’s never too soon […] Like it or not, financial pitfalls are a part of life. Financial mistakes can happen even with the best of intentions. However, it is not all about making mistakes. It’s also about the opportunities you don’t take advantage of. Even so, it’s never too late to learn from these mistakes, and it’s never too soon to avoid them. With that said, in this article, we’ll look at 25 ways you’re killing your savings and how to avoid them. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. Top Ways You’re Killing Your Savings Delaying financial planning. All of us have been guilty of putting off things until another day, whether it was starting a workout regimen or saving money. The problem with the “I’ll do that later” philosophy? You may never follow through — despite your best intentions. Additionally, you may have missed some opportunities to plan your financial future. And, even worse, you’re missing out on the power of compounding. Consider, for example, investing $1,000 and earning a 7% return annually. Your account would be valued at $1,070 after year one if you earned $70. Your account would be worth $1,144.90 in year two after earning $74.90. By year three, you would have earned $80.14, bringing your total to $1,225.04. In time, this can snowball and potentially add up to a large amount if your account continues to grow in this manner. Simply put, putting off financial chores only contributes to an ever-growing to-do list. Delaying time-sensitive tasks like paying off debt or planning for retirement could cost you more in the long run. How can you avoid procrastination? Make managing your finances easier by breaking them down into manageable chunks. While you don’t have to organize your finances overnight, ignoring your to-do list won’t make it disappear. Consider setting aside time once a week or once a month to monitor your finances and accomplish important tasks. Frivolous and excessive spending. Losing one dollar at a time can result in a lot of financial losses. You may not think it’s a big deal to order a double-mocha cappuccino, go out to dinner, or watch a pay-per-view movie. But it adds up. Consider this. Americans spend an average of $2,375 per year on dining and takeout. These funds could be used to pay off a credit card debt or pad your savings. It’s very important to avoid this mistake if you are experiencing financial hardship. When a few dollars separate you from foreclosure or bankruptcy, every dollar counts. If you aren’t in that bad of financial shape, consider dining out or getting takeout less often. When you do, look for deals or have lunch instead of dinner. Living beyond your means. Chances are you’re living above your means if you’re sweating over money. To be sure though, take a look at these five signs that you’re heading for trouble. Your credit score is 579 or lower. In this case, additional credit is difficult to get at a reasonable interest rate as this is below the average. The amount of money you save is less than 5% of your gross income. It’s likely that you’re over your head if this is the case. A person who spends more than he or she earns is definitely in over their head. You have a rising credit card balance. It is very likely that you will end up in debt if you only pay the minimum each month on your credit card balances or if you only contribute a small amount to the principal balance. You spend more than 28% of your income on housing. Determine how much of your monthly income goes toward mortgage payments, property taxes, and insurance. You may be overextending yourself if it exceeds 28% of your gross income. You are drowning in bills. You may be overstretched if your monthly income is sliced and diced to cover dozens of unnecessary installment purchases. Do not mistake living below your means for being a cheapskate or skipping out on life’s experiences. Instead, it “simply means that you’re spending less or equal than you’re making each month,” explains Deanna Ritchie in a previous Due article. “As a result, you aren’t putting yourself into debt by living off of plastic. And more importantly, this will help you create a more stable financial future.” “Of course, living within your means requires discipline and a little sacrifice,” adds Deanna. Lending friends and family money who won’t pay you back. Of course, covering a friend’s dinner is very different from helping to pay their rent. Even if you have the money currently, you’re playing with fire if they have a poor track record when it comes to managing their finances. For example, what if they don’t pay you back and you lose your job or have a medical expenses? The cash you were supposed to have will run out. If you can’t find the money from other sources, you may be forced to borrow it. Helping someone out can take many forms. It may be as simple as bringing them lunch until they are stable or helping them update their résumés. According to Bankrate: 60 percent of Americans have helped out a friend or family member by lending cash with the expectation of being paid back, while 17 percent have lent their credit card and 21 percent have co-signed for a financial product like a loan or rental Not having an emergency fund. “An emergency fund pertains to the amount set aside to maintain financial security,” explains Chris Porteous in a previous Due article. “In essence, this is the portion of your savings that you should only spend for emergencies.” This money can be used for urgent expenses during times of financial hardship. By creating a safety net, you prevent yourself from withdrawing money from your primary savings account. As a result, you are prevented from relying on