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š° 5 Fact Friday: Home Improvements That Actually Pay Off
Looking to renovate your home? Here are the top 10 high-ROI projects to maximize your property value...
Hey Money Maniacs,
Welcome back! Letās get into this weekās biggest stories in the world of money.
Todayās issue covers:
STOCKS
1. David Tepper's Top Holdings š
Ever wondered what stocks catch the eye of a billionaire investor? Enter David Tepper, founder of Appaloosa Management and owner of the Carolina Panthers.
He's arguably one of the greatest hedge fund managers of our time. Here's a look at Tepper's biggest holdings as of his most recent 13F disclosures:

At first glance, Tepper's portfolio might not surprise you. His heavy concentration in tech/growth stocks like the Magnificent 7 isn't exactly groundbreaking.
However, his big bets on Chinese stocks are where his contrarian nature shines through. Tepper's inclusion of Alibaba, Pinduoduo, and Baidu highlights his willingness to take risks where others shy away.
Chinese returns have rivaled U.S. returns over the past two decades, but many investors now consider China uninvestable. Goldman Sachs' wealth management team put it plainly: āOur view is that one should not invest in China.ā
The reasons include:
Slowing economic growth over the next decade
Weakening real estate, infrastructure, and export markets
Lack of clarity in Chinaās policymaking and data releases
Concerns regarding financial accounting standards
The Takeaway
Tepperās choices highlight a key lesson: great investors often venture where others donāt.
The more you diverge from conventional wisdom, the more differentiated your investment outcomes will be. Straying from the crowd can yield higher rewards, but it also comes with greater risks.
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MARKETS
2. S&P 500 Outshines Hedge Funds š
This year, the S&P 500 has left hedge funds in the dust. Surprised? You shouldnāt be.
The S&P 500 routinely outperforms Wall Street experts, especially after accounting for fees.
Hedge funds charge high fees (2% management + 20% performance), which eat into returns. Meanwhile, S&P 500 index funds like $VOO are virtually free with a mere 0.03% fee ($3 per year per $10,000 invested).
Warren Buffett famously made this point back in 2007.
He bet hedge fund manager Ted Seides of ProtƩgƩ Partners that an unmanaged, low-cost S&P 500 index fund would outperform an actively managed group of hedge funds over ten years, after deducting fees, costs, and expenses.
Uncle Warren was, of course, correct.
By September 2017, Seides conceded. His hedge fund investments had only earned $220,000 in the same period Buffettās low-fee investment gained $854,000.
Today, the same rings true.
The S&P 500 was up more than 16% through June. Hedge funds returned about 5% on average.
Even renowned hedge funds like Ken Griffinās Citadel and Bill Ackmanās Pershing Square returned 8.1% and 5.7% over the same period.
In fairness, this is to be expected right now. In a booming market driven by a few key stocks, passive index funds capture most gains without taking on excessive risk.
Hedge funds thrive in a different kind of environmentāvolatile, sideways markets known as āstock pickersā markets. They also donāt generally seek to maximize returns; they seek to balance return and risk.
This is especially clear over the past three years:
Year | Hedge Fund Total Returns | Hedge Fund Value | S&P 500 Total Returns | S&P 500 Value |
---|---|---|---|---|
Dec. 2021 | ā | $100.00 | ā | $100.00 |
Dec. 2022 | 1.1% | $101.10 | -18.1% | $81.90 |
Dec. 2023 | 7.7% | $108.88 | 26.3% | $103.44 |
July 2024 | 5.0% | $114.33 | 16.3% | $120.30 |
As you can see, hedge funds successfully mitigated losses in the 2022 downturn. However, they also missed much of the upside in the subsequent rebound.
The Takeaway
If you're looking to maximize returns with minimal fuss, consider the wisdom of Warren Buffett: Stick with the S&P 500. It's cheaper, simpler, and more often than not, a winning strategy.
However, bear in mind that the S&P 500 is vulnerable to market fluctuations, so always hold equities with a long-term view. Hence Buffettās 10-year bet duration.
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ECONOMY
3. Why the Fed Targets 2% Inflation šÆ
Inflation is inching toward the Fedās 2% target. But whatās with the fixation on this particular number? Hereās a breakdown of the economics at play.
Why Not Zero Inflation?
