💰 5 Fact Friday: Meme Stock Mania Returns

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Hey Money Maniacs,

Welcome back! Let’s get into this week’s biggest stories in the world of money.

Today’s issue covers:

1. Inflation Drops & Stocks Soar 🚀

2. The Great State Migration ✈️

3. Politicians Know Best 📈

4. Meme Stock Mania Returns 👀

5. Retirement Planning 101 💸

1. Inflation Drops & Stocks Soar 🚀

Good news, maniacs—the latest Consumer Price Index (CPI) report brought us some much-needed relief.

Inflation was down across the board in April. Headline, core, annual, and monthly CPI all clocked in lower than March’s readings.

Headline CPI cooled to 3.4% year-over-year, down from March’s 3.5%. Core CPI, which removes food and energy, hit a three-year low at 3.6%. Monthly core inflation also slowed to 0.3%, matching the headline rate.

Why is such a small move such a big deal?

1) Because inflation had been looking sticky! This is the first real progress we have seen in months.

2) Lower inflation eases the pressure on the Federal Reserve to maintain such high interest rates. As that red line (core CPI) approaches 2%, the Fed gets closer and closer to finally cutting rates.

Now, the Fed actually prefers to look at the Personal Consumption Expenditures (PCE) Price Index rather than the CPI. (The PCE attempts to account for how consumers change their spending patterns in response to inflation.)

But traders were far too excited to worry about such technicalities.

As soon as the good news dropped, all three major U.S. stock indexes—Dow Jones, S&P 500, and Nasdaq—soared to fresh all-time highs.

Maybe “sell in May and go away” isn’t the golden rule this summer. Maybe, we’ll get to toast to cooling inflation and more stock market highs instead. 🥂

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2. The Great State Migration ✈️

Let’s talk taxes. Did you know that a simple change in zip code could save you thousands? For many Americans, tax-friendly states are calling, and the Sunbelt is answering with open arms.

States with higher tax rates in the Northeast and on the West Coast, like New York (-102,000 residents) and California (-75,000 residents), have been losing people left and right.

Low-tax Florida (+365,000 residents) and Texas (+473,000 residents), on the other hand, have seen explosive population gains.

Want to join the migration? Here are the 9 states where taxes won’t break the bank.

No Income Tax States:

1. Alaska

2. Florida

3. Nevada

4. New Hampshire

5. South Dakota

6. Tennessee

7. Texas

8. Washington

9. Wyoming

While these states have no state income tax, they do make up for it with higher property and sales taxes. But if you’re a high-income earner, the overall savings can be substantial.

Fidelity crunched the numbers and presented two compelling examples.

1. If you’re earning $100,000 per year in Oregon, a move to Texas or Florida could save you $7,200 annually. Over a decade, this could amount to more than $110,000 (when invested at a 10% return).

2. If you’re earning $250,000 annually in Vermont, a move to neighboring New Hampshire could save you $15,400 annually. Over a decade, this could amount to more than $240,000 (when invested at a 10% return).

But don't judge a state by its tax rate alone. Effective tax rates (combined federal and state) for singles earning $100,000 vary widely:

Singles:

• Highest: Oregon (29.16%)

• Lowest: 9-Way Tie (21.91%)

Married Couples:

• Highest: Oregon (21.64%)

• Lowest: 9-Way Tie (15.89%)

So, what does this all mean?

If you’re looking to make your hard-earned dollars stretch further, consider the impact that a move to a low-tax state could have on your savings and lifestyle.

3. Politicians Know Best 📈

It turns out that mimicking the trades of U.S. politicians isn't just for conspiracy theorists and wannabe sleuths anymore—it’s a strategy that's actually outperforming the market.

How, you ask?

Enter two partisan exchange-traded funds (ETFs) launched by Subversive Capital Advisor last year: NANC (tracking Democrats) and KRUZ (tracking Republicans).

• NANC (Democrats) returned 37.5% in the year to March, trouncing the S&P 500's 29.9%. It also posted better Sharpe and Sortino ratios, which are designed to account for the amount of risk taken.

• KRUZ (Republicans) returned 25.4% over the same period, beating the Dow Jones’s 22.2% with better Sharpe and Sortino ratios.

Christian Cooper, the portfolio manager of both ETFs, selected these benchmark indices due to the funds’ radically different holdings.

Top Holdings:

• NANC: Tech-heavy, with Nvidia, Microsoft, and Amazon leading the charge. The fund also holds smaller-cap cyber security firms.

