🤢 A Hideously Profitable Trend

The Daily Dough team is always asking - “What’s the next big trend nobody’s thinking about yet?”

And that’s where Exploding Topics comes into play. Their platform helps us find hot ideas, company, and trends before the masses.

We think this is a tool every entrepreneur, trader, and investor needs in their toolbelt.

What’s on the Menu 🍴

No matter if it’s finding new trends or staying up-to-date with regulations…

We’ve got your back!

In today’s newsletter, we’ve found an ugly (but money-making) trend, and are analyzing the stock market that’s been on a rip this month.

Here’s your dough-growing ingredients for the day:

• A Hideously Profitable Trend 🤢

• Crypto Faces New G20 Regulations ⚖️

• Market Not Prepared For All-Time-Highs 🚀

• Is Stock Picking Stupid? 🧠

Today’s newsletter is a 6 minute read.

A Hideously Profitable Trend 🤢

Last week we highlighted the popularity and potential of the upcoming Barbie movie to drive growth for Mattel, but the toymaker isn’t the only company benefitting from the fun.

Crocs, the clunky yet comfy footwear company, has been sold out of its Barbie branded “Mega Crush” clogs for weeks.

Crocs also had some of the top selling products on Amazon during the recent Prime Day sales promotion, and their adult crocs clogs remain the #1 seller in the fashion category on Amazon:

Say what you will about the “fashion statement” of wearing Crocs, but the brand is benefitting from the popularity of clogs and sandals (”slides” if you’re Gen-Z) and smartly capitalizing on collabs with other brands & celebs.

Judging by Google Trends data, Crocs seems to have good product momentum:

Crocs also seems to have gained momentum in countries outside the US.

Shout out to our long-time supporter Nolan who discovered and highlighted this trend before most others!

Crocs is a publicly traded company (ticker symbol CROX). Year to date the stock is up 16%, though it’s been a choppy ride for investors.

The stock still looks relatively inexpensive today, trading at under 11 times this year’s expected earnings (PE ratio < 11X).

And there’s a reasonable probability that CROX will deliver higher than expected earnings if recent sales momentum continues.

The real question for long term investors is this:

Does CROX have the ability to keep growing in the years ahead or is it closer to peak popularity?

Fashion is notoriously cyclical, and there’s a large graveyard of once popular brands that have failed to sustain their growth.

This is why retail brands like CROX often trade at below market valuation multiples.

But CROX does at least have some utility in its footwear, with nurses and people who work on their feet swearing by the cushioned soles.

Crocs’ management team has also made acquisitions to expand the brand portfolio, though it’s not yet clear how successful those will be long term.

This is definitely a stock that has potential in the short-term and long-term.

We’ll be tuning in to see what Crocs has to say about their Q2 earnings when they report results on July 27th! 👀

Crypto Faces New G20 Regulations ⚖️

Crypto regulations have been anything but clear.

While the U.S. has fumbled the ball with crypto regulations, places like the UK, Hong Kong, and Singapore have been trying to attract talent and capital.

And this week, the G20 is giving a nod to the Financial Stability Board's (FSB) recommendations for tougher crypto regulations.

This comes as no surprise, given the crypto implosions like FTX over the past year.

The FSB is an international body that keeps a watchful eye on the global economy…

And Wednesday, the FSB published the “Global Regulatory Framework for Crypto-Asset Activities”.

This isn't just a casual suggestion; it's a significant step towards global regulation of the crypto world. 

The FSB's recommendations focus on two main areas: crypto assets and global stablecoin arrangements.

The FSB's recommendations are designed to establish safeguards for client assets, mitigate risks from conflicts of interest, and enhance collaboration between jurisdictions.

The FSB believes that these measures will help protect both crypto firms and investors from a repeat of the FTX saga.

The FSB's framework also emphasizes the need for uniform regulations across various crypto activities. It's like setting a universal dress code for the wild west of crypto.

As the FSB points out, a hiccup from one player in the crypto industry can cause a domino effect, impacting the entire industry.

The FSB's recommendations aren't just for the G20 countries. They're for all crypto players worldwide.

It's like a global call to arms, urging crypto firms to stop operating outside the regulatory perimeter or in non-compliance with existing rules.

Here’s what you need to know:

• The rules are divided into two parts: one for general crypto activities and markets, and another specifically for "global stablecoins"

• The main principle of these rules is "same activity, same risk, same regulation". This means if two activities pose the same risk, they should be regulated in the same way, no matter what technology is used

• The rules are high-level and flexible, meaning they provide general guidance but can be adapted to specific situations. They are also technology-neutral, meaning they apply no matter what technology is used

Crypto insiders might be skeptical of these new regulations for a few reasons.

