In this issue of the peel:

• 💸 Like Zuckerberg to Elon, Fed Chair JPow refused to get in the octagon with President Trump, thanks to his soon-to-be new bodyguard Scott Bessent.

• 🚬 Turns out my new coat hanger can also be used as an exercise bike, and America is a lot chiller than it has been in a long time. Meanwhile, Ford shares tanked on a weak outlook, and Qualcomm already misses Apple.

• 🎄 Amazon crushed it in Q4, and investors couldn’t have cared less. Find out below why the firm expects Q1 to be its weakest ever in revenue growth.

Market Snapshot

Banana Bits

• The Bank of England cut rates partially driven by tariff fears.

• Eli Lilly beat earnings despite “weakness,” if you can call it that, in weight-loss and diabetes drugs.

• Pinterest dominated Q4, with shares ripping more than 20% after-hours.

• Treasury Secretary Scott Bessent is on board with DOGE’s plans.

• Edison said its SoCal unit may have burned down all of Los Angeles.

• The ultimate conflict of interest everyone knew was coming.

Read The Daily Upside. Stay Ahead of the Markets. Invest Smarter.

Most financial news is full of noise. The Daily Upside delivers real insights—clear, concise, and free. No clickbait, no fear-mongering. Just expert analysis that helps you make smarter investing decisions.

Join 1M+ readers today.

Macro Monkey Says

Can We Tame the 10-year?

In the immortal words of legendary sports broadcaster Pepper Brooks of ESPN 8 The Ocho: “That’s a bold strategy, cotton, let’s see if it pays off.”

That’s pretty much the only thing that anybody who knows what Macaulay duration is (a.k.a, absolute nerds) has been thinking since our new Treasury Secretary announced his latest plans.

The newly confirmed Secretary of the Treasury, Scott Bessent, has plans to lower U.S. borrowing costs, but it has nothing to do with Fed Chair JPow.

Let’s get into it.

What Happened?

Like two parents who should’ve gotten divorced years ago but insist on ruining Thanksgiving every year, no one wants to see JPow and Trump go at it in public.

The President and my celebrity crush, I mean *Fed Chair, have been beefing since approximately 2-seconds after Powell was nominated–by President Trump–back in 2018.

Since then, and after winning a sweeping election in November, Trump 2.0 has reignited concerns over tensions between the Fed and the President, potentially risking the independence of the central bank and/or long-term policy planning.

However, after Wednesday, that concern has been quite a bit abated.

My backup celebrity crush (if JPow and I don’t work out), Treasury Secretary Scott Bessent, has devised a new plan for the President to achieve his goal of lowering borrowing costs without publicly bullying JPow like my high school bully still does to me.

Bessent’s idea involves targeting the 10-year yield directly. 

Bond yields are effectively made up of three factors:

• The Expected Path of Short–Term Rates: Reflecting the Fed’s current policy stance and expected changes (risk-free rate + expected Fed moves),

• Inflation Expectations: Projected inflation through the bond’s maturity,

• Term Premium: The X Factor accounts for uncertainty around rates, inflation, and other risks investors demand compensation for through the bond’s maturity.

Instead of indirectly targeting The Expected Path of Short–Term rates by trying to influence central bank decision-making, Secretary Bessent and President Trump will primarily target inflation expectations.

While not unprecedented, the strategy is unconventional—and that’s not necessarily a bad thing. Let me ask this to prove it: Is anyone happy with current borrowing costs? Anyway…

Truman, Eisenhower, Nixon, and Reagan have all, in one form or another, targeted inflation expectations to reduce borrowing costs, but mostly through price controls and tax policy.

Secretary Bessent believes his famous “3-3-3 Plan,” combined with potential changes to the supply of 10-year notes auctioned, will be enough to lower the 10-year yield without impacting monetary policy.

The “3-3-3 Plan” involves reducing our annual budget deficit from its current 6-7% to a maximum of 3%, increasing energy production by the equivalent of 3mn barrels per day, and attaining a sustained 3% annual GDP growth rate.

Although the plans read like a slightly more sophisticated version of the campaign promises made by your 5th Grade Class President, accomplishing the first two—along with cutting regulations and other growth-friendly moves—will go a long way toward achieving the third.

