CityWatch: House stimulus bill could send $34 billion to New York state

House Democrats have introduced a stimulus bill that would include $1 trillion for cash-strapped states and local governments, including $17 billion for hard-hit New York City and $34 billion to New York state, Mayor Bill de Blasio said on Wednesday.

“Finally, we see the beginning of an answer in Washington, D.C.,” de Blasio said at his daily briefing. “This is the biggest health-care crisis, the greatest challenge that we’ve faced in terms of health care in a century in this city, in this nation. The biggest economic crisis since the Great Depression, and they’re both happening at once.”

In total, the $3 trillion legislation would roughly double federal stimulus in the wake of the pandemic and would lay the framework for negotiations with the Republican-led Senate. 

The bill, on which the House is expected to vote on Friday, proposes sending $375 million in federal funds to local and county governments and $500 billion to states — stimulus to which some powerful Republicans in Washington, including the president himself, have said they’re opposed. 

Cities and states across the country are facing steep budget shortfalls as shutdowns have cut off vital tax revenue streams. That’s been felt acutely in New York City, the nation’s epicenter for the virus, where the number of confirmed cases approaches 200,000 and more than 15,000 people have died (more than 20,000 if probable COVID deaths are included). 

Hotels, a significant source of tax revenue for the city, are now either closed or voluntarily housing frontline workers and convalescing patients. 

Meanwhile, nonessential business closures and mass layoffs — grounding to a halt entire segments of the city’s economy, from Broadway theaters to fine dining — have dried up revenue from sales, business and personal income taxes. Even parking tickets, which provide more than $500 million a year to government coffers, have declined steeply. Last month, the city issued only 54,000 parking tickets, down 92% from April of last year, according to a spokeswoman for the NYPD. 

See: With New York City offices still closed, companies consider downsizing—or heading for the suburbs

As a result, the city expects $7.4 billion in lost revenue in fiscal years 2020 and 2021, the mayor has said. 

“We’ve taken a huge financial hit, and it only gets worse all the time,” de Blasio said on Wednesday. The federal infusion would be used to “to stabilize this city government, to make sure that we can pay the bills and keep our public servants at the front line doing the great work they do and build for a future when our economy actually comes back strong.” 

Federal stimulus has also fallen short on aiding New York City’s small businesses, a minority of which have received funding through two emergency loan programs through the Small Business Administration, community surveys have shown. 

The New York City Council took matters into its own hands by passing a slate of small business relief measures on Wednesday. They include a cap on how much apps like Seamless and Grubhub can charge in delivery fees, waiving sidewalk cafe fees and fining landlords who threaten commercial tenants with eviction.

Besides direct aid to state and local governments, the latest stimulus bill also proposes funding a number of agencies and services that would benefit New Yorkers, and proposes another round of $1,200 checks direct to individuals.

The legislation calls for an additional $10 billion in funding for food stamps and a $4 billion infusion for Section Eight public housing. The bill would also extend through the rest of the year beefed up unemployment checks, which an earlier stimulus package increased by $600 per week.

Don’t miss: Mortgage delinquencies caused by the coronavirus will exceed Great Recession levels, according to this forecast

Though the House could pass the $3 trillion package on Friday, it could be weeks before negotiations begin with Senate Republicans. De Blasio acknowledged it would be an uphill battle, particularly for Senate Minority Leader Chuck Schumer, who represents New York. 

“We know it’ll be a fight, but we also know that cities and states all over the country, it doesn’t matter if you’re a red state or blue state,” de Blasio said, “you’re in the Heartland and you’re on the coast, everyone’s going through this.”

New York Gov. Andrew Cuomo has repeatedly implored federal lawmakers to send aid to state governments, and at one point addressed Senate Majority Leader Mitch McConnell directly over comments the Kentucky senator made equating such stimulus to bailing out “blue states.”

President Donald Trump has left reopening plans as well as large-scale containment efforts, including testing and tracing, up to the states. Cuomo said it makes sense for state governments to coordinate their own reopening but they need financial assistance to do it. 

“We need help to make this happen and we need help from Washington,” the governor said on Wednesday. Without help to make budgets whole, he asked, “who gets cut?” 

“Police, firefighters, schools and local government,” he said. “The very people we call essential workers and heroes.” 

Other developments: 

• New York state’s health department will host a public webinar Thursday with health-care providers to discuss a rare inflammatory disease affecting children exposed to COVID-19. The state is investigating more than 100 cases of mostly school-aged children presenting symptoms similar to toxic shock syndrome and Kawasaki disease. 

See: New York turns attention to testing children

North Country, a rural part of upstate New York, will join three other regions of the state that will phase in reopening, including construction, manufacturing and retail with curbside pickup on Friday. 

