# 639 – 💸 Tax me if you can – The Average Joe
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    # 639 – 💸 Tax me if you can

    victorlei

    February 26, 2024

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    Good morning. Good relationships, whether with friends, partners, or colleagues, share a key quality: they’re encouraging. A recent survey highlights the phrases that truly uplift people:

    • It’s no surprise that “I love you” tops the list in relationships, followed by “I appreciate everything you do” and “I’m proud of you.”

    • At work, phrases like “Great job!” and “You’re doing a fantastic job” are always uplifting.

    • Interestingly, respondents found phrases such as “You’ve got this” and “You’re a fighter” are less encouraging.

    On a Monday morning in February, we all need some extra encouragement. We’re proud of you, reader. You’re doing a fantastic job.


    GLOBAL

    Europe’s Magnificent 7 Has A Delicious Name, Strong Dividends, and A Good Value: Should You Buy?

    America might have FAANGs, but Europe serves up something even more satisfying — GRANOLAS. No, we’re not talking about the fiber-rich snack; we’re talking about 11 stocks that have become an essential part of Europe’s investing diet.

    What’s in the mix? GRANOLAS is a basket of Europe’s most valuable stocks, mainly from the pharmaceutical and consumer goods sectors. Last year, these large-cap names made up over 60% of Europe’s STOXX 600 Index — and this year, they’re helping European markets book fresh all-time highs.

    • Over the past five years, several GRANOLAS, like ASML, Novo Nordisk, LVMH, and L’Oréal, have seen triple-digit returns — benefiting from trends such as semiconductor growth, weight-loss drugs, and demand for luxury goods.

    • Though some pharma giants like GSK, Roche, Novartis, AstraZeneca, and Sanofi have lagged due to post-COVID struggles, they’re now the cheapest in the group.

    More bite for your buck

    Some have compared GRANOLAS to America’s Magnificent Seven, but maybe it should be the reverse. Goldman Sachs’ Guillaume Jaisson says that GRANOLAS have outperformed the Mag7 with half the volatility. And in 2024, investors still have many reasons to snack on them.

    • Cheaper valuation: GRANOLAS trade at a price-to-earnings (P/E) ratio of 20x, below historical averages — and a 30% discount to the Mag7.

    • Strong dividends: GRANOLAS stocks pay an average dividend yield of 2.5% — significantly higher than the S&P 500’s 1.6% and Mag7’s 0.3%.

    How GRANOLAS are made: These companies maintain high margins, robust financial positions, and strong earnings growth — which is impressive considering Europe’s economy took a massive beating in recent years. Looking closer, you’ll find that 80% of GRANOLAS’ revenues came from outside Europe. So, if you’re tired of FAANG talk, take a break and try some GRANOLAS.


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    LARGECAP RECAP

    🧱 Roblox has become one of the biggest gaming platforms. But why can’t it make money?

    Epic Games and Unity Technologies dominate the gaming engine space, powering nearly 40% of all video games — but gaming platform Roblox (NYSE:RBLX) stands out among them, with its massive user base and prolific game creation. Boasting over 71M+ daily active users, 40M user-generated titles, and $2.8B in revenue, Roblox has become one of the largest global gaming platforms, rivaling mainstream titles on platforms like Steam. But if it’s so successful, why does Roblox struggle to turn a profit?

    • $RBLX is down nearly 40% since going public in 2021 — and has yet to achieve profitability as a public company.

    • Instead, losses have only grown over the years — reaching $1.1B in 2023, up from a $250M loss in 2020.

    Games don’t grow on trees: Similar to how Spotify pays for its music rights, Roblox compensates developers for making games on its platform. When players spend their in-game currency, Robux, the developer of that “Roblox game” earns $0.0035 for each bux spent. As Roblox’s popularity has surged, so have the payments to developers — reaching $741M last year. It’s become so lucrative that younger entrepreneurs are making big bux developing games solely for Roblox.

