💰 5 Fact Friday: Bulls, Buyers, & Boston Celtics

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Hey Money Maniacs,

I hope your 4th of July was filled with friends, family, and fireworks!

Last week, you voted on whether CEO pay has gotten out of hand, and your responses were loud and clear:

• 62% said “Yes”

• 25% said “Sometimes”

• 13% said “No”

Now, let’s get into this week’s biggest stories in the world of money. Today’s issue covers:

1. Bull Market Roars On 📈

2. Home Prices Rise, But Buyers Step Back 🏠

3. Boston Celtics: A Slam Dunk Investment 🏀

4. Tesla’s Q2 Bounce Back 🚗

5. 10 Ways To Save On Your Electric Bill💡

1. Bull Market Roars On 📈

On Wednesday, the S&P 500 logged its 33rd record close of the year, while the Nasdaq Composite notched its 23rd record close of 2024. Despite wars, political uncertainty, slowing consumer demand, and expensive valuations, the show goes on!

Markets continue to ride a bullish wave, thanks in part to recent remarks from Fed Chair Jerome Powell.

At the European Central Bank conference, Powell stated, “Inflation now shows signs of resuming its disinflationary trend.” He explained that the core Personal Consumption Expenditures (PCE) index, which rose just 2.6% in May, is nearing the Fed’s 2% target.

After Powell’s remarks, traders did what they do best and (over)reacted—with market-implied probabilities now suggesting 2-3 rate cuts this year. 

However, Powell cautioned that the Fed wants to see more consistent data before making any moves. He noted that the U.S. has the distinct privilege of being patient with rate cuts, due to a still-growing economy and a strong labor market.

This leaves us in a paradoxical “bad news is good news” scenario.

Every time consumer spending slows or the labor market weakens, the markets respond positively, seeing it as a step closer to rate cuts.

But who are we to judge?

Given that the markets have surged this year without any rate cuts, Powell deserves credit. He has successfully defied political pressure, remained patient, and communicated precisely enough to prevent a market crash.

2. Home Prices Rise, But Buyers Step Back 🏠 

Home prices continue to tick up, but closed deals are getting harder and harder to come by.

The median home price is up 6.1% year-over-year. However, compared to this point in the summer over the last three years, the market shows:

• More active listings: 955,300

• More months of supply: 3.3 months

• Longer time on the market for sold homes: median of 31 days

• Fewer homes sold above ask: only 32.3%

• More price drops: 6.7% of listings

It’s clear: with home prices rising and mortgage rates high, many buyers are staying on the sidelines. Redfin’s Homebuyer Demand Index is down 14%, and Google searches for “home for sale” are down 15% compared to last year.

The typical homebuyer’s monthly payment is now $2,785, just $54 below the record peak. This financial strain is creating a slowdown during what’s typically the most popular time to buy a home.

While these trends paint a grim picture, relief might finally be on the horizon. If inflation continues to cool, mortgage rates could decrease by year-end and bring more sellers and buyers back to the market.

Just don’t expect to see sub-3% mortgage rates anytime soon—those days are gone.

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3. Boston Celtics: A Slam Dunk Investment 🏀

The reigning champs are hitting the market, potentially fetching a record price for an NBA team.

The sale announcement, coming just two weeks after their championship win, has shocked the sports world. Analysts believe the Celtics could break the current record for the most expensive NBA franchise sale, currently held by the Phoenix Suns at $4 billion.

The Boston Celtics, bought for $360 million in 2002, are now valued at a jaw-dropping $5.1 billion. This makes them the fourth most valuable NBA team.

1. Golden State Warriors ($8.3 billion)

2. New York Knicks ($7.4 billion)

3. Los Angeles Lakers ($7.3 billion)

4. Boston Celtics ($5.1 billion)

A sale at $5.1 billion would imply a 12.8% annual return, beating the S&P 500's 9.5% return over the same period. In simpler terms, the Celtics' value increased 14x while the S&P 500 returned 7x over the last 22 years.

The Celtics' performance, loyal fan base, and historic brand contribute to its high valuation. However, the business side isn't all rosy.