More than 400 people with suspected cases of the coronavirus walked into hospitals across the state on Tuesday, a slight uptick from the previous day but a sliver of the daily hospitalizations recorded at the peak last month. The state also recorded 166 deaths on Tuesday.  

Personal Finance Daily: ‘Not everyone that owes back child support is a deadbeat’ and what happens to vouchers, credit cards and travel miles if airlines go bankrupt?

Happy Wednesday MarketWatchers. Don’t miss these top stories:

‘It’s really the Wild West out there.’ Your trip to the dentist is about to get more painful — but not for the reason you might think

One dentist has spent nearly $35,000 on disinfectant equipment, including oral high-speed aerosol evacuation units, ozone generators and ultraviolet lights.

Airlines are on the brink of bankruptcy — what happens to your voucher, travel miles and airline credit card if they go belly up?

As some warn about the possibility of airline bankruptcies, consumers could face the loss of those canceled tickets.

‘Not everyone that owes back child support is a deadbeat.’ Is it fair for President Trump to garnish stimulus checks of fathers who are behind on payments?

‘I was nearly $15,000 in debt to my ex-wife. I have been diligently paying the back support down and, now, 10 years later, I finally paid it off.’

My son is staying with me, yet my financially irresponsible ex-husband received his $500 stimulus check. Is my ex right to keep it?

The combination of ethics, divorce agreements, the law and the IRS leads to a long and winding road filled with pot holes, sharp turns and speed bumps.

‘I owe child support from my first marriage and did not receive a stimulus check. Does Trump not realize I have another family to take care of?’

‘Withholding checks now does not take into account the unprecedented circumstances in which we’re living.’

Mortgage delinquencies caused by the coronavirus will exceed Great Recession levels, according to this forecast

The troubles homeowners face now could make it harder for other people to get home loans in the future.

Lost your job and health insurance due to coronavirus? Here’s how to get coverage before time runs out

Some 26.8 million workers and their dependents could become uninsured after losing employer-based insurance, a Kaiser Family Foundation analysis found.

‘All the days are blurring together’: How to battle burnout and find a healthy work-life balance during the pandemic

‘I, for one, feel burned out by constant Zoom meetings all day.’

Automakers ramp up incentives to ease buyers’ concerns of health and the economy

Deferred or forgiven payments, 0% financing, home delivery are some strategies to help keep the fragile auto industry afloat

If there’s even a chance of bankruptcy in your future, here’s what you should do now

A few do’s and don’ts to start thinking defensively and prepare, in case bankruptcy is in the pipeline.

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President Donald Trump took to Twitter on Wednesday to express his displeasure with prominent investors delivering grim forecasts about the outlook for the economy and the stock market.

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Mortgage delinquencies caused by the coronavirus will exceed Great Recession levels, according to this forecast

The coronavirus-fueled economic downturn is hitting homeowners hard. And the worst may be yet to come.

A new report from Oxford Economics estimates that 15% of homeowners will fall behind on their monthly mortgage payments. If that forecast comes to fruition, mortgage delinquencies caused by the coronavirus pandemic would exceed the number seen during the Great Recession. Back then, the peak delinquency rate was 10%.

Nearly 4 million homeowners are in the midst of forbearance plans, representing 7.54% of all mortgages, according to the latest data from the Mortgage Bankers Association, an industry trade group. When it comes to loans backed by Ginnie Mae, that figure increases to nearly 11% — these include Federal Housing Administration and Veteran Affairs loans.

Stimulus legislation signed by President Donald Trump allows any borrower with a federally-backed mortgage to request forbearance for up to 12 months, meaning the homeowner can skip or make reduced payments during that time.

Given the risk mortgage companies are facing right now, many lenders have imposed more stringent requirements for loan applicants. “The uncertainty in the mortgage market has contributed to a significant tightening of lending standards that may persist even once a recovery is underway,” Oxford Economics wrote.

Don’t miss:If you’re skipping your mortgage payments, watch out for this costly mistake

The pace of forbearance requests has slowed in recent weeks following April’s breakneck speed, but that could change, experts warned. “Although the pace of forbearance requests slowed this week, call volume picked up — which could be a sign that more borrowers are calling in to check their options now that May due dates have arrived,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in the report.

Also see: These U.S. housing markets are most vulnerable to a coronavirus downturn

The tidal wave of forbearance requests and delinquent loans has put enormous strain on servicers, the companies that collect monthly payments and distribute them to the investors who own the loan including mortgage-backed securities.

Fannie Mae FNMA, -3.01% and Freddie Mac FMCC, -3.49% have taken steps to reduce the burden on servicers, which are still expected to forward payments onto investors for four months after a borrower has stopped paying or entered into a forbearance agreement.

One bit of good news for homeowners: While Oxford Economics said an uptick in foreclosures is “inevitable,” the wide availability of loan forbearance is expected to allow many people to stay in their homes.

