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Is Carvana Going To Declare Bankruptcy?



Key Takeaways

  • Carvana is looking to be on the brink of bankruptcy, with yields on their corporate notes above 30% according to the Wall Street Journal.
  • The stock price has jumped in early trading on Thursday after a major crash this week.
  • Despite this bounce, the price has collapsed almost 98% to just over $4 since it’s all-time high of $77 in August 2021.

It’s not looking too good for Carvana right now. The stock has collapsed over the past five days amid bankruptcy rumors, dropping 52.54% from the end of last week to the market close on Wednesday.

The biggest falls occurred on Wednesday with the stock price falling almost 43%. The losses come as rumors spread that Carvana’s major creditors have signed an agreement on the process of negotiating a restructure in the event of bankruptcy.

In short, it appears as if the online used car dealer may be getting their ducks in a row should they go under. It’s an outcome that’s not yet confirmed, but it’s looking increasingly likely by the day.

While the price drops this week have been savage, it’s not the first sign of volatility for Carvana with the stock down almost 98% so far this year.

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Why is Carvana stock down so much?

Like many companies, Carvana stock was pumped up during the Covid-19 pandemic. It was a time where credit was still cheap, and global lockdowns had all but stopped the supply of new vehicles.

It created a huge level of demand for used vehicles, and in particular drove a massive switch to online shopping, even for cars. The idea of avoiding a trip to a dealership during a global pandemic was attractive, for obvious reasons. For many months, even customers who wanted to visit a physical dealership weren’t able due to government enforced closures.

Carvana capitalized on this trend by allowing customers to browse and purchase used cars, all without leaving the house.

By the back end of 2021, Carvana was looking like a major success story. They announced Q2 results which included their first ever quarterly profit and the stock price hit an all-time high of $377 in August.

Yesterday it closed at $4.04.

So how did Carvana fall so far, and so fast? To start with, they’ve borrowed an eye-watering sum of money to fund their growth and general expenses. This included spending $2.2 billion to acquire physical used car auction house KAR Global.

At the same time, used car prices were skyrocketing due to lack of supply. This was a double edged sword for Carvana. On one hand, it meant a greater demand for used vehicles for them, but on the other it meant that they needed to pay high prices themselves to secure their inventory.

Not only that, but Carvana also spent huge sums of money on marketing throughout this period, including splashing out on a commercial during the Super Bowl, with an estimated ticket price of up to $7 million.

Since then, the world has begun to change. We’ve seen a return to normality, with many car shoppers now going back to physical dealerships. Not only that, but with a shaky economy and credit becoming much more expensive, demand for used cars has dropped substantially.

Total used car sales numbers are expected to be 12% lower in 2022 than they were last year. Not only that but Carvana’s profit per vehicle has dropped by 25% compared to this time last year.

Lower sales figures combined with high cost of goods for inventory, plus significant debt servicing requirements, puts Carvana in a difficult position.

Carvana’s debt is a major problem

And about that debt. Total liabilities at the end of September equated to almost $9.25 billion with just $666 million cash on hand. Not only that but diluted earnings per share in the 12 months prior was -$9.05.

This position has caused Carvana corporate bonds to crash hard. According to the Wall Street Journal, the yield on their 10.25% notes has risen to over 30%. Sure, a 30% yield looks nice, but it reflects a huge level of skepticism as to whether the company has the ability to pay back the funds.

Carvana’s prospects don’t look great

The issue isn’t just that Carvana is dealing with these issues, it’s also that they’re likely to get worse over the coming months. Auto loan rates are at the highest levels they’ve been in 15 years, meaning the monthly repayments on vehicles are significantly higher than they were just 12 months ago.

At the same time, the average price for a used car is still near its record high at $28,200 and households are dealing with high prices for everything from groceries to electronics to rent and healthcare.

The Fed has increased interest rates at the fastest rate since the early 1980’s and they’re not likely to stop the cycle soon. Inflation has started to come back down, but it’s still very high on a historical basis.

We can expect to see a number of further rate hikes over the coming year, which is going to make auto loans even more expensive. This is likely to continue to weigh heavily on the demand for Carvana’s sizable inventory.

