History in the stock markets has officially been made, as the Dow Jones broke the 30,000 barrier thanks to a 400+ point jump in yesterday’s trading session.
Here are the most important numbers you need to know about:
- Dow Jones: +1.54%
- S&P 500: +1.62%
- NASDAQ: +1.00%
- Bank stocks: +3.79% for Goldman Sachs and +4.61% for JPMorgan Chase
- Airline stocks: +3.29% for Boeing, +6.37% for Delta
- Tech stocks: +1.78% for Microsoft, +3.16% for Facebook
It’s the best monthly performance for the Dow Jones since 1987, and the best monthly performance for both the S&P 500 and the NASDAQ since April 2020. All in all, an extraordinary day where we have successfully overcome the losses incurred by the COVID-19 pandemic while making some additional gains.
Obviously, there has to be some explanation for this record-breaking day.
We have President Trump allowing Emily Murphy, chief of the General Services Administration, to give Biden’s team access to federal resources for transitioning into the White House (although he has stated this changes nothing about his ongoing legal battles to contest the results of the 2020 Presidential Election). For the markets, this adds some much-needed certainty.
We also have the expectation of a recovering economy that will be stronger than ever, thanks to numerous COVID-19 vaccines around the world reporting an effectiveness rate of 90% or higher. Like the previous point, this too signals the sign of a return to stability.
Sure, the USA still has an ongoing problem with the ever-rising numbers in new daily COVID-19 infections and deaths. The pandemic is nowhere near resolved and won’t be until late 2021 at the earliest, but we can forget those for a second as we fawn over the Dow Jones.
And where would we be without the Federal Reserve, who has pumped trillions of dollars into the American economy and vowed to keep interest rates at an all-time low for the next 2-3 years? You have to love the big boys who can magically wave their wands and add non-existent money to the system.
There’s a lot to look forward to, and you have to wonder how the Dow Jones will behave over the next few months. For all we know, this might be as good as it gets.
But for the time being, let’s pop open the champagne and celebrate! After all, tomorrow is Thanksgiving and the holiday provides us with an opportunity to express gratitude for the positive things in life.
What do YOU think will happen to the Dow Jones? Can it stay above 30,000, or was yesterday nothing more than temporary good luck? Reply to this newsletter and share your predictions with us!
An Extraordinarily Profitable Day for Tesla CEO Elon Musk
My news feed was blown up by all of the good things that were reported regarding Tesla’s success and the consequent implications for CEO Elon Musk’s wealth.
Just take a look at what has happened as of yesterday:
- Tesla now has a total market capitalization of $500 billion (it was $100 billion at the start of January, $200 billion in June, $300 billion in mid-July, and $400 billion in August)
- Dan Ives, analyst at Wedbush, has projected Tesla’s shares to go as high as $5,000/share (which would lead to a consequent valuation of ~$1 trillion)
- Elon Musk now has a net worth of $127.9 billion, surpassing Bill Gates at $119.4 billion. This means he has added $100 billion to his net worth in 2020 alone
According to Forbes, this makes Musk the third-richest man in the world, just behind luxury visionary Bernard Arnault ($140.6 billion) and Jeff Bezos of Amazon ($182.6 billion). Not bad for being the 35th richest man in the world at the start of 2020!
The inclusion of Tesla into the S&P 500 on December 21st, which was announced last Tuesday has really benefitted Tesla shares as they have gone up 36% since then.
Can he keep on making these impossible gains for the rest of 2020 and beyond? We’ll have to wait and see, but for the time being, I guess you could say Musk’s dream of the perfect all-electric vehicle has him sitting on Cloud 9 right now…
To Reinvest Your Dividends or Not to Reinvest? That Is the Question…
With dividend investing, there is always the ongoing struggle between cashing out your dividends and re-investing them for further gains. And unless you have someone guiding you, making the decision feels like climbing Mount Everest.
But according to Jason Hall and Danny Vena, two contributors at The Motley Fool, the right answer to the question depends entirely on your financial situation.
They argue that younger individuals looking to rely on dividends as a solid source of income in the future should continually re-invest to take advantage of the compounded gains. Buy more shares over time, get more dividend payouts, rinse and repeat. Simple!
