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Hey Money Maniacs,

Welcome back to another edition of 5 Fact Friday! Here are this week’s biggest stories in the world of money:

1. All-Time Highs Everywhere 🚀

Put some guac on that burrito bowl. Call your mom. Take a deep breath and relax. Life is good.

Why? The financial world is breaking records and taking names.

Bitcoin, the ever-dramatic lead, soared to a new all-time high after 846 days of anticipation. But just as soon as it came, it went.

After briefly surpassing $69,000, the cryptocurrency experienced a ~15% flash crash. Since then, it has rallied most of the way back and settled at around $67,000.

With Bitcoin now up more than 300% from its lows, retail traders appear to be returning to join in on the excitement. As evidence, Coinbase recently peaked at #49 on the App Store after starting the year at #489.

Gold is having itself a year too.

The precious metal finally broke through the $2,100 per ounce barrier, setting a fresh all-time high.

Peter Boockvar, CIO at Bleakley Financial Group, points out that gold’s inflation-adjusted high is closer to $3,200. While this could reflect a long period of underperformance, Boockvar believes that it indicates more “potential upside.”

Now that’s a glass-half-full kind of attitude.

And let's not forget about the Nasdaq, which recently registered an all-time high as well. Thanks to a 10% year-to-date return and a 43% jump in 2023, the tech-heavy index finally eclipsed its November 2021 peak.

This makes it the last major U.S. stock index to reach record levels this year.

Rise and grind, dollar bills!

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2. Cracks Emerge In The Magnificent Seven 🤨

In 2017, Jim Cramer coined the acronym FAANG, grouping five of the biggest tech companies of the day:

• Facebook (now Meta)

• Apple

• Amazon

• Netflix

• Google (now Alphabet)

In 2023, all attention shifted to the Magnificent Seven – a new group of stocks that had significantly outperformed the S&P 500:

1. Meta

2. Apple

3. Amazon

4. Alphabet

5. Microsoft

6. Nvidia

7. Tesla

These giants have been pivotal in driving the market's recovery over the past year, and that’s why they now represent a staggering 28% of the S&P 500.

So whether you’re an active trader or an “index and chill” kind of investor, you almost certainly have exposure to these names.

However, recent developments suggest that not all is well in the tech kingdom.

Google’s latest AI release faced criticism and mockery for its historically inaccurate responses.

Apple shelved its ambitious iCar project after a reported $10 billion investment. The EU slapped the company with a $2 billion antitrust fine over its monopolistic App Store practices. Plus, iPhone sales are down 24% in China – Apple’s second-largest market.

Similarly, Tesla saw a 19% sales decline in China in February due to increasing competition from BYD.

Due in part to these challenges, these three stocks all have negative returns year to date.

Don’t worry – the other four continue to outperform the market. But this divergence could lead to even greater concentration in the S&P 500.

So while it’s no time to play Nostradamus, it is worth keeping an eye on investments that are priced to perfection. Even a small deviation from the expected path of these heavy hitters could have an outsized impact on the market and your portfolio.

3. The Wage Gap Grows 📈

According to a Wall Street Journal poll, most Americans don’t think college is worth the price tag. However, salary data from the Federal Reserve Bank of New York would beg to differ.

In 2023, college grads bagged a median annual wage of $60,000, towering over the $36,000 earned by their high school diploma-holding counterparts. That's a whopping $24,000 difference per year.

But wait, there’s more.

As you can see above, inflation-adjusted wages earned by high school graduates are flat at best. College graduates, on the other hand, have experienced real wage growth over the past few decades.

And here's the kicker: this wage premium doubles over a worker's lifetime. By age 55, college-educated workers earn a 60% premium over high school grads, according to economist David Deming.

Even if we take a conservative view, $24,000 a year over a 40-year career amounts to ~$1 million in additional earnings.

But earnings are only one side of the equation. The other considerations are opportunity cost and the cost of attending college.

The Federal Reserve data would indicate that four years of “lost” wages amounts to roughly $36,000 × 4, or ~$150,000. Plus, even the most expensive colleges in the U.S. shake out to less than $200,000 in net cost.

That’s a $350,000 bill for $1,000,000 in extra wages. Solid trade! 🎓

(Note: There are a few offsetting assumptions here, but the conclusion is clear directionally. If you’d like to see a deeper analysis of this topic, let me know by replying to this email.)

4. OPEC+ Limits Oil Supply 👀

In a world thirsty for oil, OPEC+ has decided to extend its production cuts. Saudi Arabia, Russia, Iraq, the UAE, and others have all volunteered to limit output for three more months.

The current round of cuts has reduced output by about 2.2 million barrels a day.

Most of this sacrifice has come courtesy of Saudi Arabia which now produces 1 million barrels a day less than it did in June 2023 and 2 million barrels a day less than it did in October 2022.

Of course, limiting supply is designed to prop up prices. There’s just one problem:

The #1 crude oil producer is very much not a part of OPEC.

The U.S. is on “drill baby drill” mode. America now produces ~30% more oil than either Russia or Saudi Arabia – the next two top producers.

And if that production trajectory is any indication, the U.S. is not interested in propping up oil prices.

After all, crude oil prices influence gas prices. And gas prices?

Well, according to Michael Zdinak of S&P Global Market Intelligence, ”[Consumer] sentiment is very directly and very profoundly affected by gas prices."

In an election year, this will be an especially hot-button topic. Lower gas prices will bolster the incumbent, whereas higher prices favor the challengers.

The reality is there is a predictable seasonal rhythm to gas prices, typically peaking around Labor Day and falling once school is back in session.

Regardless, voters look to the president to implement policies that ease the pressure on their wallets.

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5. Asset Classes: Volume 3 - Cash 💵

This week, we're shining a spotlight on the ultimate financial safe haven: cash and its close relatives, cash equivalents.

To be clear, we're not talking about stuffing physical bills under your mattress or letting your dough gather dust in a 0.01% savings account. 

There are smarter ways to stash your cash, while still earning a meaningful return.

1. Treasury bills: These are short-term IOUs from Uncle Sam. They offer a fixed interest rate and maturity of one year or less. 

2. Certificates of deposit: Lock away a portion of your cash for a fixed number of months or years in exchange for a higher interest rate. Just don’t withdraw early or you could face a penalty.

3. High-yield savings accounts: These aren't your average savings accounts. High-yield options offer significantly better interest rates, FDIC insurance, and the flexibility to access your funds when needed. It's your money, ready on demand.

But… are these investments worth the extra hassle?

In a word, YES! If your cash isn't earning more than inflation, you're essentially losing value over time.

With inflation rates hovering between 2% to 3%, beating that benchmark is quite achievable with these options.

(Shoutout to today’s sponsor, Betterment, for their stellar 5.50% APY. They're the real MVP here.)

Now, cash probably won’t outperform risk assets over the long run, so don’t go all in. But in today's rate environment, there’s a strong argument for keeping some cash in your portfolio.

After all, what’s not to love about an investment with stability, accessibility, and virtually no risk?

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

Also, check out TheMoneyManiac.com for more resources on earning, planning, and investing!

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.