Silver banana goes to…

In this issue of the peel:

• 😓 Consumers are going crazy, and the elves are getting lazy this Holiday season. I don’t know what caused this dynamic, but you won’t want to miss it.

• 🏈 Rumble shares continued to surge on their new partnership with Tether while Toyota bought itself the cheapest gains in market history. Meanwhile, MicroStrategy sold off along with digital assets, and Netflix sank after hosting Christmas football.

• ⛔ I’m sure you all made plenty of mistakes in 2024 (couldn’t be me), but none were bigger than the winner of today’s Platinum Banana.

The Daily Poll

Previous Poll:

How do you feel about the economic impact of Christmas spending in 2024?

It’s great for the economy and shows holiday spirit: 28.6% // People are spending way too much: 22.9% // Neutral, it’s just part of the season: 32.9% // I’m still recovering from my own holiday expenses: 15.6%

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Macro Monkey Says

Lazy Elves & Crazy Consumers

Now that I’ve added my annual donation of wrapping paper and cardboard boxes to the island of trash in the Pacific Ocean, let’s talk about what we got for Christmas.

Or, better yet, what we didn’t get. We told you guys a few weeks ago that Americans are all on the Naughty List, but damn, we didn’t think you guys were this bad.

Let’s get into it.

What Happened?

Hopefully, it's unsurprising to most, but this tends to be a pretty quiet week for news on markets, macro, and money.

However, recent days have blessed us with a few reports of highly variable importance, including the latest Consumer Sentiment Surveys and the November Durable Goods Report.

Now, those surveys are worth less than the paper this email is printed on, but combined with an indicator worth a f*ck like the Durable Goods report, we might be able to extract some relevance—only one way to find out.

The Numbers

For starters, Americans' expectations for the future suddenly became even bleaker than that of my high school guidance counselor this month.

The December Consumer Confidence Survey from the Conference Board registered an 8.1-point drop in the headlining Confidence Index, but that wasn’t even the worst part.

The headlining index is comprised of two subindexes—the Present Situation Index and the Expectations Index.

Staying relatively flat, the Present Situation Index declined a measly 1.2 points last month. Not great, but not nearly as load-up-on-ammo-inducing as the Hindenburg level 12.6 point “tumble” seen in the Expectations Index.

Forecasts for a weakening labor market and worsening business conditions contributed the most to the decline. 18.3% of consumers expect business conditions to worsen in the next 6-months, up from 15.9% in November.

Meanwhile, the number of consumers expecting jobs to become more available in that time frame declined from 22.8% to 19.1% last month. 14.3% of consumers expect their incomes to decrease, up from 12.1%, and only 17.2% expect their incomes to increase, down from 20.7%.

Like watching a child throw a tantrum, reasons for this behavior are hard to find. Labor markets remain healthy at a high level, with incomes continuing to outpace inflation across the income distribution, but consumers aren’t acting like it.

This down bad outlook could have a lot to do with why that other report, the November Durable Goods Report, came in equally weak.

Durable goods are just goods that last a long time, typically defined as having an average life expectancy of 3-5yrs. Think things like cars, appliances, TVs, big-ticket sh*t like that.

Last month, total new orders for durable goods—a proxy of consumer demand and spending focusing on the high-priced, infrequently purchased segment of the market—declined 1.1% from the prior month.

That’s the worst performance since June for this index, signaling an abundance of hesitance from consumers when it came to swiping the card on those high-cost purchases.

New orders for capital goods, which are just durable goods used to make other durable goods, declined in November as well, falling 0.6%. 

Shipments of all durable goods declined 0.1% as inventories swelled 0.4%, suggesting that not only is consumer demand down, but effort from producers is too. In other words, Santa’s elves are getting lazy on us.

There are a lot of factors at play, and randomness is always an element, but the timing of this drop in November, paired with tumbling consumer expectations in December, signals that Houston may have a real problem.

The Takeaway?

If anything, Holiday cheer usually causes December’s macro data to reflect an overly positive populous. Clearly, that’s not the case in 2024.

Whether it’s the election, the fresh nightmare we hear about in the news every week, lingering impacts of inflation, the pandemic, or maybe just fewer Frosty the Snowmen having a jolly, happy day that’s causing this is unclear, but likely a combination of all of the above.

As always, we won’t get worried until this becomes a trend. We’ll check back in next month and let you know.

Career Corner

Question

How to be memorable at a networking event?

Answer

Try to find something personal to connect on. Networking does not equal just pitching yourself hard and only seeming to care about yourself.