costly alternatives such as bank loans, payday loans, or credit cards. “Hence, your retirement fund will remain untouched.” Most emergency funds consist of liquid assets. These are assets that are easily convertible into cash. In order to cover urgent expenses, you must have the means to do so. Some examples are your investments in financial markets and your receivables from debtors. Even when earnings are inconsistent, they provide an instant cushion to keep you afloat. “When you build an emergency fund, do not save a considerable portion of your income right away.” Chris adds. “Only set aside the amount that will not hurt your financial growth since you have constant expenses.” However, make sure you have enough money to handle future mishaps. This may include unplanned hospitalizations, unannounced layoffs, and property damage. Lack of a budget for each month. Perhaps the most common money mistake is not sticking to a budget. In fact, according to a survey by loan servicing company OppLoans, 73% of Americans do not regularly adhere to a budget. Why’s that concerning? We often burn holes in our pockets with little luxuries that we don’t even notice. These could include gym memberships, nights out, and impulsive purchases. There is nothing wrong with making these purchases every now and then. It becomes problematic when they become a habit and don’t fit within your monthly budget. “Do you need to track every single dollar coming in and out? Absolutely not,” says Aja Evans, a licensed mental health counselor who specializes in financial therapy. “A budget is for making sure you have a plan or understand where your money is going.” Along with the hassle of tracking expenses, budgeting is “hard for people psychologically,” because they associate them with self-denial. Budgets aren’t just about restrictions, Evans says. Additionally, you can prioritize things you enjoy, like dining out or vacationing. Putting off retirement savings until later in life. As Millennials and Gen Z workers enter the job market, they are more concerned with paying off their student loans than saving for retirement. After all, in the early years of one’s career, 65 may seem far away. In the long run, however, money saved early will grow into a much larger nest egg. As an example, let’s say that start contributing $2,000 annually to an IRA with a 6 percent annual return at age 25. At 65, your investment will be worth $328,095 (40 x $2.000). What if you started your $2,000 annual contribution at 30? After investing $70,000 (35 times $2,000), you’ll only receive $236,242. Overall, the sooner you start saving, the better. Inadequate insurance coverage. Insurance pays for contingencies because people don’t want to spend money on anything without a guarantee of return. It is possible to ruin your finances without insurance if you do not have enough cash to cover a large medical bill, car accident, house fire, or theft. It’s a small price to pay for ample protection. Conversely, paying for redundant or unnecessary insurance coverage can drain your bank account. You may be able to secure rental car insurance through your credit card or auto insurance, for example. Lifestyle inflation. With an increase in income, you tend to spend more on your lifestyle. Often, you don’t even notice this type of waste of money until it’s too late. To be fair, when you can afford certain items, it may be worth spending more on them. The long-term cost of well-made clothes is lower than that of cheap ones, for instance. You can often live comfortably even when you make less money if you buy things and live the way you did when you made less money. It will not make you happier or enhance your quality of life if you increase your spending. Spend your extra income on things you really need instead of on fancier things. Among the possibilities are saving more, increasing your retirement contributions, or paying off debt. If all that’s in order, consider buying an annuity. With annuities, you can save your money tax-deferred until you receive retirement income. You won’t have to worry about outliving your retirement savings with them. In addition, they can provide for your family after you die or for your own long-term care if the need arises. Repaying the wrong debt first. When you have student loans, a car payment, credit card debt, and a mortgage, it can be difficult to know where to start. In spite of this, financial advisors caution you to prioritize paying off your debts carefully. It is more common for people to pay extra on their mortgage, which has a 3% interest rate. In contrast, they don’t pay high-interest rates on their student loans or car loans. Whenever you plan to pay off your debt, start by writing down all your balances and the interest rates associated with them. Debt with the highest interest rate should be tackled first, such as credit cards, before moving on to the debt with lower interest rates. If you are experiencing [credit card] debt, you need to handle it urgently, possibly even delaying retirement contributions while you get your balances under control. When you pay off your debts, you will not only improve your credit score, but you will also have more money to invest and save. In particular, this is true when the average credit card interest rate is 23.77%, according to Forbes Advisor. Your free time is not being used to earn money. Your bank account isn’t the only reason you should make money in your free time. A little extra income can be the difference between achieving your long-term financial goals and not achieving them. In addition, it gives you the extra funds to treat yourself when it’s time. Also, don’t