• KRUZ: Energy-centric, featuring Shell, ConocoPhillips, and Chevron. Mid-cap industrials like Comfort Systems USA and National Fuel Gas also get significant weight.

Party Bias:

• Democrats (NANC) favor tech, with 36% of the fund in the Magnificent Seven stocks, compared to 4% for KRUZ.

• Republicans (KRUZ) prefer energy, giving it 14% weight compared to a measly 1% in NANC.

Cooper argues that each ETF’s outperformance against its respective benchmark shows that lawmakers have a “knack” for picking above-average companies. If so, it’s nice to know that us maniacs can now join the ride.

Fair Warning: Before choosing sides, be aware that these ETFs are still relatively young (just a year old) and unproven. They also have relatively high fees and low trading volume.

4. Meme Stock Mania Returns 👀

Remember the wild ride of 2021, when GameStop's stock price exploded from $5 to nearly $500 before crashing all the way back down? Well, it seems we're in for round two.

Meme stock mania is back and the frenzy is spreading across GameStop, AMC Entertainment, and dozens of crypto sh*tcoins.

What's driving the madness?

It all started with a meme.

Roaring Kitty, aka Keith Gill aka DeepF*ckingValue, is the trader who sparked the original meme stock craze.

Gill famously turned a $53,000 investment into a more than $30 million position with the help of Reddit’s r/WallStreetBets community.

(If you’re not familiar with the epic battle of Hedge Funds vs. Retail Traders, check out Dumb Money on Netflix.)

However, Gill had been silent on social media for nearly 3 years—perhaps due to the legal battles associated with his newfound fortune.

Then suddenly, the meme above sent the online community into overdrive, fueling a buying frenzy reminiscent of the height of the pandemic trading peak. His posts sparked a rise in meme stock activity, with traders eagerly jumping back into the fray.

But I’m not here to pump GameStop. I’m here to remind you maniacs about the risks involved.

Meme stocks don't trade on fundamentals; they're driven by hype and speculation. So, while the excitement may be contagious, it's important to recognize that buying a meme stock is closer to gambling than investing.

After all, the meme stock waves can come crashing down just as quickly as they surge. GameStop's meteoric rise in 2021 was followed by a sharp descent, leaving many investors with hefty losses. The same will likely happen here.

So, if you’re interested in gambling a few bucks—that’s your prerogative. But don’t allocate a dime of your investment portfolio to a meme stock, a meme coin, or even most SPACs.

Investing is about the long game, not opportunistic bets. It should be grounded in sound principles, not blind speculation.

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5. Retirement Planning 101 💸

Wondering if your retirement plan is solid? Here are four key benchmarks to help you secure your golden years.

1. Annual Savings Rates

Make sure you're putting enough away each year by following these savings targets:

• 25 years old: 9%-13% of gross annual income

• 30 years old: 13%-18%

• 35 years old: 17%-22%

• 40 years old: 21%-28%

• 45 years old: 26%-35%

• 50 years old: 33%-43%+

Keep in mind that the generic advice of saving 10%-15% of your income only applies if you start early. If you’re getting started after 35, you’ll likely need to save more aggressively to reach your goals.

2. Retirement Savings Milestones

Once you've made savings a habit, it's time for periodic check-ins to see if you're on track:

• 30 years old: 1x your salary

• 40 years old: 3x your salary

• 50 years old: 6x your salary

• 60 years old: 8x your salary

• 67 years old: 10x your salary

If you're behind the curve, consider adjusting your budget, savings, and investment strategy to start catching up.

3. Tracking The 4% Rule

When it's time to tap into your nest egg, follow the 4% rule to stretch your savings over 30 years:

• Year 1 Portfolio Value: $1,000,000

• Year 1 Withdrawal (4%): $40,000

• Inflation-Adjusted Year 2 Withdrawal (2% inflation): $40,800

Ask yourself, how far is 4% of your portfolio value (plus Social Security and any other pension payments) from covering your lifestyle costs? Once the 4% rule exceeds your expenses, you can seriously consider retiring.

4. Structuring Your Portfolio

Lastly, make sure your portfolio matches your risk tolerance. As you age and near retirement, your portfolio should probably become more conservative to protect your savings.

• In Your 20s (Aggressive): 100% stocks, 0% bonds

• In Your 40s (Balanced): 80% stocks, 20% bonds

• In Your 60s (Moderate): 60% stocks, 40% bonds

• In Your 80s (Conservative): 20% stocks, 80% bonds

Follow these guidelines, and you'll be on your way to retiring in comfort! 🎯

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.