Silver banana goes to…

In this issue of the peel:

• 🏠 Coming home for the holidays just got a lot easier for many Americans… as they just bought a home to come home to. Find out wtf is going on below.

• 👕 A budding romance sent Honda shares soaring while the newest member of the 4-comma club in market cap terms got a fresh upgrade. MicroStrategy investors didn’t like the latest fundraiser, and Nordstrom is bailing on investors.

• 🔥 We got a fun one today in Wall Street's favorite award show. Read below to find out who won the Platinum Banana for the Hottest Take of the Year in 2024.

Market Snapshot

Banana Bits

• Chinese President Xi Jinping devises a new long-term, top-down economic plan.

• The Silicon Valley to D.C. pipeline isn’t a usual career trajectory, but it sure is becoming a popular one.

The Daily Poll

Previous Poll:

What’s the most intriguing part of the November PCE report?

Inflation falling below expectations: 36.2% // Steady increase in incomes: 17.2% // Growth in consumer spending: 19.0% // Fed reconsidering rate policy: 27.6%

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Macro Monkey Says

Home(s) For The Holidays

We‘ve all seen those commercials of “average” American families opening presents in their 1,200 sq ft living room on Christmas morning, only for one of them to discover their gift is a new car.

So, they go outside their $7.5mn home and see a $90k brand new 2024 Acura Integra Type S or some sh*t sitting in the driveway with a nice, red bow. Everyone’s pumped, and they head back inside to enjoy hot chocolate and soak up the American Dream.

Yeah, that’s not gonna cut it this year. With inflation, a new car is expected. If you really want to stand out, buy ‘em a house.

Let’s get into it.

What Happened?

Yesterday, the National Association of Realtors published their monthly report on new residential home sales in November.

Known as the New Home Sales report, it’s a good indicator of consumer’s appetite for new homes as well as the supply of listings in the U.S.

The Numbers

In November, sales of new homes occurred at an annualized rate of 664k, a 5.9% increase from October and an 8.7% increase from November of 2023.

You love to see it.

Now, due to delays in reporting and the must-be-intentially-long time it takes for home sales to close, the November report mostly encompasses purchase decisions made in late September, October, and maybe a little of early November.

Still, we love to see it. As activity heats up, the housing market continues to slowly thaw out of the low-rate, high-price, and low-supply ice age that the pandemic sent this asset class into. Luckily, those underlying dynamics are starting to shift, too.

Looking at the months’ supply of new homes, which measures the number of months it would take to sell through all new home inventory at the current sales rate, the U.S. is sitting on 8.9 months’ worth of supply.

That’s a slight decline from October but remains in a healthy territory.

More good news awaits for wannabe-homebuyers and terrifies wannabe-home-sellers - when we take a look at prices.

In November, the median sales price of a new home in the U.S. declined 5.4% from $425.6k in October to just $402.6k in November, a 6.3% annual decline.

Usually, when interest rates fall, as has been attempted since the Fed began cutting in September, home prices rise. However, despite those cuts, other factors are clearly carrying more magnitude in the current state of the market.

One of those other factors happens to be extremely similar to my high school dating strategy: wearing people down.

The lock-in effect felt by homeowners who want to move but don’t want to forgo their sub-4% mortgage rate is slowly loosening its grip. As time goes on, the desire to keep that cheap line of capital is slowly overtaken by the desire to GTFO of the house.

That seems to be the primary driver because, as alluded to above, these rate cuts ain’t doing their job.

JPow and the FOMC gang have worked hard to reduce borrowing costs by a full percentage point since late September. In that exact same time period, mortgage rates have been moving like GameStop in January of 2021.

On September 26th, the average American could get a 30-year fixed mortgage at a 6.08% rate. As of December 19th, average rates had mooned to 6.72%, 10.5% rise… in just three months… while the Fed was cutting rates…

The unfortunate thing is that mortgages are not built directly on the back of the Fed Funds Rate. Most lenders use the 10-year treasury yield as their starting point, adding on additional costs depending on risk.

The bond market, especially Treasuries, has spent the last 3-months calling cap on the Fed’s rate cuts; hence why we don’t see so those cuts bleed through to the housing market.

The Takeaway?

What’s that saying? Slowly but… damn, surely I can’t be forgetting.

Nature is healing. It just takes its sweet time, especially in the U.S. housing market. The increase in supply, falling prices, and (hopefully) reduced rates should continue this trend of increased activity into 2025, but only time will tell.

Now go buy your friend a house for Secret Santa.

Career Corner

Question

One of the responses I got from a cold email was basically just, "If you're interested in the position, send me your CV." This is definitely positive, but I think a phone call would still help me learn about the bank and allow me to speak about that in an interview.

Should I just say yes, I'm interested, and send him the CV, or should I ask again for a quick phone call?

Answer

You definitely have to respond with your CV, and you can follow up by saying you would still love to chat if he/she has time.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

Honda Motor Co. (HMC) 12.72%

• The season of love isn’t for another few months, but Honda and Nissan are wasting no time soft-launching their new relationship—investors are loving it.