First, the very nature of cryptocurrency was born out of a desire for decentralization and freedom from traditional financial systems.

These regulations could be seen as an attempt to control and centralize a fundamentally decentralized system.

Second, there's the fear that over-regulation could stifle innovation.

The crypto world is a hotbed of creativity and technological advancement. Too many rules could put a damper on this, slowing progress and making the crypto landscape less attractive for innovators.

Lastly, there's a concern about the one-size-fits-all approach.

Cryptocurrencies are diverse, with different coins and technologies offering different benefits and risks.

A blanket regulatory approach might not take into account these nuances, leading to regulations that don't quite fit.

So, while these regulations aim to bring stability and security, we think they could be seen as a step back towards the traditional financial systems they sought to move away from.

Market Not Prepared For All-Time-Highs

The last thing on anyone’s radar for 2023 is the stock market at all-time-highs.

Yet, here we are only roughly 6% from reaching an all-time-high in the S&P 500.

The Nasdaq 100 index is also not too far from blasting into all-time-highs

In February 2023, Nikki mentioned the big tug of war in the economic data.

Coming out of a pandemic full of stimulus, people working from home, low housing inventory, higher interest rates and a lack of services, set us up for an economy that has economists scratching their heads.

This market has only been easily processed by those with an open mind and a multi faceted investing strategy…

Which has NOT been a lot of people (looking at you perma-bears 🐻).

So, is it too late for those who have watched these market gains pass them by?

What are you supposed to do now?

For one, no, it’s not too late if you’ve been watching the market rip higher with frustrations that you haven’t participated.

While valuations in the stock market are not cheap…

They’re also not at nosebleed levels either.

We’ll have a clearer picture of how expensive the stock market may or may not be as earnings season kicks off this week (stay tuned).

Secondly, what are you supposed to do?

This is still a great market to stay invested in, keep investing in, and also keep cash on the sidelines for opportunities like corrections…

Bbecause they will come… they always do.

We’ve always loved the idea of investing extra when you see the market correct 5% or more.

If any lesson has been learned from this market action, it’s this:

Trying to predict and time bull and bear markets based on classic fundamentals is hard in today’s market environment.

Call it passive investing making the market more resilient, call it investors buying recklessly… we don’t know for sure.

None of what has happened in the markets in 2023 has “made sense” to a lot of people as we’ve talked about before.

The antidote to this, is being prepared for multiple outcomes in the face of extreme uncertainty AND remembering that investing is for the long haul.

The best investing strategy today is being flexible.

Is Stock Picking Stupid? 🧠

The message is loud and clear in personal finance land: stock picking is a “waste of time” and you should only buy index funds.

However, if it’s such a waste of time, and investing in index funds works best… then WHY do people keep trying to pick stocks?!

It’s because across ALL wealth classes, from the working class investor, to the ultra wealthy: we’re all looking for outsized returns somehow.

The desire for outsized returns is tough to tame when people have seen how some big technology company stocks have performed.

Everyone wants to find the next AMZN, GOOG, NVDA, AAPL or TSLA.

Let us not forget that A LOT of wealth has been generated by very concentrated individual stock positions (thanks to stock compensation).

We love the comparison of everyday people picking stocks and wealthy people investing in startups.

It’s the same idea:

1. You’re looking for outsized returns either way.

2. The risk is high and the reward is high with both stock picking and startup investing.

We also can’t discount that some people just find stock picking FUN.

It’s a skillset to learn just like anything else.

You learn a lot about business and the economy from reading financial filings like 10Ks and corporate earnings reports.

Why do people think this is so bad?

After all, it’s better than watching Netflix for hours on end.

There are plenty of ways that people take on big risk to get outsized returns:

1. Real estate

2. Entrepreneurship

3. Startup investing

4. Individual stock positions

People just take advantage of how easy it is to buy a stock, and not do one ounce of research.

This leads to poor investing decisions and poor returns.

Then we have risk management:

If you manage how much of your wealth you’re allocating to higher risk activities, you’ll typically be fine.

Wealthy people would never put all of their eggs in just one investment, or even investment strategy. Neither should you.

So, no, stock picking is not stupid…

it’s an accessible way for everyday investors to get access to outsized returns if done right.

Delicious Bites 😋

• Coinbase to Meet Democrats About Crypto Legislation

• 7 counter-intuitive investing lessons

• Despite high rates, there are still some 0% car financing deals out there

• Estimated trading volumes of US politicians since 2020

• Investing is not like gambling over the long run

Food For Thought 🧠

"The biggest risk of all is not taking one."
- Mellody Hobson

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.