Bankrate conducted a survey and discovered that over 60% of people in the US do not have enough funds to handle even $500 worth in a financial setback. Nearly 50% of those that were part of the study, and make a minimum of $75,000 each year said they had inadequate funds if they were ever to experience a financial emergency. About 20% of those who completed the study stated they believe they would have to cut back on what they are spending if they want money for an emergency fund. 15% of people said that if they were in that situation, they would simply use their credit card to pay for the expenses.
Lauren Berg, a spokeswoman for Simple Finance, says that those who turn to credit may find that it can also become a setback, even if it’s just minor. She added that just a minor setback can still be all it takes to form a serious long-term financial crisis. Berg continued to say that her company strongly discourages people to transfer unexpected expenses to credit cards.
Continuing this type of financial behavior will only make it worse, as people accrue credit card interest. Another 15% of those said if a negative financial situation were to occur, they believe they would be ok because they would find a friend or a family member to borrow it. Sheyna Steiner, reporter and senior investing analyst at Bankrate, said that of you choose to borrow the money to get past a tough bind, it also means you may not have the credit during the times you do need it. She says that if a situation were to arise when you need a line of credit, it is possible it will not be there in the event there are any changes to your report.
Steiner mentioned that one thing that occurred during the great recession was people discovering that their credit lines had significantly lowered. Therefore, if you depend on it to be extended to you when you need it, the answer may not be what you want. Experts say that going the payday loan route during your times of trouble is just as bad as a credit card. Their interest rates are ridiculously high, as much as 400%, and can easily lead someone to a downward spiral.
The same survey conducted by Bankrate found they about 57% of people successfully made it through the year without using any source of financial help. Nearly 40% of people said that they, or someone they knew, experienced a major financial setback in the last year. Steiner says that unexpected expenses can arise often enough that people should prepare for it. Of course, saving money even when you know you need it is not as simple as it sounds for many. There are people, namely young adults, that are still working on paying their student loans back or are finding a job where they can make an adequate income.
Without a proper job that pays enough, it difficult to save anything when someone is living paycheck to paycheck. These adults typically make just enough to pay their bills, and any financial setback would be extremely detrimental to them. Berg, who says she understands and recognizes this, says that saving money can typically feel like a thankless ordeal when someone is faced with that of extreme debt. She recommends that even the smallest effort can make a big difference. The main thing you want to have is to focus on gaining more confidence in money management. She states that it is the foundation of her company philosophy, which is that all consumers should feel completely confident with their cash. Berg adds that that if you can put away even $5.50 away each paycheck, that can amount to $2,000 in emergency savings you can use after a year.
Steiner even says that she advises people to ease a little on their debt payments so they can prioritize saving for an emergency first. She believes it the key is putting saving first and reducing money where you know you can reduce it, even if it is temporary. Steiner says that if you truly want to be fully equipped and prepared for the inevitable, you have to start treating it as if it will happen. Most people are bound to need car repairs sometime down the road or will need to call the plumber. She believes if it’s debt that is the main reason you’re having financial setbacks, then remember to deal with it as best as you can. That alone will save you $500-$1000 in a year that you can use when you need it. Most importantly, it will be money that is now owed. She believes that after you get all that set up, then you can go back to tackling any debt you have.
US Housing Sales Boom Will Last Until 2021
Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.
Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion.
Why do people buy houses during a recession?
During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.
The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap.
The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy.
Demand coming from the rich
Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”
People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.
Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said: “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.”
Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”
Shrinking inventory of houses for sale
With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data.
Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”
Demand won’t last forever
The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities.
The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.
Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:
Are you house hunting right now, or have you already bought a house this year? Why are you doing so? Let us know why buying a home is a good idea right now. Share your thoughts in the comments section below.
