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2020 vs 2023: Are Economists Making The Same Mistake?

The following headline from a July 2020 CNBC article is stunning: Here’s why economists don’t expect trillions of dollars in economic stimulus to create…



The following headline from a July 2020 CNBC article is stunning: Here’s why economists don’t expect trillions of dollars in economic stimulus to create inflation.

In hindsight, so many economists could not have been more wrong in 2020 about the path of inflation. Today, despite their spurious track record, scores of economists exude confidence in their forecasts for a sustained rate of higher-than-average inflation and a soft economic landing.

Because of their terrible forecasting errors in 2020, let’s review the CNBC article and find the flaw in their logic. The value of this exercise is not to put economists down. Instead, it helps us better appreciate their current logic and how much credence we should put into their projections.

Background July 2020

The fiscal and monetary responses to the COVID pandemic were enormous. The economy was essentially shut down and collapsing at a speed unwitnessed in American history. Even three and half years removed from the onset of COVID, the New York Times headline and graphic below, detailing the unprecedented loss of jobs, is still remarkable.

Within six months of the pandemic’s start, the Federal Reserve grew its balance sheet by $2.8 trillion and cut the Fed Funds rate from 1.50% to 0%. For context, the Fed’s balance sheet growth in the first half of 2020 was $1.6 trillion more than the emergency QE1 conducted in 2008.

fed balance sheet

The Fed’s actions were meant to support failing financial markets but even more so to allow the government to borrow as much money as it wanted and at meager interest rates.

As shown below, the second quarter 2020 deficit was $2 trillion, or over $500 billion more than the annual deficit used to combat the financial crisis. All other quarterly deficits pale in comparison. 

federal deficits

Despite the massive fiscal and monetary onslaught and a severe breakdown in supply lines and the production of most goods, many Wall Street economists were sanguine about inflation prospects.

The Fed was not worried either. As a result, on June 10, 2020, the Fed’s outlook for inflation was 0.8% for the remainder of the year, 1.6% for 2021, and 1.7% for 2022. Over the longer run, they expected inflation to settle in at 2%. As we highlight below, of the 16 FOMC members surveyed, the highest estimate for inflation over multiple future periods was 2.20%. Unfortunately, PCE inflation ultimately peaked at 7.11%!

fed expectations dot plot

2020 Logic

The following comes from the article:

Supply shocks have driven up prices for some goods in recent months. Yet many economists expect consumer prices will stay low despite trillions of dollars in government stimulus.

“While there certainly is quite a lot of disruption to the supply side of the economy, that’s likely to be dominated by the huge hit to aggregate demand,” said Evercore ISI Vice Chairman Krishna Guha.

Krishna Guha sums up a popular opinion among economists at the time and one on which the Fed based monetary policy. Despite the sizeable stimulus and enormous supply-side disruptions, price increases would apparently be muted due to the “huge hit to aggregate demand.”

Economists chose to ignore everything except demand. They feared the velocity of money was declining at such a rapid pace it would offset the stimulus, supply line problems, and the unprecedented increase in the money supply.

Monetary velocity measures how often money circulates in an economy. Therefore, the more velocity, the more demand for goods and services.

To expect little inflation, they must have assumed consumers would save the stimulus money for a long time.  

The graph below shows the massive surge in the money supply and the recent decline. The increase was unprecedented, as is the current decline.

money supply annual change

Velocity Was Misjudged

Per the article:

At this stage, even with the Fed doing as much as it can, it’s still not leading to an enormous increase in demand,” Olivier Blanchard, a senior fellow at the Peterson Institute for International Economics- CNBC.

Blanchard goes on to say that the $1,200 stimulus checks from the federal government were not extensive enough to stoke inflation.

Despite limitations on what they could spend on, consumers ramped up their spending.

The graph below shows the initial COVID-induced plummet in retail sales. However, a rapid catch-up quickly followed. More importantly, spending continued much faster than the pre-pandemic trend.

retail sales gdp

Economists ignored tremendous amounts of data pointing to growing inflationary pressures and wrongly predicted a continued decline in monetary velocity. Hence, the colossal underestimate of inflation in mid-2020. The highlighted box in the following graph shows that velocity initially tumbled but quickly stabilized and slowly started rising. Its recovery occurred as the money supply was still increasing. 

money supply and velocity

Review 2020’s Inflation Factors

Before considering today’s situation, let’s summarize the environment of July 2020

  • Money supply up 20% year to date – Inflationary
  • Monetary velocity down 18% year to date – Disinflationary/Deflationary
  • Fed Balance Sheet up 66% year to date – Inflationary
  • Fed Funds down from 1.50% to 0.00% – Inflationary
  • Government deficit January through July $2.45 Trillion – Inflationary
  • Supply lines and means of production broken – Inflationary
  • Personal Savings rate rose 468% – Inflationary
  • Crude oil fell below $0 in April – Inflationary (prices could only rise)

Monetary Velocity, a proxy for aggregate demand, was weak for a short period, but virtually everything else happening in the economy was inflationary. Once it stabilized, inflation took off.

