# 645 – 👟 Ugly shoes join the S&P 500 – The Average Joe
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    # 645 – 👟 Ugly shoes join the S&P 500

    victorlei

    March 5, 2024

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    Good morning. Getting a sizable group together for a birthday dinner? You might have trouble snagging a reservation, as many restaurants are turning down parties of six or more:

    • Large groups take their time eating, meaning less turnover (and revenue) for the restaurant.

    • Plus, dealing with a big table can be tough for restaurant staff, especially with staffing shortages.

    • And let’s be honest, a noisy, large group can bother other diners.

    But before you bite the bullet and host your own dinner party, there’s one more option: you can call up the restaurant and beg.


    ANNUITIES

    Annuities Spring to All-Time Highs As Guaranteed Rates Near 6%

    American founding father Benjamin Franklin once famously said there were two certainties in life: death and taxes. But he overlooked a third — financial sales reps pushing complex investment products for juicy commissions. One of those products is annuities — which appeal to retirees seeking steady payments to hedge against market downturns.

    As interest rates climbed, so did rates on annuities — making them more appetizing for investors who aren’t sure whether to buy stocks at record highs or bonds. And if you’re 5-10 years away from retirement, this could be one of the most opportune times to take advantage of annuities.

    A-new(ity) record: Annuities are insurance contracts investing in both stocks and bonds. Investors pay monthly or one-time premiums in exchange for regular income streams. But many people view annuities in a bad light given the complex nature of the investments, high fees, and the pushy nature of sales reps from the high commissions they receive on these products. However, this perception is changing with the introduction of simplified, commission-free products.

    • High rates have fueled a surge in demand, with US annuity sales rising 23% to hit a record $385B in 2023 — marking its second consecutive year of record-breaking sales.

    • Guaranteed annuity rates, which offer minimum returns, are the highest since 2011 — with rates nearing 6%.

    But beware of sales tactics…

    While annuities might suit older Americans looking for guaranteed returns and lifetime income, there are still risks to consider. Despite regulations mandating that annuity sellers act in clients’ best interests and disclose conflicts of interest in 44 states, pitfalls remain:

    • Potential for missed gains: Safety comes with a cost, as annuities are designed to help you preserve your investment, not beat the market.

    • Fees, fees, fees: Many annuities carry hidden commissions and investment management fees — and exiting your annuity before the end of the term will also generally come with a fee.

    Worth the hour-long sales pitch? Annuities can supplement and guarantee retirement income but can also lose value and confuse investors. With so many variations of annuities available, it’s wise to consult a financial planner or expert and not just a daily newsletter… despite how much you trust us.


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    LARGECAP RECAP

    👟 Decker ($DECK) joins the S&P 500 thanks to the rising popularity of “ugly” shoes 

    You might not own a pair of UGGs or HOKAs, but your portfolio might soon include the company that makes them. On Mar. 18, footwear giant Deckers will join the S&P 500 index as part of its quarterly changes. HOKA shoes have become more mainstream in recent years, shedding their “dad shoe” image and gaining popularity among various demographics, including celebrities, hikers, and hospital workers seeking comfort. This trend has significantly benefited Deckers, which acquired HOKA in 2013 and has been capitalizing on the resurgence in UGG’s popularity.

    • Last year, HOKA sales soared by 58.5% — now accounting for 39% of Deckers’ total sales, up from 22% in 2021 and right behind UGG’s 53% share. 

    • Strava’s annual report shows that the Hoka Clifton surpassed the Nike Pegasus as the year’s top running shoe — along with the fastest-growing shoe of the year. 

    Deckers won’t be alone: It’ll be accompanied by Super Micro Computer ($SMCI), which rode the semiconductor wave (thanks to AI) to become one of America’s best-performing stocks in 2023. Super Micro’s stock surged another 25% upon the news of its addition, potentially challenging Nvidia ($NVDA) as the best-performing stock in the S&P 500.

    🇨🇳 Western manufacturers may be no match for China’s cheap goods

    The US helped make China the world’s second-largest economy — but what it gave, it could take away. Higher tariffs and reshoring of manufacturing have made China fall behind Mexico as America’s largest trading partner, but China has a plan to win back the West… by pouring money into its manufacturing sector to revive its struggling economy. However, experts warn this could risk a repeat of the “China Shock.”

    • In the 1990s, China’s economic reforms and entry into the World Trade Organization made it a popular trading partner, exporting cheap consumer goods to the US and other developed countries.

    • The country soon put other countries’ manufacturing sectors out of business with a deluge of cheap consumer goods — helping its share of global manufacturing and exports more than triple over the last three decades.