think you can just make money on the side of your wallet. You can enhance your career prospects by having a side hustle, which will impress potential employers as this can develop your money skills. It doesn’t matter if it’s pet sitting, starting and running your own business, selling photos online, or any other passive income idea, every little bit helps. Buying new cars without considering used cars. A new car’s value drops the minute you drive it off the lot. It differs from car model, make, upkeep, and other factors, but the depreciation rate of a new car can be as high as 20% (or even more) after one year and reach around 40% after five years. For this reason, used cars may be a good option if you need new wheels. Depreciation has already been paid for by the previous owner – not you. If you sell your vehicle after three to six years, you’ll gain more money than if you sell it after one to three. Using home equity as a piggy bank. The act of refinancing and withdrawing cash from your house means you are giving away ownership to another person. If you’re able to lower your rate or refinance and pay off high-interest debt, refinancing might make sense. Alternatively, you can open a home equity line of credit (HELOC). A HELOC, is a revolving credit line secured by your home that can be used for large expenses or to consolidate higher-interest rate debt from other loans, such as credit cards. In addition to having a lower interest rate than some other common types of loans, a HELOC may also be tax deductible. Not diversifying your investments. In the event that all of your savings are invested in one type of investment and it performs poorly, you will lose money. The best thing to do is to spread your money among a few different accounts. Your investment portfolios should be managed by the same financial planner or held in the same blanket account – with varying levels of risk and reward. Using this strategy, you can grow your wealth while maintaining stability in lower-risk investments while capturing some of the benefits of riskier investments. Not paying your bills on time. Late fees, damaged credit scores, and other negative financial consequences may result from falling behind or missing bill payments. Your credit score can be damaged if you fail to meet your monthly obligations as well. In some cases, as little as two late payments can result in a permanent mark on your credit report. The easiest solution? Streamline the process of paying your monthly bills by setting up an automatic payment through your online checking account, brokerage account, or mutual fund. Consumer Affairs reports that “Less than a third (32%) of respondents were able to save money consistently, while just over a quarter (26%) were able to invest. About a fifth said their ability to afford bills worsened due to inflation.” Missing out on your employer matching contributions. Do you max out your workplace retirement plan (401k, etc)? Is your employer offering a matching contribution? It applies specifically to you if you answered yes to both questions. Why? It is possible that you are missing out on free money. Moreover, it could be free money accumulating over a 30-year period. There are many types of workplace retirement plans out there, such as 401k plans, 403b plans, and 457 plans. Even so, 17% of employees have access to employer-sponsored benefits but do not contribute. MagnifyMoney found that 12% of employees who do not return company matching funds leave the funds on the table, totaling 17.5 million people. Considering opting into an auto-escalation feature at your employer can increase your retirement savings. As a result of this feature, your savings rate will automatically be boosted each year by 1% or 2%. For anyone under the age of 50 in 2023, the contribution limit will be $22,500. A contribution limit of $30,000 applies to people 50 and older. Having an employer who matches your contributions AND maxing out your 401k plan before the end of the year can also present a problem. After maxing out your 401k plan, you must stop contributing. If you stop contributing, your employer will not match your contributions. Having an unpayable credit card bill. When you use your credit card as free money instead of using what you have, you are on the fast track to financial ruin. In this regard, treat your credit card just as you would a debit card. Have you been thinking about getting that new iPhone? Rather than putting it straight on your credit card, only use it if you’re confident you’ll be able to pay for it immediately. After all, even at a somewhat reasonable 16.99% APR, a $1,000 balance would result in monthly interest charges of $14.06. Likewise, buying now, and paying later services like Klarna is a also big no-no. According to a Consumer Reports survey, 11 percent of people who use buy now, pay later services miss at least one payment, often because they lose track of when it’s due or don’t know when it’s due. Others said they thought they’d set up automatic payments only to discover they weren’t. They later discovered that their payments had still gone through, even though they thought they had canceled their purchase. In addition to late fees and interest charges, people who miss buy now, pay later payments may have their credit history affected. Furthermore, 5 percent of people who used a buy now, pay later service said they couldn’t otherwise afford the purchase. That can cause trouble: People say they miss payments mostly because they thought they had the money but didn’t. TL;DR: Make sure you only purchase what you can afford. Having the ability to pay off your credit card or other credit