Current Situation

Let’s start by bringing the inflationary factors above up to date (October 2023).

  • Money supply down 2.25% year to date – Disinflationary/Deflationary
  • Monetary velocity up 5% year to date – Inflationary
  • Fed Balance Sheet down 7% year to date – Disinflationary/Deflationary
  • Fed Funds at 5.33% – Disinflationary/Deflationary
  • Government deficit Jan. through July $1.20 Trillion – Less inflationary
  • Supply lines and means of production fully healed – No marginal effect
  • Personal Savings fell 9% year to date – Disinflationary/Deflationary
  • Crude oil hovering around $85, $20 above the 5-year average – Disinflationary/Deflationary (prices more likely to revert to average)

It is now three and half years after the pandemic shock, and almost all the factors above have become disinflationary or deflationary. However, there is one outlier- monetary velocity. It is currently inflationary.

Velocity Is Not All That Matters

Once again, the sole focus of economists and the Federal Reserve continues to be on aggregate demand. This time, however, they think it continues to stay red hot.

Can it continue? The base case for inflation to remain higher than the Fed’s 2% objective and a soft landing is to assume it does.

The problem with such a hypothesis is that the U.S. economy’s growth and the financial system’s health depend highly on debt growth. Credit drives our economy, and the health of the economy drives consumer spending.  

While the money supply has fallen for ten consecutive months, a feat not accomplished since the Depression, it is still moderately above pre-pandemic levels. For the economy to grow over extended periods, money supply growth must keep up with economic growth.

That aspect makes the graph below concerning. The solid black line is the ratio of M2 to nominal GDP. The dotted line shows its trend. While the ratio is above pre-pandemic levels, it’s well below the trend. Since 2000, when the ratio was below trend, a recession ultimately occurred.

money supply velocity gdp

Barring renewed growth in M2, which entails lower rates, a steeper yield curve, and the cessation of QT, a recession is likely.

With a recession, unemployment will rise, wage growth will falter, and consumers will cut back on spending.

The only question in our mind is when.


Might economists and the Fed be making the same mistake as in 2020: too heavy of a reliance on demand and insufficient consideration for other price factors?

In July of 2020, it was hard to imagine that consumers would spend at the rates they ultimately did. Today, consumers seem to continue to spend despite whatever the Fed does to slow the economy.

It’s easy to get caught up in recent trends and believe they can continue for long periods. Consequently, it’s hard to imagine how they end.

Given the likelihood that economists are again myopic in their inflation forecasts and bond traders are betting on such projections, we see a day soon when a disinflationary or deflationary reality hits the bond market and bond yields plummet.

The post 2020 vs 2023: Are Economists Making The Same Mistake? appeared first on RIA.

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Three Top Tech Stocks Recommended by Cathie Wood of Ark Invest

Three top tech stocks recommended by Cathie Wood, the chief executive officer of New York-based Ark Investment Management LLC, are climbing. The three…



Three top tech stocks recommended by Cathie Wood, the chief executive officer of New York-based Ark Investment Management LLC, are climbing.

The three top tech stocks recommended by Cathie Wood are key holdings in the ARK Invest flagship fund, Ark Innovation ETF (ARKK), featuring a video streaming company, an innovative electric vehicle manufacturer and a cryptocurrency exchange platform. All are showing strong upward momentum, said Wood, who acknowledged receiving criticism from the CNBC business news television channel, CNBC, for aligning her investment firm’s focus on the long-term growth of the disruptive innovation in technology sector rather than short-term trades.

Chart courtesy of

One of the three top tech stocks to buy is Roku Inc. (NASDAQ: ROKU), a San Jose, California-based streaming service that seeks to provide users with content they love and advertisers with unique ways to engage with consumers. The company offers Roku TV models, streaming players and TV-related audio devices that are available in various countries around the world through direct sales and licensing arrangements with original equipment manufacturer (OEM) brands.