Owner Wyc Grousbeck recently told the Boston Globe, “We are losing money… [and] we are unconcerned by that.” According to Sportico, team owners traditionally make their money from asset appreciation, not earnings.

This sale highlights a simple but important investment lesson.

Stocks often offer the best returns for a passive investment. However, the absolute highest returns come from business ownership, which involves active management, operational challenges, and greater risk.

4. Tesla’s Q2 Bounce Back 🚗

Although Tesla’s year-over-year deliveries dropped for the second straight quarter, the numbers were better than expected. Deliveries hit 443,956 vehicles, a 4.8% decline from Q2 2023, yet a 14.8% increase from Q1's disappointing results.

This recovery was enough to send the stock up 17% since Tuesday’s press release.

Behind the Numbers

1. Competition: Tesla remains the top dog in the global electric vehicle (EV) market, but its lead is shrinking. Its market share is now at 50%, down from 80% in 2020.

2. Market Dynamics: Cheaper Chinese rivals are undercutting Tesla’s prices, posing a serious threat. The Alliance for American Manufacturing has warned that low-priced Chinese EVs could be an “extinction-level event” for the U.S. auto industry.

3. Layoffs: Tesla's been forced to slash prices, squeezing their operating margins from 16.8% in 2022 down to 5.5% in Q1 2024. These struggles have led to significant layoffs, totaling 14,500 jobs this year—the most in all of tech.

4. Tariff Support: In a stroke of luck for Tesla, there is bipartisan support in the U.S. for tariffs on Chinese EVs. These tariffs aim to price out Chinese goods, bolstering American manufacturing and innovation.

The Road Ahead

Even after the recent rally, Tesla is the only stock in the Magnificent 7 that remains down year to date. Competitive forces from both inside and outside the U.S. continue to challenge its market position.

However, this Q2 performance offers a glimmer of hope, with analysts optimistic that the worst might be in the rearview mirror.

One thing is clear: As Tesla navigates these complexities, the company’s ability to innovate and adapt will be critical. The next big opportunity is Tesla’s robotaxi or “CyberCab” reveal, slated for August 8th.

5. 10 Ways To Save On Your Electric Bill💡

Summer is here, and so are those skyrocketing electric bills. Don’t sweat it! Here are 10 tips to keep your cooling costs in check:

1. Use Reflective Window Film: Apply reflective film on windows to reduce heat gain. This can block up to 70% of solar energy, keeping your home cooler without using extra energy.

2. Create a Cool Roof: Use reflective shingles or paint so your roof absorbs less heat. This can lower your roof temperature significantly and reduce the need for cooling.

3. Plant Shade Trees: Strategically plant trees or shrubs around your home to provide natural shade. Deciduous trees are ideal as they provide shade in the summer and allow sunlight in the winter when they lose their leaves.

4. Use Thermal Curtains: Thermal or insulated curtains can help keep the heat out during the day and retain cool air at night.

5. Cook Outdoors: Use an outdoor grill or microwave instead of your oven or stove to prevent adding extra heat to your home.

6. Run Appliances at Night: Run your dishwasher, washing machine, and other major appliances during off-peak hours, typically at night, to save on electricity costs and reduce the heat they generate during the day.

7. Replace Filters: Ensure your A/C is running efficiently by cleaning filters and scheduling regular maintenance. A clean unit can save 5-15% on energy use.

8. Seal Leaks and Insulate: Ensure your home is well-sealed and insulated to keep cool air in and hot air out. This includes weather stripping around doors and windows and adding insulation to your attic and walls.

9. Use Fans: Ceiling or portable fans use far less energy than air conditioning. They create a wind-chill effect, so you can raise your thermostat by a few degrees.

10. Smart Thermostats: Install a programmable or smart thermostat. Set it to raise the temperature when you're not home and cool down just before you return.

With these simple strategies, you can significantly reduce your electric bills and keep your home comfortable all summer long!

That’s all for today. For more insights, follow me on Instagram, Twitter, and at TheMoneyManiac.com.

Also, I’d love to hear your feedback. So please reply with comments – I read everything.

Until next time,
Daniel

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.