every month is essential. Having missed payments on your credit report can adversely affect your ability to obtain loans or mortgages in the future. You are not monitoring your credit scores and reports. Have you ever thought about how your credit score can affect your life? A credit score is important when you want to borrow money, buy a house, or even rent an apartment. If you discover any problems or errors with your credit profile, you can work with your lenders to correct them. Because of their importance, it’s vital that you regularly check your credit score. Additionally, Equifax® credit reports are free each year if you create a myEquifax account. To get your free Equifax credit report and VantageScore® 3.0 credit score based on Equifax data, click “Get my free credit score” on your myEquifax dashboard. Credit scores come in many forms, including VantageScores. Living paycheck to paycheck. The personal saving rate in the United States decreased from 7.5 percent in December 2021 to 3.4 percent in December 2022. Due to this, it should not be surprising to learn that many households live paycheck to paycheck. As a consequence, you cannot prepare for an unforeseen problem, which has the potential to become a disaster. As a result of overspending, people are put in a precarious position, one where they can’t afford to miss a paycheck. In the event of an economic recession, you do not want to find yourself in this position. Thankfully, there will be very few options available to you if this happens. The advice of many financial planners is to keep three months’ worth of expenses in a quick-access account. Changing economic conditions or loss of employment could drain your savings and place you in a debt cycle. If you don’t have a three-month buffer, you may lose your home. Fad investments. Even if cryptos or fad investments do make you a lot of money in a short period of time, the disruption to your investing strategy can cause you to lose money long-term. To put it another way, you should stick to investments that have a proven track record or only invest money you’re willing to lose. Or, in the words of Paul Samuelson, “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” Failing to file taxes or not paying them on time. If you do not pay your tax debt, you will be charged penalties and interest every month. A lingering balance is going to cost you more money in the long run. The good news? A tax debt reduction or installment agreement are two methods the IRS offers for settling delinquent balances. An experienced tax professional can guide you through the process, typically at no cost. Loyalty to expensive energy and bank providers. It is time to put an end to staying loyal to banks and energy providers. You might think you’re getting a great deal if you’ve been a customer for a long time. In most cases, it will be the exact opposite. People tend to think that switching utilities are a hassle, so banks and other utility providers know this. As a result, they rely on your laziness to keep your business and your money. However, switching bank accounts is mostly automated today. For new customers, some banks offer great cash rewards and interest rates on savings accounts. When you think you could find a better deal, it’s definitely worth shopping around. Your career isn’t being maximized. Your career is your most important financial asset. Since the average American can expect to earn around $1.7 million in their lifetime, it’s no wonder. That comes out to just under $42,000 per year. However, if you start at $40,000 today and earn 3% pay increases over 45 years, you will earn over $3.7 million. In short, you can lose millions of dollars if you don’t work hard to maximize your income. So, if you want to avoid this bad money mistake, you simply need to develop and implement a career plan to maximize your earnings. Also, do not quit your job without a backup plan. The stress of working at your current job is nothing compared to the stress of worrying about how you’ll pay for essential expenses. Neglecting your health. According to one study, medical reasons may account for two-thirds of bankruptcies in the United States. Even if that statistic is skewed, we all know how difficult it can be for families to pay for medical costs. Aside from that, unhealthy habits cost a lot of money. For example, if you give up smoking or junk food for $10 a day, you can save $3,650 a year, plus interest. And, those are just the immediate savings. Long-term savings can also be made over the course of a person’s life. Overweight people could save between $2,200 and $5,300 on their lifetime medical costs if they lost 10% of their weight. Increased medical costs can be reduced by thousands of dollars per year by delaying the onset of diabetes. Additionally, employers are increasingly recognizing the benefits of healthy employees. In the end, healthy employees take fewer sick days, so the company pays less out of pocket for health insurance. As such, companies may offer financial bonuses for not smoking or discounts for gym memberships. Reluctance to learn about finances. Almost no personal finance education is offered in public schools, so many Americans rely on what they learned from their parents. Despite thinking you’ve got things under control, you can avoid many financial mistakes by learning financial literacy and best practices. The good news? Learning how to become a financial master has never been so easy. Educating yourself is the best way to avoid making financial mistakes, whether you watch videos, read blogs, or listen to podcasts. FAQs What is a realistic budget? Budgeting and planning your