Tesla Keeps Streak Intact, Posts Profitable 3rd Quarter
The winning streak continues Tesla posts a profitable 3rd quarter, it’s fifth consecutive. The EV company posted a net profit of $331 million for the three-month period ended Sept. 30. Tesla also confirmed its goal of delivering 500,000 vehicles within the year. CEO Elon Musk calls the latest quarter as Tesla’s “best quarter in history.” The company posted a record of $8.77 billion in revenue against estimates of $8.28 billion. This is an increase of 39% from a year ago. Analysts surveyed by FactSet expected sales of $8.28 billion. Shares went up over 3% at about $438 in after-hours trading. Since January, Tesla shares have grown 500%.
500,000 Deliveries on Target
Despite the pandemic, the company will proceed with its original goal of 500,000 cars in 2020. In a statement, Tesla affirmed its goal. “While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target,” it said. This entails building more cars at its Shanghai factory, and improvements in logistics and delivery.
Earlier in October, Tesla reported 139,593 vehicle deliveries in the quarter. This places the 500,000 targets is within reach. Model 3 and Model Y took up the bulk of deliveries and growth during the period. The more expensive Models S and X dropped by 12% compared to 2019. As such, Tesla started slashing prices for its higher-end models to increase demand. The Model S reduced its prices twice to $69,420.
China Remains the Crucial Market
China remains the key market for Tesla’s profitable 3rd quarter. Tesla’s auto sales in China climbed nearly 13% in September, their sixth straight monthly gain. The company’s Shanghai Gigafactory raised production due to demand. Demand for the Model 3, especially in China, led to a retooling. From 150,000 units per year, it now handles 250,000.
China’s “Golden September, Silver October” is the country’s high point in car purchases. Sales reached 2.57 million vehicles last month. The China Association of Automobile Manufacturers (CAAM) said that sales were still down. For 2020, 17.12 million vehicles got sold, which is 6.9% below last year.
Electric vehicles enjoyed brisk sales during the period. Sales increased by 67.7% to 138,000, which is the third straight month of gain. Tesla reduced its Model 3 prices by 8%, down to 249,900 yuan ($36,805).
Based on September sales, the momentum looks to carry over to October. Haitong International analyst Shi Ji expects even better numbers this month. He said: “Based on our dealer channel checks, the growth in momentum extended into the October Golden Week, as retail sales exceeded dealers’ expectations”
A Decrease in Credit Sales
While revenue rose, regulatory credits fell down from $428 million to $397 million. Ben Kallo of RW Baird observed that “Regulatory credits are a big part of the EPS beat. But that’s part of the game: Tesla’s competitors are paying them, and Tesla is reinvesting that into their factories in Berlin and Texas.”
Tesla generates extra income by selling credits. Manufacturers buy these credits to comply with carbon-emissions standards. They come from all over California, Europe, and other areas. Investors prefer seeing profits from the core business of selling cars. A Bloomberg analyst thinks that the S&P snub might be due to credit sales. Analyst Michael Dean noted “question marks about the sustainability of regulatory emission-credit sales, which are currently underpinning earnings.”
For 2021, Tesla aimed for even more increases in production. This includes its all-electric semitrailer truck and its pickup truck. The company hopes to get more cars out of its China factory. It also expects its newest plants in Berlin and Texas to start churning cars. Musk estimates the 2021 production could reach 840,000 to 1 million vehicles.
The company also laid out plans during its recent “Battery Day” event. Musk announced that the company will start making its own “tabless” batteries. These batteries improve the cars’ range and power. The improvements will help bring down the cost to produce a car. Soon, Tesla hopes to launch a vehicle priced under $25,000.
Watch this as Yahoo! Finance reports on Tesla earnings: Tesla posts a profitable 3rd quarter, it’s fifth consecutive and EPS estimates:
Are you thinking of buying an electric vehicle? If so, will you get a Tesla? Or do you see yourself holding out for more choices in the near future? Let us know what you think about EVs, and if you’re planning on getting one soon? Drop a line on the comments section below.