Three Top Tech Stocks Recommended by Cathie Wood: Roku

Roku zoomed more than 30% on Thursday, Nov. 2, due to its strong earnings report that day, Wood told me when I interviewed her at the COSM Technology Summit in Seattle that evening. Roku offers a “streaming platform” and finally people are starting to understand that it does not compete with Netflix Inc. (NASDAQ: NFLX), she added.

Paul Dykewicz interviews Cathie Wood at COSM.

Roku, a digital video company, reported revenue of $912 million for third quarter 2023, ended Sept 30, beating Wall Street analysts’ estimates of $857 million. In addition, Roku’s management offered guidance of fourth-quarter revenue reaching about $955 million, a bit more than the $952 million analysts that are expecting, according to FactSet.

Roku branded televisions and Roku Smart Home products are sold exclusively in the United States, while the company operates its Roku Channel as the home of free and premium entertainment with exclusive access to Roku Originals. The Roku Channel is available in the United States, Canada, Mexico and the United Kingdom.

Three Top Tech Stocks Recommended by Cathie Wood: Tesla

Her second top technology stock right now is Austin, Texas-based Tesla Inc. (NASDAQ: TSLA), a stock she has championed for several years through good and bad times as founder Elon Musk has persevered amid adverse circumstances. Tesla has become a world leader in producing electric vehicles (EVs).

Chart courtesy of

“We really do believe that now that GM and Ford are backing away from EVs, as they can’t make them profitably… market share is opening even more for Tesla,” Wood said. “Then, on top of that, we believe that the autonomous taxi opportunity is probably going to be theirs to win.”

Tesla has collected more “real-world driving data” than all the other vehicle manufacturers put together worldwide, Wood continued. The Musk-led company has 5,000 robots, including a Model 3 and a Model Y that Wood told me she personally is driving to help Tesla collect data about the roads that she traverses, as well as all that can go wrong on the roads.

“Tesla, we believe, is in the pole position to become the biggest investment opportunity that is out there today,” Wood told me.

Worldwide, electric vehicles will become an $8-$10 trillion-dollar revenue opportunity, Wood opined. That equals roughly 10% of the U.S. gross domestic product (GDP), she added.

“We’re really excited about that one,” Wood said.

Three Top Tech Stocks Recommended by Cathie Wood: Fast Money

Telsa produced big profits in several of the trade recommendations from Mark Skousen, PhD, and stock pick Jim Woods in the Fast Money Alert advisory service that they lead together. The tandem has recommended Tesla several times, but the best results came during 2020 when the company’s financial survival was in jeopardy.

Mark Skousen is a co-head of Fast Money Alert.

They recommended the purchase of Tesla stock and options in 2020. An average gain of 404% was attained by Fast Money Alert subscribers who followed instructions to purchase call options and then sell them in two separate segments for profits of 579.4% and 428.6%, respectively.

Jim Woods is a co-head of Fast Money Alert.

Three Top Tech Stocks Recommended by Cathie Wood: Coinbase

Coinbase Global, Inc. (NASDAQ: COIN), originally based in San Francisco, is a cryptocurrency trading platform that now describes itself as a remote-first company. It gives investors a chance to access the broader crypto economy beyond just bitcoin.

Chart courtesy of

With $114 billion in assets, Coinbase employs more than 3,400 people and operators in 100-plus countries. With its extensive international reach, Coinbase is positioned to become involved in crypto worldwide.

“We think Coinbase is spreading its wings around the world and that it will get into everything crypto,” Wood said.

Coinbase is known as an exchange, but it also offers a digital wallet, Wood said. She continued that Coinbase should be expected to become involved in all kinds of financial services that the crypto community calls DeFi, or decentralized finance, an umbrella term for peer-to-peer financial services on public blockchains.

“We’re pretty excited about that as well,” Wood said.

Three Top Tech Stocks Recommended by Cathie Wood: Bitcoin Boost

Another driver of opportunity for Coinbase could be a rebound in bitcoin.

Interestingly this year, bitcoin became a risk-off asset as a flight to safety occurred amid market uncertainty with interest rates rising and some regional banks failing.

Seasoned Wall Street trader Bryan Perry recommended Coinbase in August for his Hi-Tech Trader subscribers and advised the sale of the shares less than three months later for a profit of 5.35%. He also recommends options in Hi-Tech Trader and still has such a Coinbase trade outstanding that has yet to close.