It’s a sentiment shared by many, with some analysts such as Wedbush Securities’ Seth Bashman slashing 12-month price forecasts to as low as $1. If they survive that long.

What does Carvana’s crash mean for investors?

For investors who are already in, it’s a tough call. Do you cut your losses and salvage what funds you have left, or do you hold on for the chance of a recovery? Obviously that’s not our call to make, but if you’ve ridden this all the way from the peak, the current market price represents close to a total loss already.

For investors on the sidelines hoping to avoid anything similar happening to their own portfolio, there’s a pretty simple strategy to limit the damage.


Sure, that could mean spreading your own investments across a large number of individual stocks, hoping that you’re able to pick more winners than losers. In an economic environment that’s particularly challenging, that’s more difficult now than it was a year or two ago.

Alternatively, you could enlist the help of artificial intelligence to help run your portfolio by using what we call our Investment Kits. At, we use the power of AI to analyze massive amounts of data and make predictions on how different investments are going to perform each week. The AI then automatically rebalances your portfolio in line with those predictions.

If you’re looking for a broad portfolio that covers the US stock market, the Active Indexer Kit is a great option which looks to adjust the mix between large caps and small caps, while also adjusting exposure to tech companies.

You can also add Portfolio Protection to this Kit, which utilizes AI to assess your portfolio’s sensitivity to various forms of risk. It then automatically implements sophisticated hedging strategies to help guard against them.

It’s like having your own personal hedge fund, right there on your phone.

Download today for access to AI-powered investment strategies.


Bonds See 2023 Recession, Stocks Aren’t So Sure



The yield curve is one of the most robust recession predictors and has signaled a recession may be coming since mid 2022. In contrast, U.S. stocks as measured by the S&P 500 are up materially from the lows of last October and only just below year-to-date highs, seemingly rejecting recession fears. Yet, fixed income markets see the Fed potentially cutting rates by the summer, perhaps reacting to a U.S. recession.

The Evidence From The Bond Markets

The recessionary evidence, at least from fixed income markets, is mounting. The 10 yield Treasury yield has been below the 2 year yield consistently since last July. That is is called an inverted yield curve and has signaled a recession fairly reliably when compared to other leading indicators.

Building on that, fixed income markets see almost a nine in ten chance that the Federal Reserve cuts rates by September of this year. That’s something the Fed has repeatedly said they won’t do on their current forecasts. Yet, a recession could cause it to happen.

The Stock Market

In contrast, the stock market shows some optimism. The S&P 500 is up 7% year-to-date as the market has shrugged off fears of contagion from recent banking issues. In particular, tech stocks have rallied.

In contrast, more defensive sectors such as healthcare, utilities and consumer goods have lagged in 2023. This suggests that the stock market is taking more of a ‘risk on’ position and is perhaps less worried about the economy.


That said the stock market is a leading indicator of the business cycle, it may be that stocks see a recession, but are now looking past it to growth ahead and are factoring in the lower discount rates that a recession might bring as interest rates decline. Also, the U.S. stock market is relatively global, so the fate of the U.S. economy is a key factor in driving profits, but not the only one.

What’s Next?

Monitoring unemployment data will be key. Though the yield curve is a good long-term forecaster of recessions it is less precise in signaling when a recession starts. Unemployment rates can offer more accurate recession timing. Unemployment edged up in February, suggesting a recession may be near, but we’ve also seen monthly noise unemployment. Two similar monthly unemployment spikes during 2022 both proved false alarms.

However, if we see a sustained move up in unemployment from the low levels of 2022 that may be a relatively clear sign that a recession is here. Economist Claudia Sahm estimates that a sustained 0.5% increase in unemployment rate from 12-month lows is sufficient to trigger a recession. Unemployment rose 0.2% from January to February 2023, so maybe we’re on the way there. Of course, the jobs market performed better than expected in 2022 and it could do so again. Still, fixed income markets do suggest a 2023 recession is coming. Stock markets don’t necessarily share that view.

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Which States Have The Highest And Lowest Life Expectancies?