Outside the Box: Are you a trader, speculator or investor? Ray Dalio and Jim Cramer weigh in on stocks

A young relative recently asked me if I thought it was a good idea to buy a certain stock, an airline. Its share price had fallen because of the pandemic.

“Well,” I told her, “Let me ask you a question first. Do you consider yourself an investor or a trader?”

I’m not sure of the difference, she replied. I said, “Well, a trader buys a stock with the idea of selling it for a profit, usually in a few weeks or months, at most a few years. An investor buys a company in order to own it for much, much longer, maybe forever.”

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Most people say they are investors. But they tend to act like traders. There’s a huge difference.

I see this same conflict playing out across the actions of many young people. They know they must own stocks for their future security. The crisis seems to have created an opportunity to buy.

Some young investors do their buying through a smartphone app called Robinhood which allows for small purchases of stock with little effort. No knock on their business model; I’m all for getting people invested.

The app’s makers recently released the top trades on their platform for March, so it’s a neat data slice on how young investors are thinking at the moment.

Among those trades were a biotech that is working on a vaccine for the COVID-19, blue chips such as Ford Motor F, -5.22%, Disney DIS, -1.56%, Boeing BA, -2.92% and GE GE, -3.33%, the cruise line Carnival CCL, -7.14% and a cannabis stock.

It’s a “fantastic list,” commented CNBC personality Jim Cramer. “Not perfect, but very good for speculation.”

Cramer is absolutely right. What most people do on Robinhood is not investing. It’s not even trading. It’s speculation — buying on the short-term bet you can get out quickly with a win.

Is it wrong to buy shares that are beaten down? Of course not. But don’t confuse that with investing.

Ray Dalio, the investment guru who runs Bridgewater Associates, recently took to YouTube to try to shake some sense into investors tempted by what appear to be sudden stock bargains.

You’re outclassed from the start and don’t even realize it, Dalio warned.

“An investor must understand that they probably won’t be able to play the game well. You will not be able to decide how to move in and out of things,” Dalio said. “In order to be successful in the market, it’s more difficult than getting a gold medal in the Olympics.”

Normal people wouldn’t dream of getting up on a starting block alongside swimmers such as Michael Phelps or Katie Ledecky. Even world-class athletes would shudder at the thought. (Have you seen Ledecky lead her competitors by more than a pool length?)

“You wouldn’t think about competing in the Olympics, but everybody thinks they can compete in the markets,” Dalio said.

The problem is that there’s much more money competing in those trades than you realize. Hundreds of millions of dollars coming and going from these same stocks, Dalio points out.

He would know. His fund is among the biggest movers of such money. “The worst thing you can do is think you can time all these movements. I guarantee it’s a tough game to time,” he said.

In fact, he says, it’s likely that even experienced investors will get confused and do the opposite of what they should — and that quickly gets dangerous.

“The greatest mistake of all investors is to think that what has done well lately is a better investment rather than more expensive. And what has done worse lately is the worst investment — get me out of it! — rather than it’s cheap.”

“Unless you know how to deal with the differences of those, which most people don’t, they’re going to be in trouble,” Dalio says.

So what should investors do? First, Dalio says, diversify. “Diversify by company, by country, by currency.”

Second, yes, you should invest. Waiting is a real risk. “Cash is seductive, no volatility, but it taxes you about 2% a year” because of inflation, Dalio notes.

Burt Malkiel, the Princeton professor who wrote the investment classic “A Random Walk Down Wall Street,” had this advice in a recent opinion column for The Wall Street Journal. Malkiel serves on the investment committee of my firm.

Yes, buy stocks, but do it the smartest possible way: In careful steps. In addition to diversification using index funds, Malkiel says, buy into the market over time.

“There is no need to complete any reallocation all at once,” Malkiel writes. “By moving money into equities slowly over time, you will ‘dollar-cost average’ your reallocations and avoid the feeling of regret you could experience by reallocating equities at prices that could be well above the ultimate market bottom.”

Put another way, invest without trading and definitely steer clear of speculating. Where the market goes in 10 or 20 years is what matters, not what stock you choose today with an eye toward dumping tomorrow.

That direction, ultimately, is up. Instead of worrying about what to buy, focus instead on what you pay to do your investing. It’s almost certainly too much, and that cost often determines your performance over the years.

Revolution Investing: Small-cap stocks will continue to underperform as companies lack a lifeline

We’re back to a wildly volatile market for small-cap stocks as large companies get richer and smaller companies get the shaft.

The iShares Russell 2000 ETF  dropped 4% on Tuesday, and it’s tumbling again Wednesday.

People were amazed that the stock market had regained almost all its losses. However, the “stock market” doesn’t really exist….