Bryan Perry heads the Hi-Tech Trader advisory service.

Three Top Tech Stocks Recommended by Cathie Wood: Bitcoin Bump

Bitcoin shot up earlier this year from $19,000 to $30,000 because there is no counter party risk in bitcoin like there is in the regional banking system, Wood said.

Wood expects the U.S. Securities and Exchange Commission will soon approve a bitcoin exchange-traded fund. That will be a key signal to validate bitcoin, she added.

Bitcoin still has its critics. One of them is Professor Dennis Ridley, an economist who has faculty positions at both Florida State University and Florida A&M University. Professor Ridley was a panelist at the COSM Technology Summit with George Gilder, co-founder and senior fellow at the Discovery Institute and head of the Gilder’s Technology Report investment newsletter.

“I do not trust Bitcoin,” Professor Ridley said. “I hope we can return to the gold standard.”

Gilder personally owns bitcoin, but he focuses on his passion of technology investing as one of the world’s foremost futurists. His Gilder’s Technology Report is a monthly publication but it is supplemented with updates in the weeks when the newsletter is not sent to his subscribers.

Paul Dykewicz meets with George Gilder, head of Gilder’s Technology Report.

Political Risk Mounts with Wars in the Ukraine and the Middle East

Even though the three technology investments to buy rebounded in the first part of 2023 after the sector fell more than 30% in 2022, they slid again in recent months before perking up lately. Investors need to withstand headwinds of higher-for-longer interest rates, runaway federal deficits and rising political risk with Russia’s unrelenting war in Ukraine amid escalating attacks in the Middle East following the murderous Oct. 7 rampage by Hamas inside Israel.

President Joe Biden invoked the Defense Production Act on Oct. 30 in a technology-related executive order only meant to be issued in the most urgent of moments, such as mobilizing the nation during war time or developing COVID vaccines amid a pandemic. His executive order about artificial intelligence (AI) applied the same authority to make companies prove that their most powerful systems are safe before allowing their use.

That means companies must tell the government about the large-scale AI systems they’re developing and share rigorous independent test results to prove they pose no national security or safety risk to the American people, President Biden said. At the same time, President Biden said he would direct the Department of Energy to ensure AI systems don’t pose chemical, biological, or nuclear risks.

In the wrong hands, AI can make it easier for hackers to “exploit vulnerabilities” in the software that makes American society run, President Biden said.

For that reason, President Biden said he was directing the Department of Defense and the Department of Homeland Security to develop “game-changing cyber protections” that will make computers and critical infrastructure more secure than today. As part of that response, President Biden said his administration would take “decisive steps” to prevent the use of cutting-edge AI chips that could undermine U.S. national security, he added.

Paul Dykewicz,, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at and He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is a great holiday gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.

The post Three Top Tech Stocks Recommended by Cathie Wood of Ark Invest appeared first on Stock Investor.

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Guest Contribution: “The Fed Approaches the End of the Rate Hiking Cycle”

Today, we present a guest post written by David Papell and Ruxandra Prodan, Professor and Associate Instructional Professor of Economics at the University…



Today, we present a guest post written by David Papell and Ruxandra Prodan, Professor and Associate Instructional Professor of Economics at the University of Houston.

The Federal Open Market Committee (FOMC) maintained the target range for the federal funds rate (FFR) at 5.25 – 5.5 percent in its November 2023 meeting. While the September 2023 Summary of Economic Projections (SEP) projected a range between 5.5 and 5.75 percent by the end of 2023, it clear that the Committee will wait before deciding whether to end the rate hiking cycle or to have one more rate increase at a subsequent meeting.

There is widespread agreement that the Fed fell “behind the curve” by not raising rates when inflation rose in 2021, forcing it to play “catch-up” in 2022. “Behind the curve,” however, is meaningless without a measure of “on the curve.” In the latest version of our paper, “Policy Rules and Forward Guidance Following the Covid-19 Recession,” we use data from the SEP’s from September 2020 to June 2023 to compare policy rule prescriptions with actual and FOMC projections of the FFR. This provides a precise definition of “behind the curve” as the difference between the FFR prescribed by the policy rule and the actual or projected FFR. We analyze four policy rules that are relevant for the future path of the FFR in the post:

The Taylor (1993) rule with an unemployment gap is as follows,

where Rt is the level of the short-term federal funds interest rate prescribed by the rule, πt is the inflation rate, πLR is the 2 percent target level of inflation, ULRt is the 4 percent rate of unemployment in the longer run, Ut is the current unemployment rate, and rLRt is the ½ percent neutral real interest rate from the current SEP.

