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How Degens Are Trading 2025

💸 Thanks, apes. All that shareholder value you create day in and day out is paying off. The Services sector (like Financial Services) is carrying the team.

January 08, 2025

Silver banana goes to…

In this issue of the peel:

  • 💸 Thanks, apes. All that shareholder value you create day in and day out is paying off. The Services sector (like Financial Services) is carrying the team.

  • 🚚 Nvidia crowned Aurora Innovation as its partner of choice in the self-driving truck market, and Getty Images is booming on news of a new merger. Meanwhile, it was a bad day to be worth trillions of dollars as Nvidia and Tesla both fell.

  • 🎲 We’ve wasted a bunch of time recently talking about what the “experts” expect in 2025. Today, we’re asking the degenerates what they think.

Market Snapshot

Banana Bits

This Tech Company Grew 32,481%…

No, it’s not Nvidia… It's Mode Mobile, last year's fastest-growing software company according to Deloitte.

Mode’s disruptive $martphone, has already helped consumers earn and save $325M+ through simple, everyday use. That led to 32,481% revenue growth between 2019 and 2022, and presence in 170+ countries. Turning smartphones from an expense into an income stream, Mode is disrupting the $1 trillion smartphone industry, like Uber did with taxis and Airbnb with hotels.

They've just been granted the stock ticker $MODE by the Nasdaq, and you can still invest in their pre-IPO offering at just $0.26/share.

Macro Monkey Says

A Well-Serviced Economy

Finally, something to talk about.

The Holidays are fun and everything, but god damn, do they make market and investing news boring. Thankfully, the most wonderful time of year is finally over.

Actual news that’s worth talking about is emerging again. And the best part? We’re gonna have to thank you, apes, for today’s big story.

Let’s get into it.

What Happened?

Yesterday, the Institute for Supply Management released the Purchasing Managers’ Index for the side of the economy that actually matters—Services.

We talked earlier this week about the December Manufacturing PMI, but in the U.S., manufacturing (a.k.a, goods) makes up ~35% of the economy, while services encompass the remaining 65%. In Q3’24, Services were even higher, pushing 67% of GDP.

So, sorry for wasting your time the other day. Here, the ISM Services PMI measures the activity level of the Services sector. 

As usual with PMI readings, anything above 50 indicates expansion of the Services sector, and below 50 represents contraction. If this reading gets below 49 and stays there for a few months, however, that’s a sign of overall economic contraction.

The Numbers

In December, the ISM Services PMI increased 2 percentage points to 54.1%, from 52.1% in November.

For an index that usually moves a few bps, a 2% jump is huge. Looking at the index’s subcomponents, we can start to see where that strength is coming from.

Unfortunately for us, this report looks similar to the ‘roided up guy in the gym screaming at himself in the mirror—nearly all the strength is from the worst possible place.

The Prices index led the overall ISM Services Index higher in December, shooting up 6.2 percentage points from 58.2 in November to 64.4 now, the highest it’s been since early 2023.

Like most things in macro, this is both good and bad. It’s good because rising prices reflect rising demand. However, rising prices also necessitate rising inflation, so unless this was massively offset by shelter or something else, we can expect an uptick in December’s inflation reading.

Business Activity flexed with the next highest monthly increase, up 4.5 percentage points. Consensus views this subcomponent as the most important in the overall index, so this was a great sign for the Services economy.

The rise in New Orders and Supplier Deliveries was another great sign for the Services sector, indicating a strong uptick in demand.

While the drop in the Backlog of New Orders is fully trying to kill the vibe, this is partially offset by the rise in Inventories, Deliveries, and New Orders.

The Takeaway?

Thanks, apes. 

Looks like all of you out here in the Financial Services sector finished the year strong, which should help GDP growth and, thus, (fingers crossed) my portfolio.

We’ll get the December CPI exactly one week from today, so we’ll find out how much of a problem this jump is caused by prices. Stay tuned.

Career Corner

Question

Is it worth it to try to network and have calls with IB professionals based in Hong Kong if I'm recruiting in the U.S.?

Answer

If you’re still learning about the industry, sure, but beyond that, probably not unless you’re open to locations or struggling to find someone to connect with in the U.S.

For example, if the only person at Bank XX who went to your college is based in another country, by all means, reach out, but if you have plenty of options in the U.S., then I would focus time there.

Head Mentor, WSO Academy

What's Ripe

Aurora Innovation (AUR) 29.1%

  • In their relentless pursuit to take unemployment to 100%, Nvidia has partnered with Aurora Innovation to unemploy America’s 3.5mn truck drivers.

  • Yesterday, at the Consumer Electronic Show in Las Vegas, Nvidia CEO/Rockstar Jensen Huang unveiled to the world his company’s partnership with Aurora.

  • Nvidia effectively drafted Aurora, a small self-driving firm, and Continental AG, a German auto parts manufacturer, to build out its self-driving truck unit.

  • This unlikely, teacher-assigned-class-partners kinda group plans to launch their first tuck in April and wants to start mass manufacturing by 2027.

Getty Images (GETY) 24.1%

  • Usually, the purpose of a compromise is to make both parties equally upset. But, there’s a first time for everything, as this corporate compromise has created two very happy shareholder bases.