So when should you cash out, exactly? Both Danny and Jason suggest considering the possibility of cashing out once you are very close to achieving your financial goals. If you are further away from your financial goals, keep on reinvesting until you achieve said goals.
By the time you arrive at your destination, you’ll have more than enough cash available to start supporting your lifestyle. Plus, it’s always nice to sit on a big pile of liquid assets when the market starts selling off.
What do YOU think about Danny and Jason’s advice on re-investing your dividend earnings? Agree or disagree? Share your opinions with us by replying to this newsletter!
The Financial Advantages of Being a “Late Bloomer”
As much as I love the “financial independence, retire early” (FIRE) movement, it has this weird downside of making a LOT of people feel guilty. It’s easy to fall into the mindset that you are unsuccessful because you didn’t achieve financial freedom in your early 30s or younger.
But according to MarketWatch contributor Chris Mamula, being a late bloomer to financial independence isn’t a bad thing at all. And in some cases, you can tap into advantages that are unavailable to the early birds.
As an older individual, you are in your “prime earning years”: A higher income allows you to save much more aggressively and save a lot more. And you can do so without having to make significant lifestyle sacrifices.
Fewer obligations: Most late bloomers, especially those in their 50s, already have their kids fully raised and sent off to college (or at least out of the house). Without the financial obligation to take care of them and cover their costs, along with the time needed to raise them up, there are fewer obstacles towards reaching financial independence. Not to mention you can downsize to a smaller house and save even MORE money!
Making greater contributions to your retirement accounts: Accounts such the IRA and your 401(k) allow those older than 50 years old to contribute an extra $1,000/year or $6,500/year (respectively) on top of the $6,000 or $19,500 you are limited to normally contributing annually.
Granted, you’ll have to overcome a lot of mental conditioning and undo any bad financial habits you have had for decades. It’s difficult but it can definitely be done. A late start does not mean “game over”!
A 60,000-Point Welcome Bonus for the American Express Gold Card
The year 2020 has led several credit card companies to up the ante in offering exclusive benefits to first-time users. And as of now, the American Express Gold Card is looking like the “golden opportunity” for anybody on the hunt for a new credit card.
Here’s how their brand-new welcome bonus works:
If you spend $4,000 on eligible purchases within the first six months of
opening your account, you will get 60,000 Membership Rewards points for no
additional cost. However, anybody who has – or had – a Premier Rewards Gold
Card or American Express Gold Card cannot receive this welcome bonus.
60,000 points can get you numerous things: A $600 gift card, a $600 flight, a $420 upgrade for a pre-booked cruise or hotel, $300 at Ticketmaster, and much more.
As part of the card’s standard features, you get 3x the points when you book a flight directly with an airline, and 4x the points when you make a purchase at a US supermarket or any restaurant worldwide.
Just be aware that you’re going to end up paying a $250 annual fee, but that can be reduced by 50% if you dine at participating restaurants a few times a month.
Best Buy’s Exceptional Q3 2020 Results Didn’t Stop Their Shares From Falling
Normally, when a company posts excellent results for a quarter, their shares go up as a result.
At least that’s what should have happened for Best Buy when they published their numbers for Q3 2020:
- Revenue = $11.85 billion (versus +21.4% from Q3 2019, and beating projections of $11 billion)
- Net income = $391 million (versus $293 million in Q3 2019)
- Online sales = +174% on a year-on-year basis (versus +15.6% in Q3 2019)
- Of the total sales, 33% came from digital orders
However, the good news about beating all of the analysts’ projections was soured by comments from Matt Bilunas, the Chief Financial Offer at Best Buy:
“While the demand for the products and services we sell remains at elevated levels as we start the fourth quarter, it is very difficult for us to predict how sustainable these trends will be due to the significant uncertainty related to the various impacts of the pandemic.”
That statement, along with warnings of “inventory constraints” in select categories and sales growth going down in Q4 2020 while remaining positive, spooked investors and caused a sell-off in yesterday’s trading session. As a result, Best Buy saw a 6.96% decline in their shares.
Let that be a lesson to you: NEVER scare your investors after reporting positive news, because they’ll remember the negative bits with 10 times more clarity and emotion!