Yellen (2012) analyzed the balanced approach rule where the coefficient on the inflation gap is 0.5 but the coefficient on the unemployment gap is raised to 2.0.

The balanced approach rule received considerable attention following the Great Recession and became the standard policy rule used by the Fed.

These rules are non-inertial because the FFR fully adjusts whenever the target FFR changes. This is not in accord with FOMC practice to smooth rate increases when inflation rises. We specify inertial versions of the rules based on Clarida, Gali, and Gertler (1999),

where p is the degree of inertia and  is the target level of the federal funds rate prescribed by Equations (1) and (2). We set p as in Bernanke, Kiley, and Roberts (2019). Rt-1 equals the rate prescribed by the rule if it is positive and zero if the prescribed rate is negative.

Figure 1 depicts the midpoint for the target range of the FFR for September 2020 to September 2023 and the projected FFR for December 2023 to December 2026 from the September 2023 SEP. Following the exit from the ELB to 0.375 in March 2022, the FFR rose to 5.375 in September 2023 and is projected to rise to 5.625 in December 2023 before falling to 4.875 in December 2024, 3.875 in December 2025, and 2.875 in December 2026. The figure also depicts policy rule prescriptions. Between September 2020 and September 2023, we use real-time inflation and unemployment data that was available at the time of the FOMC meetings. Between December 2023 and December 2026, we use inflation and unemployment projections from the September 2023 SEP. The differences in the prescribed FFR’s between the inertial and non-inertial rules are much larger than those between the Taylor and balanced approach rules.

Figure 1. The Federal Funds Rate and Policy Rule Prescriptions. Panel A. Non-Inertial Rules

Policy rule prescriptions are reported in Panel A for the non-inertial Taylor and balanced approach rules. They are not in accord with the FOMC’s practice of smoothing rate increases when inflation rises. The prescriptions for the two rules are identical at the ELB through March 2021. The FOMC fell behind the curve starting in June 2021 when the prescribed FFR increased from the ELB of 0.125 to 2.625 for the Taylor rule and to 0.375 for the balanced approach rule while the actual FFR stayed at the ELB. The policy rule prescriptions sharply increased through 2021 and peaked in March 2022 to 7.875 for the Taylor rule and 8.125 for the balanced approach rule when the FFR first rose above the ELB to 0.375. The gap also peaked in March 2022 at 750 basis points for the Taylor rule and 775 basis points for the balanced approach rule. The gap narrowed considerably between March 2022 and September 2023 as the FFR rose from 0.375 to 5.375 while the Taylor rule prescriptions fell to 6.125 and the balanced approach rule prescriptions fell to 6.625. Looking forward, the gap between the FFR projections and the policy rule prescriptions reverses in December 2023 and the FFR projections are above the policy rule prescriptions through December 2026.

Figure 1. The Federal Funds Rate and Policy Rule Prescriptions. Panel B. Inertial Rules

Panel B reports the results for the inertial Taylor and balanced approach rules. They are much more in accord with the FOMC’s practice of raising the FFR slowly when inflation rises. The prescriptions for the two rules are identical at the ELB through March 2021 and rise to 0.375 for the Taylor rule in June 2021. The FOMC fell behind the curve starting in September 2021 when the prescribed FFR increased to 0.875 for the Taylor rule and 0.625 for the balanced approach rule while the actual FFR stayed at the ELB. The gap between the policy rule prescriptions and the FFR peaked in March 2022 at 200 basis points when the prescribed FFR was 2.325 for both rules while the FFR first rose above the ELB to 0.375.

The Fed is no longer behind the curve. The gap narrowed steadily and, in September 2023, the FFR was equal to the inertial balanced approach rule prescription and 25 basis points above the inertial Taylor rule prescription. As of the November 2023 meeting, it is unclear whether the FOMC will follow the prescriptions in the September 2023 SEP and raise the FFR to 5.625 or leave it unchanged at 5.375 at the December 2023 meeting. If the FOMC raises the FFR to 5.625, it will be 25 basis points above the balanced approach rule prescription and 50 basis points above the Taylor rule prescription. If the FOMC leaves the FFR unchanged at 5.375, it will be equal to the balanced approach rule prescription and 25 basis points above the Taylor rule prescription.