Deflation Risk: Zero inflation is too close to deflation for comfort. Falling prices may sound good in theory, but in practice, it can be dangerous. When consumers expect prices to fall, they delay spending. This reduction in demand leads to lower growth, reduced investment, and ultimately, layoffs.
Debt Burden: With zero or negative inflation, the real value of debt increases. Borrowers have to repay loans with money that is worth even more than when they borrowed it. This discourages borrowing and spending, which are crucial for economic growth.
Monetary Policy: Central banks manipulate interest rates to control economic activity. With zero inflation, thereās little room to cut rates (and stimulate the economy) during downturns.
Inflation as a Lubricant: Mild inflation acts as a lubricant for the economy, by encouraging spending and investment.
Why Not Higher Inflation?
Some economists argue for a higher inflation target. Olivier Blanchard, the former chief economist of the International Monetary Fund, suggested that a 4% target could be optimal.
However, the most recent cycle of inflation has been enlightening.
Hilariously, economists have ācome to realizeā that Americans detest inflation. Disliking the devaluation of your own currencyāwhat a surprise!
These out-of-touch economists seem to have forgotten that inflation hits each income group differently.
For those at the top of the income spectrum, higher inflation isn't a huge deal. They spend a smaller percentage of their income on living expenses. Plus, they often have financial assets that generate extra interest income, which can offset the increased cost of living.
Conversely, those at the lower end of the income spectrum spend a higher percentage of their income on necessities. They don't benefit from interest income and are hit hardest by rising prices, making inflation particularly painful.
The Takeaway
The 2% inflation target strikes a balance.
It's high enough to avoid deflation and its nasty side effects, yet low enough to keep the cost of living increases manageable for most Americans.
CRYPTO
4. Bitcoin Hits A Rough Patch š
Bitcoin is down 14% over the past 30 days, and if you're wondering why, you're not alone. Let's dive into the key factors behind this decline.
Interest Rate Cuts Pushed Back: The Federal Reserve's decision to delay rate cuts has throttled the crypto market. When rates are high, so is the opportunity cost of holding crypto. Itās no coincidence that your high-yield savings account wasnāt paying 5% during the last crypto bull run.
German Bitcoin Dumping: This month, Germany has dumped nearly $2 billion worth of Bitcoin seized from criminal activities. The government still holds almost $800 million more. This immense selling pressure has depressed prices and caused a bit of panic.
Mt. Gox Repayments: Mt. Gox was the largest Bitcoin exchange in 2014āuntil it was hacked. A full decade later, the Mt. Gox bankruptcy estate is finally set to return Bitcoin to creditors. That means 142,000 BTC will hit exchanges as early as this month. Investors fear that this release will create an overhang on the market.
The Takeaway
Bitcoin's recent downturn is a classic case of supply and demand.
Large holders like the German government, combined with the Mt. Gox repayments, are flooding the market with Bitcoin. Meanwhile, demand is tepid due to elevated interest rates.
While these factors create short-term volatility, they also highlight the importance of understanding market dynamics and the broader economic context when investing in crypto.
Stay informed, stay cautious, and always be ready for the ride.
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Amazon Prime Day is just a few short days away! While the main event kicks off on Tuesday, July 16, Amazon has already unleashed a flood of early Prime Day deals you can snag right now.
Here are a few of the bestsellers:
Apple 2nd Generation Airpods: $69 (down from $129)
Drone with HD Camera: $59 (down from $249)
Shark Voice Control Robot Vacuum: $295 (down from $599)
Insignia 50ā 4K Smart Fire TV: $189 (down from $299)
Take advantage of these markdowns today! Or, prep your cart for upcoming deals from brands like Apple, Ninja, and Samsung.
REAL ESTATE
5. Most Valuable Home Improvements š”
Looking to renovate your home? The latest Cost vs. Value report is out, and it explains how homeowners can maximize their return on investment (ROI) in 2024.
Trends and Insights
Curb Appeal Is King: Eight out of the top ten high-ROI projects are exterior improvements. Improving curb appeal not only attracts buyers but also boosts your homeās marketability.
Location Location Location: These figures are heavily influenced by current market conditions. As a result, the Pacific and New England regions currently offer the highest ROIs, overtaking the Mountain region for the top spot.
Strategic Home Investments: Future sellers should prioritize high-ROI projects like garage door replacements and stone veneers. Surprisingly, more expensive upgrades to kitchens and bathrooms offer less than a 100% return.
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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.
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