• Executives at the 8th and 9th largest auto producers globally agreed to hold talks over the next 6-months on a potential merger. Basically, they just started talking.

• Further complicating their situationship is the participation from Mitsubishi, who is also involved in the merger talks. This combined company would be the 3rd largest automaker globally, behind only Toyota and Volkswagen. 

Broadcom (AVGO) 5.52%

• True Alphas like us at The Daily Peel Global Headquarters love winners. And apparently, there are some fellow Alphas at the research desk at UBS, too.

• This became clear as the Swiss bank upgraded its rating on Broadcom shares after the stock had risen >45% in the last month alone, crossing the $1tn market cap line.

• UBS is hopped up on Broadcom’s nascent, outsized revenue growth in the AI chip sector, becoming a true challenger to Nvidia’s dominance.

What's Rotten

MicroStrategy (MSTR) 8.79%

• Going from a company that sells software to one that exclusively sells equity is a risky play but has accounted for a gain of approximately 2,300% in the last 5yrs.

• Hats off to the team—this is the kind of financial engineering that puts you on par with the greats like Warren Buffett, Jack Bogle, or Bernie Madoff.

• However, it’s not an evergreen strategy. For example, an SEC filing Monday revealed MicroStrategy continued to show off its talent for buying BTC exclusively at or near all-time highs.

• The BTC holding firm took advantage of its recent run-up and sold 1.3mn new shares of common stock to purchase another 5,262 BTC at an average price of $106,662.

Nordstrom (JWN) 1.47%

• Joining the chorus of companies that don’t want an EPS estimate from a 23-year-old in NYC to give them a heart attack four times per year, Nordstrom is going private.

• The $6.25bn deal, announced Monday, involves the controlling family, who own a 33% stake, and El Puerto de Liverpool, a real estate conglomerate, buying out all shares for $24.25.

• This marks a 36% premium to the share price at the start of 2024 but a 1.1% discount from Friday’s close, hence the selloff on Monday.

Thought Banana

Platinum Banana Awards: Hottest Take of the Year

We’ll (obviously) be off tomorrow, so let me give you an early Merry Christmas from all of us here at The Daily Peel Global Headquarters. It’s been a fun year, and we thank you for sticking through it all with us.

Let’s celebrate the season of giving in the most Wall Street style possible today: by talking about taking.

Let’s dive in.

Hottest Take of the Year

For you, wise apes, this one might be a little easier to guess than the others.

Today’s installment of the wildly popular, lifelong dream for many Americans, the Platinum Banana Awards, focuses on the hottest take among the investing community in 2024.

I don’t just mean the wrong-est prediction—Jim Cramer would permanently wear the crown on that one. We’re looking for a take that was bold enough to turn heads, iconic enough to be remembered, and focused on a topic that was a key theme of 2024.

Time to congratulate our winner of the Platinum Banana Award for the Hottest Take of the Year 2024…

Cathie Wood & ARK Invest’s 2029 Tesla price target!

Cathie & Co. likely would’ve won this award every year since 2021 if we had given it out then, but 2024’s updated Tesla price target was like no other.

In case you forgot, Cathie Wood, founder, CEO, and CIO of ARK Invest, predicted that Tesla would reach a share price of $2,600/sh by the end of 2029—a market cap of ~$8tn.

She gave a similarly cracked-out prediction back in 2021, but this time felt different. In 2021, any asset with a dollar sign in front of it was hitting all-time highs—euphoria was the dominant market feeling.

But in 2024, this prediction came as we were all waiting with bated breath for a “looming” recession to hit. She bucked the negativity of the year with this clearly drug-induced price target, and we love it for both the optimism and the insanity.

Predicting Tesla to grow larger than the British East India Company—the largest company in world history, with an estimated market cap of $7tn at peak and their own f*cking military—is certainly bold, but it wins for other reasons too.

Forecasts on some ephemeral aspects of the AI landscape were a dime a dozen this year. However, what ARK and Cathie Wood did that few others seemed component enough to put together was actual, quantifiable numbers behind the prediction.

Say whatever about the numbers, but the thought process makes sense. Oh, and in case you were wondering, the bull case calls for a price target of $3,100… a $10.9tn market cap. And worst case scenario? A price target of $2,000/sh… or a market cap of $7tn.

The Takeaway?

Oh, Cathie. We hope you’re right (mostly because we hold Tesla shares), but damn, the world’s gonna be a crazy place if you are.

Thanks for giving us this take; it's really more entertainment than investment “information,” but we love it nonetheless.

Can’t wait to see what they come up with in 2025.

The Big Question: What other hot takes could’ve made our list? Any early guesses on what might win for 2025?

Banana Brain Teaser

Previous

When n liters of fuel were added to a tank that was already 1/3 full, the tank was filled to 7/9 of its capacity. In terms of n, what is the capacity of the tank in liters?

Answer: 9/4n

Today

Kevin invested $8,000 for one year at a simple annual interest rate of 6% and invested $10,000 for one year at an annual interest rate of 8% compounded semiannually. What is the total amount that Kevin earned on the two investments?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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