Sponsored by

Hey Money Maniacs,

Welcome back to 5 Fact Friday, your weekly roundup of the most important financial news.

Every day I read, research, and rummage through the economic landscape... so you don't have to.

Here's what's caught my attention this week:

1. Meta makes it rain 💸

Ahh, Mark Zuckerberg. Love him or hate him, just know you can’t beat him.

After watching Meta’s stock drop more than 75% during the Covid Correction, CEO Zuckerberg embarked on a “Year of Efficiency”. And boy, did that change of speed pay off.

In 2023, Meta’s profit grew 69% year over year and its stock tripled. Now, the company is officially doling out "Zuck Bucks" to its shareholders.

That’s right, the parent company behind your favorite time-sinks—Facebook, Instagram, and WhatsApp—has announced its first-ever dividend.

But why the sudden generosity? 🤔

Dividends are usually the hallmark of slow-moving, cash-rich companies—think utility providers and big banks, not tech titans with breakneck growth.

Meta's move signals confidence in its continued cash flow. It’s a shareholder-friendly decision and a nod toward a more stable, predictable future.

Some investors fear that a dividend signals a company transitioning from its wild growth phase to a more mature plateau. It could be viewed as a sign the company lacks investment opportunities.

To that, I say, look at Apple and Microsoft’s share price performance. Sometimes, there’s enough cash to go around.

Meta initiated the dividend at $0.50 per share, or $2 annually, implying a ~0.4% yield. In doing so, the company is courting a whole new crowd of income investors and dividend-loving funds.

Will this strategy pay off? Only time will tell, but for now, Meta's making it rain and that's worth a like, share, or maybe even a follow.

Get the facts, not opinions. 1440 delivers.

Overwhelmed by biased news? Cut through the clutter and get straight facts with your daily 1440 digest. From politics to sports, join millions who start their day informed.

2. Regional banks are back in the hot seat 😰

Remember the good ol’ days… when the most exciting thing about banks was their free pen policy, and the biggest risk was a paper cut from your new checkbook? Those days, my friends, seem like a distant memory in today's volatile world.

Lately, fears of another regional banking crisis are sweeping across Wall Street.

Round one was borne from rising interest rates and a liquidity crisis.

Silicon Valley Bank, Signature Bank, and others purchased long-dated bonds that temporarily lost value due to the Fed’s aggressive interest rate hikes. This left them in a tough spot as unprofitable startups (much of their customer base) slowly drew down their deposits.

This time, the spotlight's on the $20 trillion commercial real estate (CRE) market, which, let's just say, has seen better days.

Here's the deal: Office and retail property values have been on a freefall, thanks to our new BFFs, remote work and online shopping. But that's only the beginning.

More than $2.2 trillion of CRE debt matures in the next few years, putting the entire market in a bit of a pickle. Revenues are down and expenses are about to spike, if these properties can even refinance. If they can’t, we may see a wave of distressed sales—which could drag down the prices of neighboring properties too.

Why should you care? 🤔

Because regional banks, those not in the "too big to fail" VIP club, are knee-deep in commercial real estate loans. That’s right, these smaller banks hold a whopping 80% of the potentially toxic CRE loans.

Now cue the dramatic music… because this story might be starting to play out. New York Community Bancorp (NYCB) recently dropped a bombshell with a surprise $252 million loss in Q4, after netting a $172 million profit in the quarter prior.

Their loan losses? A jaw-dropping leap from $62 million to $552 million, thanks to some of those not-so-great bets on commercial real estate.

Shares took a nosedive (see above), but not just for NYCB. The contagion fear has spread faster than gossip in a high school cafeteria, with the U.S. Regional Bank index shedding ~8% faster than you can say "bank run."

3. China faces a deflationary spiral 📉

For more than a year, prices in China have been on a slippery slope. Consumer prices have dipped for 4 straight months and production prices have fallen for a whopping 16 consecutive months.

Lower prices don’t sound half bad, right? But what’s good for your wallet is not always good for the economy. Here’s why:

Imagine going to a sale and realizing prices will be even lower tomorrow, the next day, and the day after that…

When prices keep falling, consumers and businesses hit the pause button on spending and investment, hoping to cash in on lower prices later. This wait-and-see game slows down the economy, turning the cycle of deflation into a self-fulfilling prophecy of economic stagnation.

And here's the kicker: China's economic slowdown isn't just a local affair.

It sends ripples across the global pond, affecting everything from international trade dynamics to your local job market.

Lower demand from the world's 2nd largest economy means other countries could see a dip in their export numbers (see Apple’s slowing iPhone sales in China). Plus, there’s the potential for even cheaper goods flooding the market, sparking tariff talks and trade tensions.

To break this cycle, President Xi is reportedly focused on boosting the ailing Chinese stock market. Since its peak in 2021, the CSI 300—China’s S&P 500—is down more than 40%. Ouch.

Ready to elevate your investing journey to new heights?

Unlock the power of informed decision-making with our daily newsletter, tailored to empower investors like you. The Early Bird delivers crucial insights that keep you ahead in the stock market, ensuring you make profitable decisions. Sign up today.

4. Unemployment is low, but it’s complicated 🤔

At first glance, the latest jobs report was a banger.

In January, the U.S. economy added 353,000 new jobs, crushing analysts’ expectations of 180,000.

However, this news was so strong it re-ignited some inflation fears. The U.S. 10-year Treasury yield popped back above 4% and the probability of a March rate cut plummeted to 18%.

But hey, we should celebrate a strong economy, right? With unemployment staying below 4% since February 2022, you'd think we're all set for a financial fiesta. Not so fast.

Despite the low headline number, it’s important to remember how unemployment is calculated. This figure only takes into account people who are actively looking for work.

As it turns out, the labor participation rate of prime-age workers (25-54) has actually decreased since September. Although new unemployment claims are relatively low, continued unemployment claims remain elevated.

This reinforces the sentiment echoed across social media. It’s getting hard to find a good job after getting laid off—which could be why 694,000 people exited the labor market altogether last year.

5. Delaware sides with shareholders 👀

More than 68% of the Fortune 500 call Delaware home. Why? It’s widely regarded as the most business-friendly state in the nation.

Incorporating in Delaware provides:

1. Tax benefits

2. Privacy

3. Simplicity

4. Predictable legal precedents

Well, Elon Musk may beg to differ with that last point.

Last week, a Deleware judge struck down Musk’s $55 billion compensation package. He promptly responded on X, "Never incorporate your company in the state of Delaware."

The fact that they lost this in Delaware court," Dan Ives of Wedbush Securities remarked, "it's a jaw-dropper.

So, how did all of this go down? 😮

For one, Musk tied his compensation to revenue, profit, market capitalization, and other key metrics at Tesla. Every successful milestone entitled Musk to 1% of the company’s outstanding shares. In this way, Musk and shareholders had aligned interests.

During the plan, Tesla’s value increased from ~$50 billion to more than $800 billion. So Musk got $55 billion, and investors got a 16x return on their money.

Although both shareholders and Tesla’s Board of Directors approved the plan, critics argued that Musk had undue influence over what should have been a completely independent committee.

With this agreement now being overturned, investors have to ask themselves…

Would you have preferred a vanilla compensation package with a vanilla CEO? Or the full focus of one of the most talented (and controversial) entrepreneurs in the world?

I’d argue the results spoke for themselves. But I want to hear your thoughts! 👇

Thanks for tuning in to this week's edition! If you enjoy 5 Fact Friday, follow me on Instagram and Twitter to stay in touch.

Also, check out my latest blog post on how to save $20,000 in a year (and still have fun).

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.