Lastly, prior to his confirmation, Secretary Bessent had voiced concern over his predecessor Janet Yellen’s plans around quarterly refunding auctions, intending to sell as much as $125bn in debt, spread across 3, 10, and 30-year maturities.

Bessent wanted to weigh these auctions more heavily towards 20 and 30-year bonds, worrying that an overreliance on short-term notes to focus on immediate economic stabilization would unnecessarily raise risk in the event that rates rise.

However, as of Wednesday, the Treasury Secretary has indicated plans to maintain those auction sizes through 2025. 

If he did decide, “F*ck it, we ball,” and wants to reduce 10-year auctions, this tends to drive up demand for notes of that maturity, given that the supply is fewer. Ultimately, this leads to increased prices and, thus, lower rates.

The sad part is the United States had a golden, decade-long opportunity to issue 40, 50, maybe even 100-year megabonds at dirt-cheap rates. 

Throughout (roughly) the entire post-GFC-era, U.S. 30-year bonds have carried yields under 3% the majority of the time, 51.28% of the time, to be exact. 30-year rates have been under 4% 84.62% of the time and even under 2% on 10.05% of trading days.

10.05% might not seem like much, but that’s actually almost equivalent to an entire year, as 3,525 trading days have passed since January 3rd, 2011.

During that time, the U.S. realistically could have bought itself financing for an entire century at a 1-1.5% spread over 30-year notes. In other words, there’s an entire year-long period where we could have secured 100yrs of financing for 3-3.5%.

The Takeaway?

Maybe this is what Washington needs—a little more creativity.

Cheap borrowing costs are a Holy Grail for any government—or business or person, for that matter—but especially in the U.S.’s case.

This would reduce the burden of interest payments on our federal debt that’s somehow even larger than Elon Musk’s ego, allowing the government to actually allocate funds to services it wants to provide, rather than continuing to pay for yesterday’s money.

Prospective homebuyers would be some of the biggest beneficiaries as well, given that most mortgages are built on top of the 10-year yield.

Usually, we’re happy if we can kill just two birds with one stone. But this plan has us so hyped it might even fix all of Jay-Z’s 99 Problems. 

Career Corner

Question

When connecting with the mentors from the roster on LinkedIn, should I add a note mentioning I’m in the WSO academy, or should I just send a connection request without a note?

Answer

Yes, I strongly suggest it. I get connection requests, and it is not entirely clear from the Academy; it just makes a quick acceptance easier.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

Peloton (PTON) 12.0%

• You’re telling me that the $2,000 coat rack I bought is actually an exercise bike? I’ll be the judge of that, but it seems like a lot of people made the same discovery last quarter.

• Peloton is hot again, and it didn’t take a global pandemic this time. Shares surged as the company approached what no one thought possible even a year ago—profitability.

• The comedians they are, Execs said the firm still has “a steep hill to climb,” but the Street was pleased with last quarter’s $674mn in sales, despite a $0.24/sh loss.

• Cost cuts on R&D, advertising, and administration allowed EBITDA to blow away expectations and issue next-quarter guidance of $70-$80mn, well above the $50mn analysts were pricing in.

Philip Morris (PM) 10.9%

• Here’s my new investment strategy: Buy Philip Morris stock, develop a crippling addiction to Zyns so strong it counts as insider trading, and retire off the profits—if I live that long.

• It seems like a lot of you beat me to that strategy, however, as Philip Morris is booming thanks to strong sales of Marlboro cigarettes and Zyn nicotine pouches.

• Zyn sales grew 42% annually and blessed Italy, Romania, and Thailand by adding them as new markets. Marlboro sales 

• The King of Nicotine delivered EPS of $1.55/sh on $9.71bn in sales vs estimates for $1.50/sh on $9.44bn. Shares hit an all-time high, along with drunk cigs. 

What's Rotten

Ford (F) 7.5%

• Despite beating estimates, investors are clearly disappointed with the fact that Ford CEO Jim Farley hasn’t even once smoked weed on Joe Rogan’s podcast.

• No time like the present. For now, Ford is getting pummeled after reporting EPS of $0.39/sh on revenue of $44.9bn vs estimates for $0.33/sh on $43.02bn.

• However, guidance presents a difficult 2025 for the automaker, expecting $7–$8.5bn in FY’25 EBIT compared to $10.2bn earned in 2024, driven by tariffs and investments in improving vehicle quality.