The inertial rules prescribe a much smoother path of rate increases from September 2021 through June 2023 than that adopted by the FOMC. If the Fed had followed the inertial Taylor or balanced approach rule instead of the FOMC’s forward guidance, it could have avoided the pattern of falling behind the curve, pivot, and getting back on track that characterized Fed policy during 2021 and 2022. Looking forward, the FFR projections from the September 2023 SEP are generally 25 basis points above the policy rule prescriptions through June 2025, equal to the policy rule prescriptions through March 2026, and 25 basis points below the policy rule prescriptions through December 2026. The current and projected FFR is in accord with prescriptions from inertial policy rules.


This post written by David Papell and Ruxandra Prodan.

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Beloved fast-food chain files for Chapter 11 bankruptcy

The popular Boston-based fast-food restaurant chain filed for Chapter 11 to stabilize and restructure its business.



Iconic and essential retailers have been marching into bankruptcy court this year as issues related to supply chain disruptions, rising inflation and other financial difficulties pushed many into Chapter 11.

Giant retailer Rite Aid on Oct. 15 filed Chapter 11 as it has struggled financially for many years competing against Walmart WMT, Costco COST, CVS CVS and Walgreens Boots Alliance WBA drug retailer Walgreens. Tough competition, however, wasn't what pushed Rite Aid over the edge, as potential liability from a Department of Justice civil lawsuit, which it filed against the company in March 2023, forced Rite Aid to file.

Related: Essential retailer closing more stores in bankruptcy

In its lawsuit, the DOJ alleged that Rite Aid's pharmacists inappropriately filled opioid prescriptions, contributing to the opioid epidemic by “repeatedly filled prescriptions for controlled substances with obvious red flags" and it "intentionally deleted internal notes about suspicious prescribers.” The debtor is hoping to negotiate a favorable settlement in bankruptcy that won't cost it billions. The company has already identified 178 stores that it plans to close to cut costs.

Upscale furniture maker Mitchell Gold + Bob Williams revealed it was having financial trouble in late August and unexpectedly closed its 27 stores across 14 states and multiple Canadian provinces on its way to filing Chapter 11. The company was unable to secure adequate debtor-in-possession financing, which prompted Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court of Delaware to subsequently force the retailer into Chapter 7 liquidation.

Restaurant operators file Chapter 11

Restaurants are also having a tough time this year. Several fast-food restaurant franchisees have faced economic distress from a number of issues such as labor needs, economic woes and changes in consumer behavior. Burger King operators Meridian Restaurants and Toms King filed Chapter 11 this year blaming high costs and slow sales, Restaurant Dive reported. Hardee's restaurant operator Summit Restaurant Holdings with 106 units also filed bankruptcy in May and either closed or sold off its restaurants.

Some struggling restaurant chains are able to close underperforming locations without filing bankruptcy. In June, vegan/vegetarian fast-casual restaurant chain Veggie Grill closed six of its restaurant locations in California citing reduced demand for its fast-casual dining offering from a shift to hybrid work models, the company's CEO T.K. Pillan said in an email to Patch. A review of the company's website shows that it still operates 12 locations in California, two in Oregon, two in Washington and one in Massachusetts.

Fast-food chain Clover Food Lab has filed Chapter 11 to reorganize its business.

Clover Food Lab

Vegetarian fast-food chain files for bankruptcy

Boston-based vegetarian fast-food restaurant chain Clover Food Lab on Nov. 3 filed for Chapter 11 Subchapter 5 bankruptcy in the U.S. Bankruptcy Court for District of Delaware to reorganize its business as its sales have not fully recovered from the effects of the Covid pandemic, according to its website.

In addition to lower than expected sales, the company in court papers said that high rent for its locations and inadequate funding as a result of the failure of Silicon Valley Bank contributed to the chain's distress, WBUR reported. The restaurant chain had planned to raise capital to expand in New England and into New York but the fallout from the failure of Silicon Valley Bank led its financing plans to collapse.

High rents and low sales at three of its locations led the company to seek lease concessions from its landlords, which was unsuccessful and forced the company to file bankruptcy.

"COVID changed everything for restaurants like us," the company said in a statement on its website. "The way we eat, drink, work, and get together has shifted substantially and, while Clover has seen a steady recovery in sales (and the creation of a whole new part of Clover with our meal box program) our sales are still below pre-pandemic levels. So, we’ve decided to use Chapter 11 Subchapter 5 bankruptcy  to reorganize the company."

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