    🔮 Goldman’s king of predictions gives his 2024 forecast

    When Goldman Sachs’ (NYSE:GS) chief economist Jan Hatzius makes forecasts, people listen. He accurately predicted the ‘08 recession and nailed the soft landing last year. Now, his latest prediction for 2024 is not so bold: he expects inflation to continue declining towards 2%, while the unemployment rate remains stable.

    • Hatzius and Goldman analysts estimate the likelihood of a recession this year at just 15% — more optimistic than the consensus view of ~40%.

    • Goldman recently revised its rate cut projections and no longer expects a cut in May, although they still predict rates will fall to 3.25-3.5% by year-end.

    Cleared for landing? How long does it take for rate cuts to affect economic output? Some economists fear the effects could be felt soon, especially with recent indicators like weak retail sales. However, Hatzius and his team believe that we’ve already navigated that effect on output — and “the hard part is over.” Let’s hope he’s right again.


    JOE’S MARKET PULSE

    🔗 Warner Bros. Discovery / Block

    It’s not too late to add AI to your portfolio: RAD AI is having a monster couple of years — growing their revenue ~3x, raising $27M from 6,000+ investors, including VCs, execs at Google, Amazon and Meta, and landing major clients including Hasbro, Sweetgreen, MGM and more. And now you can finally invest here →*

    Markets & Economy

    Sun launches three solar flares in 24 hours: Sounds scary, but what does it actually mean? Such events can trigger “space weather” throughout the solar system and impact shortwave radio communication — but no, solar flares did not cause last Thursday’s AT&T (NYSE:T) blackout. [Read]

    More Americans paying bills on time: While still a struggle for far too many, the share of Americans having difficulty paying for household expenses dropped by five points to 36%. This improvement can likely be chalked up to a resilient labor market where wages exceed inflation. [Read]

    Bitcoin trading volume is up: Bitcoin and Ether have made big rallies this month, driven mostly by retail investors getting in the game. JPMorgan’s analysts attribute it to the upcoming Bitcoin halving and potential approval of an Ether spot ETF. [Read]

    Business & Wealth

    Intuitive Machines (NASDAQ:LUNR) lands first spacecraft on the moon since 1972: Shares surged as they became the first company to pull off such a feat. The successful landing of their “Odysseus” spacecraft marks a turnaround for the Houston-based company, which saw stocks hit an all-time low just last month. [Read]

    The 2024 box office is off to a rough start: They can’t all be Barbenheimers. Ticket sales have decreased 15% from the same period a year ago, and the lone bright spot has been the fairly successful “Bob Marley: One Love” biopic. (As for Marvel’s “Madame Web,” the less said, the better.) [Read]

    Vice Media stops publishing on Vice.com, lays off hundreds: It’s yet another grim outcome for digital media as the brand plans on publishing its content on other sites. Once valued at $5.7B in 2017, the now-bankrupt company says they’ll announce a sale in the coming weeks. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


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    DIGIT OF THE DAY

    America's Richest Are Dodging $150B In Taxes Each Year

    The wealthiest Americans are playing a game of “tax me if you can” with the Internal Revenue Service (IRS) — and the taxman is catching up. IRS Commissioner Danny Werfel revealed that US billionaires and millionaires are evading over $150B in taxes annually — contributing to a significant tax gap due to underreported income.

    • Between 2010 and 2019, weak funding from Congress left the IRS struggling to support its audit divisions — leading to a 70% decline in the audit rate for millionaires.

    • The IRS has uncovered 1.6K millionaire taxpayers who owed at least $250K in assessed taxes and has collected over $500M from them so far.

    Evasion crackdown: Last year, a study in the Journal of Accountancy found that each dollar spent on auditing top earners generated $12 in revenue between 2010 and 2014. And with $80B in new funding, the IRS aims to increase enforcement — expecting to collect an additional $561B in tax revenues by 2034.


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