Happy Friday! It’s Feb. 23, 2024. We have three great stories to wrap up the past few weeks in markets, business, and the economy for you and your family. We’ll preface this edition by saying… all three major U.S. indexes hit all-time highs yesterday — so you aren’t going to want to miss this.

Here are the highlights:

• All-Time Highs Are Happening Everywhere. You can thank “the most important stock in the world.”
• Big returns for retail in 2023. How much did investors end up making in 2023?
• Capital One is buying Discover for $35 billion. It’s a BIG bet you’ll keep spending on credit.

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All-Time Highs Everywhere, Thanks to Nvidia

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Nvidia was the best-performing stock in the world last year. And to start 2024, it’s reminding investors that there’s a reason why it has leapfrogged Meta, Amazon, and Alphabet to become America’s third most-valuable company.

• What happened? On Wednesday, Nvidia reported earnings… and knocked it out of the park. The company’s CEO, Jensen Huang, says that AI demand is hitting an inflection point. In the fourth quarter, the company’s data center revenue — which includes sales from the specialized AI chips it sells companies like OpenAI — rose over 5x year-over-year to nearly $20B.
• That’s a big number… and a huge deal. Analysts at Goldman Sachs called Nvidia “the most important stock on Earth” ahead of the earnings call — and the reaction to its earnings beat was heard around the world. Nvidia rose more than 16% on Thursday after its report, lifting everybody up with them.
• Living up to its reputation. Stocks rallied to all-time highs in the U.S., with the S&P 500, Nasdaq, and Dow Jones all closing at record levels — and investors in Europe and Japan came along for the ride, with indexes in those regions also reaching all-time highs.

Why does it matter for EarlyBird families?

People might want you to think that we are worse off than we were four years ago, but that reality is simply not true in the United States economy or stock market — even after the last few years of crazy that we’ve all experienced. And no amount of layoffs or alarmism is going to change this reality: if you stayed the course with consistent investing since the start of the COVID-19 pandemic, you’re richer today because of it.

You can thank the Nvidia-mentum for some of that, but diversification makes winning the norm — not the exclusion. There’s a good chance you had never heard of this company before last year; and a near-certainty that you wouldn’t have picked this stock individually before it’s massive run. You can kick yourself for not foreseeing the future… but you’d be better off congratulating yourself.

By embracing a diversified strategy, your EarlyBird portfolio is creating wealth right in front of your eyes. There are ups and downs, but the trend line has kept soldiering up.

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Big Returns for Retail: How Investors Did in 2023

There’s a lot you can learn from retail investors — and after a paltry 2022, there’s a lot that retail investors could learn from themselves. Brokerage darling Robinhood reported earnings last week, revealing that more of its users were contributing to retirement — and Business As Usual revealed that diversified strategies like exchange-traded funds (ETFs) were on the rise with the Robinhood crowd.

• How did retail do? In 2022, Robinhood investors lost over $54 billion of their own money after speculative growth stocks began to collapse under the weight of higher interest rates — a third of the broker-dealer’s assets under custody (AUC) vanished. But as stocks soldiered back in 2023, so too did Robinhood’s investors — users cumulatively made over $23.3 billion last year.
• How does that compare to the S&P 500? Results may vary. On the whole, Robinhood investors outperformed the S&P 500 in two of the four quarters of 2023. And among Robinhood’s top 100 stocks, 35 individual stocks outperformed the S&P 500 — with 13 stocks more than doubling in value according to Business As Usual.
• How did investors succeed? High-quality stock picking played a significant role in the rising tides of Robinhood investors — but exposure to more diversified stock portfolios was another meaningful factor in the billions made by retail investors last year. In 2022, just 3 of Robinhood’s top 100 stocks were ETFs — by the end of last year, 12 ETFs were in the top 100.

Why does it matter for EarlyBird families?

You can time the market or spend time in the market. Robinhood investors lost billions finding out that doing the former makes for good entertainment, but is more comparable to heading to the casino than building wealth. For most people, diversification and long-term investing is simpler and more rewarding — which is why EarlyBird only invests in exchange-traded funds which track high-quality, proven growth names. Getting rich slow doesn’t sound too exciting, but we promise it’s a better strategy than putting it on black.

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Capital One is Betting $35 Billion That You’ll Keep Spending on Credit

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Capital One is already one of America’s largest creditors, but it’s hoping to get bigger… a lot bigger. The company is spending $35 billion to acquire Discover, which will make the company the largest credit card lender in the country — with over $250 billion worth of outstanding balances.

• What’s the big deal? At the end of 2023, Americans held a record $1.13 trillion worth of credit card debt. Thanks to rising interest rates, that debt is accruing interest faster than ever. Today, the average interest rate on a credit card is 22.8%, which means it’s more costly than ever to spend more than you can afford.
• Capital One wins when you spend beyond your means. Spendthrift Americans have spent their way through their pandemic-era savings — but even after they’re all gone, Capital One bets that America’s obsession with putting their purchases on plastic will endure. That’s why it’s buying its closest competitor, which will see it own nearly a fourth of U.S. credit card debt.
• Plus, there’s something else in it for them… Today, America’s payment industry is dominated by two companies — Visa and Mastercard. The two process over 80% of credit card purchases in the U.S. today. But by buying Discover, Capital One plans to move many of its Visa and Mastercard-branded credit cards to the Discover network — which it says could save it over $1.2 billion per year on credit card transaction fees.

Why does it matter for EarlyBird families?

This deal would be the biggest in the history of the credit card industry — so it won’t proceed without facing scrutiny from regulators. However, don’t expect the word “antitrust” to stop it. Capital One could gain approval by arguing that it is injecting much-needed competition into the payments industry, which is dominated by Visa and Mastercard. And they might be right.

However, even if Capital One’s efforts are good for competition, they succeed at your expense. Credit card companies now spending hundreds of dollars to entice cardholders… why? Because they make hundreds more off of Americans making the minimum payments and demonstrating undisciplined spending — more than enough to make up for the carrot of bonuses, cashback, and points in exchange for spending.

In any case, there’s nothing wrong with credit cards and rewards, but holding a balance only rewards one person: the bank. So be careful and try not to…

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What else is up?

• iShares is rolling out a new way for retail investors to vote proxy. Do you vote? No, not in presidential or state elections… Do you vote proxy? You can now impact the outcome of shareholder elections thanks to a new feature from BlackRock’s iShares. Find out more about what it means for you.
• Ethereum is over $3K for the first time in two years. And HODLers know where the next stop is… the stock market. Analysts and investors are increasingly excited about the prospect of an Ether ETF, which would offer exposure to the world’s second-largest cryptocurrency on the U.S. market, following in the footsteps of the recently-approved Bitcoin ETF. Bitcoin has since-risen to over $52K. What you need to know about Ether right now.
• The Wall Street Journal’s tax columnist on how to tackle taxes. ’tis the season… for taxes. Don’t know what you’re doing? You’re not alone… and while there’s no shame in sending your W-2 and 1099s off to a CPA, The Wall Street Journal’s tax columnist is sharing her wisdom. Read how she does her taxes.

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