There’s a wide variance of life expectancies among the 50 states in the U.S., according to a recent report prepared by Assurance, an insurance technology platform that helps consumers with decisions related to insurance and financial well-being.

Figure 1 below shows the 10 states with the highest life expectancy, starting with Hawaii, the state with the highest life expectancy.

Figure 2 below shows the 10 states with the lowest life expectancy, starting with Mississippi, the state with the lowest life expectancy.

Assurance scoured life expectancy data prepared in January 2023 by the U.S. Centers for Disease Control and Prevention (CDC). With this data, Assurance created several easy-to-understand graphics that offer information about life expectancies.

Life expectancies are a basic measure of well-being

As measured by the CDC, life expectancies are a basic measurement of well-being in a broad population and not a prediction of how long an individual might live. The CDC measures the expected lifespan for a person born in the year of measurement. This measurement is calculated based on the assumption that the individual will live and die according to the rates of death that are prevalent in the measurement year for each age. There’s no assumed improvement or backsliding in the assumed mortality rates in future years for each age in the life expectancy calculation.


By contrast, an estimated lifespan for an individual would consider their current age, their gender, and some basic lifestyle information. It might also attempt to project future improvements or backsliding in mortality rates based on key factors.

Significant influences on life expectancy calculations

Leading causes of death in the U.S. are heart disease, cancer, and accidents in that order. These immediate causes are significantly influenced by factors in the population such as poverty rates, educational attainment, rates of obesity and smoking, access to healthcare, prevalence of violent crime, and the support people receive from federal, state, and local governments. All these factors can vary widely among different states, which can be a key reason why life expectancies vary by state.

When you think about it, all these factors also have the potential to influence a person’s quality of life. The measured life expectancy rate rolls up all these factors into one objective measurement of well-being that’s based on population data.

In addition to the factors listed above, mortality rates increased and life expectancies decreased in the past few years due to the Covid-19 pandemic. A recent article titled “Live Free And Die” summarized recent research results that show that life expectancies in most countries around the world rebounded after the Covid-19 pandemic but that they continued to decline in the United States. Many of the reasons cited in the article for the continued decline in U.S. life expectancies are the same or similar to the factors listed above.

NPR‘Live free and die?’ The sad state of U.S. life expectancy

Why should retirees care about the life expectancies reported here if these measures don’t predict your own lifespan? Life expectancy calculations indicate the general well-being of the entire population in your area. While the living conditions in your area can influence your own lifespan and quality of life, retirees should focus on their remaining life expectancy given their age. They should also consider how the factors listed above that influence life expectancies in the population might apply to them.

You can obtain customized estimates of your remaining life expectancy at the Actuaries Longevity Illustrator. Part of your planning for retirement is understanding how long you an an individual might live, instead of relying on generalized information about larger populations you see in the media.

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IRS Dirty Dozen Campaign Warns Taxpayers To Avoid Offer In Compromise ‘Mills’



Owing taxes can be stressful. Unfortunately, the actions of some companies can make it worse. As part of its “Dirty Dozen” campaign, the IRS has renewed a warning about so-called Offer in Compromise “mills” that often mislead taxpayers into believing they can settle a tax debt for pennies on the dollar—while the companies collective excessive fees.

Dirty Dozen

The “Dirty Dozen” is an annual list of common scams taxpayers may encounter. Many of these schemes peak during tax filing season as people prepare their returns or hire someone to help with their taxes. The schemes put taxpayers and tax professionals at risk of losing money, personal information, data, and more.

(You can read about other schemes on the list this year—including aggressive ERC grabs here, phishing/smishing scams here and charitable ploys here.)

Tax Debt Resolution Schemes

“Too often, we see some unscrupulous promoters mislead taxpayers into thinking they can magically get rid of a tax debt,” said IRS Commissioner Danny Werfel.

“This is a legitimate IRS program, but there are specific requirements for people to qualify. People desperate for help can make a costly mistake if they clearly don’t qualify for the program. Before using an aggressive promoter, we encourage people to review readily available IRS resources to help resolve a tax debt on their own without facing hefty fees.”