    Lessons learned: Despite the disinflation, the “China Shock” cost the US ~2M jobs, which the US would like to avoid repeating. And there’s even more concern now as China competes on price even in high-priced industries like electric vehicles (EVs). To stay competitive, the US is imposing tariffs on Chinese goods — potentially reaching as high as 60% if Trump wins the 2024 election. 


    JOE’S MARKET PULSE

    🔗 MicroStrategy / Tesla

    When companies solve real problems, magic happens: ConsumerDirect has helped over 300K subscribers save $2.9B in interest by providing the tools so they can raise their credit score1. Along the way, they’ve exploded as a company with 540% revenue growth since 20192 — reaching over $91M in sales in 2023 profitably3. And investors can finally get in… Invest the company changing the American financing game→*

    Markets & Economy

    BofA ($BAC) analyst boosts S&P 500 forecast: Equity strategist Savita Subramanian has joined a chorus of voices expecting a big 2024 for markets, pushing her projections from 5,000 to 5,400 following solid Q4 earnings and ongoing AI hype. [Read]

    Severe weather hits US: Now, the largest wildfire in Texas history, the Smokehouse Creek Fire, has spread across 1M+ acres. And just a few states over, Nevada and California are experiencing a different type of natural crisis as a life-threatening blizzard bears down on the Sierra. [Read]

    Investors raise bid for Macy’s ($M) by $1B: Arkhouse Management and Brigade Capital Management initially bid $5.6B, but that’s up to $6.6B after Macy’s said the offer wasn’t high enough. The new bid represents a ~33% premium on Macy’s current shares. [Read]

    Business & Wealth

    JetBlue ($JBLU) and Spirit ($SAVE) aren’t merging after all: The match made in regulatory hell was officially called off after both airlines lost a federal antitrust suit. Now, each airline must sort out its ongoing financial troubles independently. [Read]

    Anthropic debuts Claude 3, its most powerful set of AI models yet: The OpenAI rival, backed by Google ($GOOG), Amazon ($AMZN), and other heavyweights, say their latest models can summarize 200K words of text — compared to 3K for ChatGPT. [Read]

    Wage gap widens between high school and college grads: Talk of college degrees not making a difference in earning potential may be overstated. College degree holders aged 22-27 earn $24K more annually than peers without degrees — up from $15K in 1990. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


    CHART


    DIGIT OF THE DAY

    The Box Office Gets a Breath of Life Thanks To Dune’s $81.5M Domestic Weekend Opening

    In their desert of despair, movie theaters found an oasis with Dune: Part Two. The long-awaited, postponed sci-fi sequel starring Zendaya and Timothée Chalamet re-energized the sluggish box office with a staggering $81.5M in domestic ticket sales — sending the US box office to its first $100M weekend since January.

    • The new movie represented the majority of the $112M made in US theaters this weekend, marking the highest domestic weekend total of the year — and the highest since the $246.2M Barbenheimer weekend in July 2023.

    • The movie captured 22.7% of its ticket sales from IMAX screens, making it the biggest March opening IMAX ever.

    The show must (not) go on: While 2023 wasn’t a great year for the box office, 2024 is expected to be even worse, thanks to limited Hollywood film releases. Businesses in the entertainment industry are suffering already — with AMC Entertainment Holdings ($AMC) just cutting CEO Adam Aron's pay by 25% as the company’s revenue remains 12% below pre-Covid levels. Despite predictions of a challenging year for the industry, Boxoffice Media’s Daniel Lora believes “Hollywood is doing just fine.” But that depends — are you an exec who could benefit from OpenAI’s Sora or an employee about to lose their job?


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    1Calculation Methodology: Our savings calculations are estimates using historical internal data. It is based on analysing subscribers' credit reports that had an increased credit score, while a current subscriber, for two categories: new auto and new mortgage financings. The calculations assumed precise credit score reporting, a consistent correlation between score ranges and financing rates, uniform loan terms except for interest rates, and steady interest rates over the loan’s term, along with unvarying borrowing behaviors among users. It’s important to note that our calculation estimates rely on accurate credit reporting, average loan data and current interest rates, but may not account for an individual subscriber’s interest rate variations, if any, or significant shifts in users’ borrowing and repayment habits, if any. Additionally, there was an assumed conversion from VantageScore® v3.0 to FICO® v8.0 and then verified by an official FICO® v8.0 calculator to determine savings from starting credit score to credit score before the above mentioned financing occurred. Our calculation is subject to change without notice.

    2Based on an Internal financial statements evaluation of growth revenue calculated between 10/19-09/23.

    3Based on an Internal financial statements evaluation of gross revenue calculated for the trailing 12 months ending December 2023.

    All content provided by The Average Joe is for informational and educational purposes only and should not be taken as trading or investment recommendations.

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