DOJ Files Antitrust Suit Against Google
Yesterday, the US Department of Justice (DOJ) filed an antitrust suit against Google. The Justice Department alleged that Google maintained a monopoly on internet searches. Its dominance allowed it to cut off rivals from critical distribution channels.
Eleven Republican state attorneys general joined the lawsuit as plaintiffs. These are Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas.
DOJ Cites Sherman Act of 1890
Under the Sherman Act, DOJ lawyers alleged that Google illegally maintained monopolies. This covered markets for “general search services, search advertising, and general search text advertising.” US Deputy Attorney General Jeffrey Rosen led the filing of charges. He said that “Google is the gateway to the internet and a search advertising behemoth. It maintained its monopoly power through exclusionary practices that are harmful to competition.”
The lawsuit comes after a House Judiciary report that says some tech act as monopolies. Apart from Google, Amazon, Apple, and Facebook also got mentioned. The report recommended Congress to update antitrust laws. These changes can help with breaking up businesses.
Within a month, the Justice Department issued a lawsuit against Google. It is a result of a 16-month investigation into company business practices. Google got involved in a 2013 antitrust suit but did not get charged.
Monopoly Power In Online Search
Google allegedly tied up distribution channels for online search and related markets. The suit said Google “foreclosed competition for internet search” through exclusionary agreements. This prevented rivals from achieving the scale to fight Google’s dominance. The DOJ said Google holds 88% of the U.S. search market and 94% of mobile searches. Google allegedly harmed consumers by providing lower quality search and reducing choices.
The DOJ also claimed Google owns more than 70% of the search ads market. It said that the company’s monopoly power lets them charge more. While they charged more, Google provided lower-quality services in the absence of competition.
Google used exclusionary tactics with distributors of its Android mobile OS. As such, Google also suppressed innovation in the search market. Google allegedly requires phone manufacturers who use Android to agree to certain limits. Android-powered devices that aren’t compliant with Google standards face selling restrictions. The company then provides the same manufacturers access to its “vital proprietary apps.” They do so in exchange for agreeing to carry other Google apps. Under the agreement, the devices should prevent users from deleting certain Google apps.
Apart from exclusivity, Google’s revenue-sharing model for distributors helped expand its dominance. A senior executive described the model as bittersweet. He said it was“a bitter pill for carriers, and a generous revenue share is a sugar that makes it go down smoother.”
Google’s partnership with Apple is the centerpiece of the DOJ’s allegations. Google allegedly misused its power in an anticompetitive manner. At stake is a major revenue stream for both tech giants.
It’s no secret that Google relies on search traffic from Apple’s iPhones. The search engine is the default service on Apple’s Safari phone browser. This means that consumers get Google search results—and related advertising – automatically. The agency claimed Google “locked up” distribution by entering exclusionary agreements with Apple.
Google responds to the suit
Google Chief Legal Officer Kent Walker responded immediately to the suit via a blog post. He laid out the company’s rebuttal to the DOJ’s claims.
He wrote: “Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives. This lawsuit would do nothing to help consumers. On the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use.”
Walker refuted claims that Google’s arrangement with Apple is exclusive. Rivals also pay to appear in Apple’s Safari. He said Apple chose Google search because they found it as “the best.” He linked a 2018 article where Apple CEO Tim Cook complimented the search engine.
Missed the Main Point
Walker also said that the suit missed the “bigger point.” He argued that consumers choose to use Google’s services because they want to. In case they didn’t, switching default search engines is an easy task to do. Walker pointed to specialized search engines like Expedia, OpenTable, and even Twitter. These companies help people seek specialized information and are available. While Google pays for digital shelf space competitors “are readily available too.” As for agreements, he said that Google’s contracts are industry standard. They offer nothing unusual.
Watch this as FoxNews reports that the US Department of Justice has filed an antitrust lawsuit against search engine giant Google:
Do you think that the antitrust suit has merit and that Google might be too big a company? Do you use, or even know, any other search engine other than Google? If not, is that enough proof of the company’s monopolistic behavior? Let us know what you think by sharing your comments below.
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