Networking also means being with everyone; don’t ignore those whom you don’t find relevant. The industry is as you work into it over time, and skill sets mix and people end up in multiple places.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

Rumble (RUM) 28.3%

• “Rumble” is not only what me and my dad did on the living room floor over the last gift of Yankee Swap, but is the name of a stock having one of the strongest closes of 2024.

• The YouTube-like video-sharing site took off again Thursday after soaring more than 81% already this month as optimism over a new partnership grows.

• Last week, Tether, the company behind the world’s largest stablecoin, agreed to invest $775mn in the platform. $250mn is going to “growth initiatives,” and the remaining $525mn for equity capital management.

Toyota Motor (TM) 8.8%

• Taking manifestation to the next level, a Toyota executive's likely meaningless comment translated into tens of billions in market cap for the world’s largest automaker.

• Shares are flooring it as Nikkei reports that an “unnamed executive” said the company wants to double its current 11% ROE… eventually.

• That’s literally it. For the fortunately uninitiated, ROE is just net income divided by common equity. It’s a measure of profit per unit of equity, and Toyota just spoke a higher one into existence.

What's Rotten

MicroStrategy (MSTR) 4.8%

• I hope MicroStrategy offers good health insurance because CEO Michael Saylor has essentially chosen to 10x the odds that he or one of his employees has a heart attack.

• But, then again, the share price has been more than 10x’d since choosing a life of volatility and becoming a BTC holding firm back in 2020. 

• Yesterday’s selloff comes from a combination of low trading volume the day after Christmas, hence lower liquidity levels supporting digital assets, nerves over further dilution, and good ol’ randomness.

Netflix (NFLX) 0.9%

• While the NFL games aired live on Christmas Day were a helluva lot more entertaining than last month’s Tyson/Paul pillow fight, investors aren’t happy. 

• A few glitches seem to have momentarily shaken the market’s confidence in the King of Streaming’s ability to steal market share in the lives sports category.

• It’s likely just short-term jitters, as analyst commentary on this growth initiative has been overwhelmingly positive. Maybe, and understandably, traders are just mad that the f*cking Chiefs won.

Thought Banana

Platinum Banana Awards: Mistake of the Year

With three trading days left in the year, it’s time to get down to our most serious business.

The Platinum Banana Awards given out so far, as highly coveted as they are, don’t scratch the surface of the unimaginably elite prestige bestowed upon the recipients of the winners of these next three.

Make sure to stay tuned next week for the last two, but for today, let’s dive in.

Mistake of the Year

This is an award I feel particularly qualified to give out, as when it comes to mistakes—especially big ones, I’m a bit of a subject matter expert.

I don’t mean to brag, by the way, just making sure my qualifications are known. Anyway, we all know what a mistake is, so no need to explain this award.

With no further ado, let’s congratulate the winner of The Daily Peel’s Platinum Banana Award for Mistake of the Year in 2024…

Google and its LLM Rollout!

Let me just state right off the bat—Google fixed this mistake up real quick. After launching LLMs that hallucinated worse than a startup founder on ayahuasca, Google’s Gemini is set to close 2024 as one of the industry’s most powerful models.

But, at launch, nothing could have been further from the truth.

On February 26th, Google-parent Alphabet’s share price sank 4.4% on the launch of Google’s newly rebranded Gemini (formerly Bard) LLM.

Meant to be a competitor to ChatGPT on launch, users, traders, and shareholders alike quickly realized that wasn’t the case as Gemini did things like tell users to eat rocks for health benefits, use glue to keep cheese on pizza and display George Washington as Black.

Particularly driven by politically charged backlash, these erroneous responses from Google’s ChatGPT challenger led to the loss of tens of billions in market share in a single day.

In addition to losing approximately tens of billions more than we’ll ever make in our lives, Google gets the honor of this award for exactly what the mistake was.

A politically charged topic of discussion in an election year, with heavy undertones of hotly debated topics like free speech, all stemming from the responses given by an AI model, is as 2024 as The Rizzler going on Fox Business.

The Takeaway?

Hats off to Google on this extreme honor. I’m sure you’re making plans on how you can win again in 2025.

Another unusual aspect of this particular Platinum Banana is that there is an actually valuable takeaway. Although literally the biggest mistake of the year, confirmed by myself, Google more than made up for it, with shares up over 42% since then.

The Big Question: What other mistakes should have been in the conversation? What are your early guesses for big mistakes in 2025?

Banana Brain Teaser

Previous

The harvest yield from a certain apple orchard was 350 bushels of apples. If x of the trees in the orchard each yielded 10 bushels of apples, what fraction of the harvest yield was from these x trees?

Answer: x/35

Today

In a certain fraction, the denominator is 16 greater than the numerator. If the fraction is equivalent to 80%, what is the denominator of the fraction?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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