Offers In Compromise

Legitimate is a key word. Offers in Compromise are an important program to help people who can’t pay to settle their federal tax debts. But, as the IRS notes, these “mills” can aggressively promote Offers in Compromise—OIC—in misleading ways to people who don’t meet the qualifications, frequently costing taxpayers thousands of dollars.

An OIC allows you to resolve your tax obligations for less than the total amount you owe. You generally submit an OIC because you don’t believe you owe the tax, you can’t pay the tax, or
 exceptional circumstances exist.

Because of the nature of the OIC—and the dollars involved—the process can be time-consuming. It can also be confusing for taxpayers who may not have a complete grasp on their finances.

First, you must complete a detailed application, Form 656, Offer in Compromise. You must also submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B, Collection Information Statement for Businesses, with supporting documentation (generally, bank and brokerage statements and proof of expenses).

You’ll also need to submit a non-refundable fee of $205 and payment made in good faith. The payment is typically 20% of the offer amount for a lump sum cash offer or the first month’s payment for those made over time. Generally, initial payments will not be returned but will be applied to your tax debt if your offer is not accepted. Payments and fees may be waived if the OIC is submitted based solely on the premise that you do not owe the tax or if your total monthly income falls at or below income levels based on the Department of Health and Human Services (DHSS) poverty guidelines.

The IRS will examine your application and decide whether to accept it based on many things, including the total amount due and the time remaining to collect under the statute of limitations. The IRS will also review your income—including future earnings and accounts receivables—and your reasonable expenses, as determined by their formula. The IRS will also consider the amount of equity you have in assets that you own—this would include real property, personal property (like automobiles), and bank accounts.


Before your offer can be considered, you must be compliant. That means you must have filed all your tax returns and paid off any liabilities not subject to the OIC. After you submit your offer, you must continue to timely file your tax returns, and pay all required tax, including estimated tax payments. If you don’t, the IRS will return your offer.

Additionally, you cannot currently be in an open bankruptcy proceeding, and you must resolve any open audit or outstanding innocent spouse claim issues before you submit an offer.


You can probably tell—it’s a lot to consider. You may want representation. A tax professional can help marshal you through the process and offer practical guidance, while communicating what fees could look like.

By contrast, according to the IRS, an OIC “mill” will usually make outlandish claims, frequently in radio and TV ads, about how they can settle a person’s tax debt for cheap. Also telling: the fees tend to be significant in exchange for very little work.

Those mills also knowingly advise indebted taxpayers to file an OIC application even though the promoters know the person will not qualify, costing taxpayers money and time. You can check your eligibility for free using the IRS’s Offer in Compromise Pre-Qualifier tool.

“Pennies On A Dollar”

What about those promises that taxpayers can routinely settle for pennies on a dollar? Not true. Generally, the IRS will not accept an offer if they believe you can pay your tax debt in full through an installment agreement or equity in assets, including your home. That’s why the IRS tends to reject a majority of OICs that are submitted. The acceptance rate is less than 1 in 3, according to the 2021 Data Book.

The IRS will generally approve an OIC when the amount offered represents the best opportunity for the IRS to collect the debt. It’s true that there’s a formula that the IRS uses to figure out how much they think they can collect from you. But there is some wiggle room to account for special circumstances, including a loss of income or a medical condition. It’s worth noting those are the exceptions, not the rule.


While submitting an OIC may keep the IRS from calling you, it doesn’t stop all collections activities—don’t believe companies that suggest that submitting an OIC will make your tax debt disappear. Penalties and interest will continue to accrue on your outstanding tax liability. Additionally, the IRS may keep your tax refund, including interest, through the date the IRS accepts your OIC.

You may also be liened. In most cases, the IRS will file a Notice of Federal Tax Lien to protect their interests, and the lien will generally stay in place until your tax obligation is satisfied.

Be Skeptical

An OIC is a serious effort to resolve tax debt and shouldn’t be taken lightly. Be skeptical—if it sounds too good to be true, it likely is. If you’re considering an OIC, hire a competent tax professional who understands the rules and is willing to level with you about your chances of being successful—including other options. Don’t fall into a trap that can make your situation worse.

MORE FROM FORBESIRS Urges Those Hoping To Help To Beware Of Scammers Using Fake Charities

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