Qualcomm (QCOM) 3.7%

• Like the Patriots losing Tom Brady, the Mavs trading Luka, and Michael Scott leaving The Office, analysts are real nervous about Qualcomm losing their “It” guy.

• The chipmaker specializing in handsets obliterated quarterly estimates, delivering $3.41/sh on $11.67bn in revenue vs estimates for $2.96/sh on $10.93bn. 

• However, analysts—for once—are ignoring the short-term results to focus on long-term prospects. And apparently, they don’t look great with the firm’s largest customer.

• Increased competition from Huawei and an expected reduction in handset chip revenue next quarter were all the reasons investors needed to GTFO.

Thought Banana

Earnings Spotlight: “My Name’s (Not) Jeff”

Amazon shareholders miss founder & former CEO Jeff Bezos more than McKenzie.

After all, It’s hard to replace the guy who took us all to the moon–financially speaking (so far…).

Let’s dive in.

What Happened?

“You know what happened? A f*cking tsunami”—That Guy from The Wolf of Wall Street

Everyone send up a prayer for this $2.5tn company as, according to their guidance, management expects the slowest revenue growth ever in company history next quarter. By the way–Amazon was founded in 1997. Has no one told them about AI?!

The Everything Store reported per-share earnings of $1.86/sh on $187.79bn in revenue vs estimates for $1.49/sh on $187.30bn. And they still didn’t refund me when I picked too small of a size on this sick shirt.

The beat comes as Amazon’s cloud unit, Amazon Web Services–the crown jewel of the Amazon empire and the OG hyperscaler–came right in line with expectations, delivering $28.8bn in sales.

That represents 19% YoY growth, much slower than Microsoft Azure’s 31% and Google’s 30%. However, as the largest player in the space with essentially the same market share as the others combined, slower growth is expected.

Plus, this unit grew only 13% in the same quarter of 2024, meaning sales growth accelerated by nearly 50% in this unit.

Although AWS makes up only ~17% of Amazon’s revenue, it accounts for >58% of the firm’s operating income. The only thing business owners wish for more than a high-growth, high-margin play like that is to have had friends growing up.

Amazon’s retail unit stayed just how the firm likes it–boring. There was no surprise to the up or downside, but the firm’s advertising revenue grew 18% to $17.9bn as Amazon has quietly become the third largest digital advertising firm in the U.S., after only Meta and Alphabet.

Capital expenditures last quarter were $27.8bn, almost double the $14.7bn in Q4’23. For FY’24, the firm spent $75bn and plans to ramp that to $100bn in 2025.

While the firm is loading up on GPUs, investing in Anthropic, and building foundational models, most of Amazon’s AI gains thus far have been on the cost-cutting side.

Incorporations of AI across workflows was a huge driver in growing net income by nearly 100% to $20bn from $10.6bn in Q4’23. 

Amazon expects Q1’25 revenue of $151–$155.5bn, implying anemic growth levels of 5-9%, which the firm attributes to expected FX headwinds. Analysts were pricing for $158.5bn.

The Takeaway?

You’re doing something right if growing revenue, even 5% to $155bn is a bad thing.

Shares sold off on the weaker growth expectations and lack of flashy AI news compared to other big tech firms. However, by continuing to aggressively cut costs, the firm is setting itself up well for an unmatched margin profile once AI revenue starts rolling in.

We don’t know exactly what that “AI revenue” would look like, which again could play a role in the stock’s after-hours selloff. Shares were off 4.03% from close by 6:56pm.

The most notable takeaways here are the reacceleration of AWS growth, a 33% ramp in annual CapEx spending, and a doubling of net income to a historic margin of 10.65%.

The Big Question: What competitive advantage can Amazon carve for itself in AI? You buying the dip?

Banana Brain Teaser

Previous

In a certain high school, 80% of the seniors are taking calculus, and 60% of the seniors who are taking calculus are also taking physics. If 10% of the seniors are taking neither calculus nor physics, what % of the seniors are taking physics?

Answer: 58%

Today

Tanks A and B are each in the shape of a right circular cylinder. The interior of Tank A has a height of 10 meters and a circumference of 8 meters, and the interior of Tank B has a height of 8 meters and a circumference of 10 meters. The capacity of Tank A is what percent of the capacity of Tank B?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

ADVERTISE // WSO ALPHA // ACADEMY // COURSES // LEGAL