finances can be daunting. Taking the time to look back at your past spending habits is a real moment of honesty. Do it anyway. To get started, try the 50/20/30 system. Your money is divided into three categories: 50 percent for essential expenses (rent, utilities, car payment), 20 percent for savings, and 30 percent for flexible spending. That’s all there is to it. If you’re single and tend to spend most of your meals out rather than in, the flex percentage works well for you. Is there a limit to how much debt one should have? The answer depends on the situation. In contrast to credit card debt or what is often called “bad debt,” student loans are considered “good debt.” This is due to the fact that student loan debt has a lower interest rate and that getting a degree will lead to a higher-paying job. Try to keep your credit usage to 30 percent or less. In general, your debt should be less than 20 percent (including car loans, real estate loans, and personal loans).   Are you still unsure? The following questions will help you gauge how you’re doing: Is it possible for you to make only the minimum payment? Do you skip some bills in order to pay others? Have you maxed out your credit cards? Are you living paycheck to paycheck? You should come up with a dedicated plan if one or more of your credit cards are maxed out. Prioritize paying off the card with the highest interest rate first, and then pick off the rest one by one. Does it matter if I don’t pay off my credit card every month? The ability to lease a car, take out a loan, or rent an apartment requires a good credit score. All of these things are pretty essential. Credit collectors are trained to increase your anxiety levels to sky-high levels when you have bad credit. Make sure you pay off your credit card each month. Get in touch with your creditor if the debt seems impossible to pay. Perhaps you can work out a revised payment plan and save a ton of money on interest. What is the recommended amount of money I should have in my “Emergency Fund”? According to financial circles, three to six months’ post-tax income is a good starting point. The ideal is six months, but most of us don’t have any emergency savings, so even half that is a reasonable start. What is the right time to begin saving for retirement? As soon as possible. As a result of compound interest, the earlier you start saving, the more you will accumulate. In the absence of a 401k or similar model at your employer, consider setting up a personal retirement account. You must participate in your employer’s retirement plan if it is an option. As a side note, if they offer matching, make sure to take advantage of it every time. It is also worth researching IRA options, including Roth IRAs as well as Traditional IRAs. You may also want to learn about mutual funds, bonds, and more if you’re more advanced in your retirement savings. Article by John Rampton, Due About the Author John Rampton is an entrepreneur and connector. When he was 23 years old, while attending the University of Utah, he was hurt in a construction accident. His leg was snapped in half. He was told by 13 doctors he would never walk again. Over the next 12 months, he had several surgeries, stem cell injections and learned how to walk again. During this time, he studied and mastered how to make money work for you, not against you. He has since taught thousands through books, courses and written over 5000 articles online about finance, entrepreneurship and productivity. He has been recognized as the Top Online Influencers in the World by Entrepreneur Magazine and Finance Expert by Time. He is the Founder and CEO of Due......»»

The Supreme Court will hear two challenges to Biden's student-debt-cancellation plan on February 28. Here's what borrowers should know. Student-loan borrowers gathered at the Supreme Court on January 2.Photo by Larry French/Getty Images for We, The 45 Million The Supreme Court will hear two challenges to Biden's student-debt-relief plan on Tuesday. The court's decision will determine if millions of borrowers will get up to $20,000 in loan forgiveness. Here's everything you need to know about the cases and what's at stake for borrowers. Alexandria Mavin believes student-loan forgiveness is long overdue.Mavin, who had borrowed  $117,000 in student loans by the time she graduated from college in 2013, has paid back $70,000, but she still owes $90,000 because of surging interest rates. It's an example of the crushing burden many borrowers face — and it's time for relief, Mavin previously told Insider. "There needs to be an understanding between the generations on what the real issues are, and not just play the unfair game" when it comes to debt relief, Mavin, 33, said. "It's just something really good that needs to happen to help everybody, because everybody deserves a future."Mavin is among the millions of Americans who would benefit from President Joe Biden's plan, released in August, to cancel up to $20,000 in student debt for federal borrowers making under $125,000 a year. Yet after the president's announcement last summer, his administration has faced a slew of GOP-backed lawsuits seeking to block the policy. Two of those legal challenges have succeeded in that federal judges have temporarily paused the implementation of the relief.Now, the Supreme Court is set to review the pair of cases in oral arguments on Tuesday, and its decisions, to be released this summer, will determine the fate of millions of borrowers.To Mavin, the student-loan industry is broken, and Biden's proposal would help mitigate the harm to borrowers. "We need this fix," Mavin said. The casesThe challengers have argued that Biden exceeded his constitutional power by enacting sweeping relief without congressional approval. But the Biden administration has defended its legal authority and expressed confidence that the Supreme Court will uphold the plan.The central issue is Biden's use of the HEROES Act of 2003 to carry out his broad student-debt cancellation, a federal law that grants Education Secretary Miguel Cardona the authority to waive or modify student-loan balances in connection with a national emergency like COVID-19. Several legal experts have supported Biden's use of the law to enact the relief, as has one of the architects of the HEROES Act, former Democratic Rep. George Miller. In both cases, the Supreme Court will review whether the administration overstepped its legal authority and whether each of the lawsuits have standing — which means the plaintiff would be injured by the policy, that the injury can be directly traced back to the defendant, and that the relief they're seeking would address those injuries. There are multiple possible outcomes — the Supreme Court could strike down the relief completely as unconstitutional, or issue a more narrow ruling that would allow the relief to proceed if it finds one of the cases lack standing.  In Biden v. Nebraska, six Republican-led states — Arkansas, South Carolina, Iowa, Kansas, Nebraska, and Missouri — insist Biden's plan is an overreach. The states argue the relief would hurt their tax revenues, along with the revenue of the Missouri-based student-loan company MOHELA.The Missouri student-loan company's involvement in the case has left some legal experts confounded. While the states claim that "MOHELA will lose the revenue from servicing" loans because of the relief, the company itself denied having anything to do with the legal challenge, and the DOJ argued that the company can sue and be sued on its own."On one hand, when the state created MOHELA over 40 years ago, it made clear that MOHELA is separate," David Nahmias, a staff attorney with the UC Berkeley Center, previously told Insider."But now with this lawsuit, Missouri is trying to argue that the state will lose income by virtue of the fact that student-debt cancellation possibly could cause MOHELA to lose some loan-servicing revenue that possibly could be passed along to the state of Missouri," Nahmias said.In a separate challenge to be heard by the Supreme Court on Tuesday, two student-loan borrowers  — Alexander Taylor and Myra Brown — sued the Biden administration because they did not quality for the full debt forgiveness. The case, Department of Education v. Brown, is backed by the conservative Job Creators Network Foundation Legal Action Fund.Taylor claims he did not qualify for the full $20,000 in debt relief since he was not a Pell Grant recipient, and Brown holds commercially held loans, which don't qualify for any relief.The borrowers argue that Biden's plan violates the Administrative Procedure Act's notice-and-comment procedure, a federal statute that requires agencies to justify rulemaking to the public and give them an opportunity to comment.The Biden administration has consistently stood by its legal reasoning."The lower courts' orders have erroneously deprived the Secretary of his statutory authority to provide targeted student-loan debt relief to borrowers affected by national emergencies, leaving millions of economically vulnerable borrowers in limbo," Biden's Justice Department wrote in a brief to the Supreme Court.The stakesThe hotly contested issue of student-debt cancellation has attracted widespread attention from the left and right in recent years. Prominent figures in the legal and political worlds have weighed in on the two high-profile Supreme Court cases in dozens of briefs filed to the Supreme Court.More than 170 Republican members of Congress have argued against Biden's relief, along with 17 Republican-led states, the US Chamber of Commerce, and over a dozen conservative-leaning advocacy groups.Proponents of the relief include two top labor unions, the National Education Association and the American Federation of Teachers; a coalition of city and county governments nationwide; 21 Democratic-led states and Washington, DC; and liberal-leaning advocacy groups such as the Student Borrower Protection Center and NAACP.Millions of student-loan borrowers' financial futures hang in the balance. The total student-debt load in the US currently stands at $1.7 trillion, and the White House estimates that of the 43 million Americans with federal loans, 20 million of them would have their balances completely wiped out under Biden's plan.What's nextFollowing oral arguments on Tuesday, the Supreme Court is expected to hand down rulings in the two cases before the end of its term, which typically wraps up in late June or early July.For now, payments on student loans are still paused. Biden in December extended the pause that was first enacted nearly three years ago by the Trump administration at the onset of the COVID-19 pandemic. Payments are expected to resume 60 days after June 30, or 60 days after the ongoing legal challenges are resolved, whichever happens first — meaning there's a chance borrowers could start payments again without any debt relief. Still, Biden's Education Department is preparing to ease borrowers back into repayment by implementing a new income-driven repayment plan, which would cut monthly payments for undergraduates with federal loans in half and limit the amount of interest that can build on their principal balances, among other provisions. An exact implementation date for those reforms is unclear.Read the original article on Business Insider.....»»