  • Getty Images and fellow image company Shutterstock announced plans to merge on Tuesday, creating a $3.7bn combined firm, including debt.

  • Getty will own 55% of the combined firm, which will keep its name. Shutterstock told shareholders they could choose cash, Getty stock, a combo of both—or just GTFO of the way.

What's Rotten

Nvidia (NVDA) 6.2%

  • Here’s a new core competency for Nvidia to learn: how to shut up. Opposite of most firms, this company seems to hurt itself when it says anything besides its earnings guidance.

  • Shares woke up on a high note this morning after CEO Jensen Huang rocked CES last night. However, once investors digested the news, no one wanted Huang signing their boobs anymore.

  • Huang left too much to be questioned with the production ramp of their Blackwell chips and offered little detail on their next-gen GPU, the Rubin. Analysts were looking for any kind of concrete detail, and Huang didn’t deliver.

Tesla (TSLA) 4.1%

  • It was a bad day to be worth $1tn yesterday. These poor, sweet companies are just trying their best, and all of a sudden, at least for Tesla, BofA analysts decided to become haters.

  • Bank of America analyst John Murphy cut the world’s most valuable auto maker’s rating from Buy to Hold yesterday, citing a fully baked valuation now fairly pricing in self-driving.

  • Tesla plans to launch its self-driving service by late 2025. According to Murphy, the stock’s recent rise reflects a way-too-cocky expectation of that unit’s short-term success.

Thought Banana

Betting 2025

We talked recently about how much investment analysts love to be wrong in their annual predictions. But traders, on the other hand, absolutely hate being wrong.

The difference is traders will put money where their mouth is—and having a punishment for being wrong makes us act differently. It’s Nassim Taleb’s idea of “skin in the game.”

And it just so happens that today is our lucky day. Kalshi went ahead and quantified a bunch of their trader’s predictions for 2025. Let’s dive in.

What Happened? 

Kalshi, a U.S.-based prediction markets platform that blew up on election betting in mid-late 2024, just published a piece called “Forecasting 2025: What Kalshi Traders Predict for the Year Ahead.”

Any prediction that includes a face-tatted JPow or Donald Trump and Elon Musk dressed up as the Costco Guys has my attention immediately. 

But Kalshi is especially compelling because it essentially shows us what the common man (albeit the “common man” who is willing to place real money bets on a site like Kalshi) sees on the horizon for 2025.

Plus, Kalshi is primarily American, unlike Polymarket, which serves the international market. So, the below is essentially what the most degenerate Americans believe will happen in 2025. This should be fun.

The Numbers

Starting with the economy, Kalshi traders see in 2025…

  • 2.7 rate cuts of 25bps (meaning 70% odds of 3 cuts and 30% odds of 2),

  • 2.9% annual inflation (CPI),

  • 2.4% real annual GDP growth,

  • 21% odds of a recession, and

  • 16% odds that Costco increases the price of its hot dogs.

Compared to the Fed’s view and Wall Street consensus, Kalshi traders are a bit more cautious. 

The Fed sees 2 rate cuts, 2.4% inflation, 2.5% real GDP growth, and 29% odds of a recession in 2025. 

Street consensus is fairly similar but typically noncommittal, expecting 2-4 rate cuts, broad-based disinflation, GDP growth anywhere from 1.9-2.5%, and a 15-30% likelihood of a recession.

Remember—it’s not the actual outcomes that matter in determining their impact on the stock market, only how those outcomes compare to prior expectations. 

Kalshi included a bunch of political predictions, too, so I’ll include a few of the ones least likely to get me angry emails from you guys later today:

Kalshi traders are predicting in 2025…

  • 53% odds that DOGE cuts more than 100k government jobs,

  • 38% odds that the U.S. bans TikTok by May,

  • 21% odds of buying Greenland, and

  • 10% odds of privatizing the post office.

Some of the coolest science and technology predictions included:

  • 43% odds that ChatGPT is the top AI model by the end of the year,

  • 168.6 SpaceX launches (they did 138 last year),

  • 26% odds that OpenAI claims they achieve AGI this year,

  • 23% odds the U.S. grants a license for a new nuclear reactor.

Kalshi included predictions on a bunch of other topics, too, which you can find here. But, some of my favorite predictions in their Cr*pto, Entertainment, and Doomsday categories included:

  • 10% odds that a Mag 7 company buys BTC and 56% odds that Trump creates a National BTC Reserve,

  • 40% odds BTC hits 150k and an annual high for ETH of $4,850,

  • 48% odds that substantial digital asset regulations are created this year,

  • 81% odds Taylor Swift is the Top Artist of the year, and 86% odds Joe Rogan is the Top Podcast,

  • 25% odds that Trump recognizes Taiwan as an independent country,

  • 15% odds that a major AI company pauses research out of safety concerns.

The Takeaway?

Aside from the potential to immediately conscript 500k young Americans and launch WWIII by recognizing Taiwan, expect 2025 to be mostly very similar to 2024.

That nerdy virgin loser Isaac Newton said it best—an object in motion tends to stay in motion (thanks, buddy, I couldn’t figure that one out on my own).

So, effectively, objects that were in motion in 2024 will stay in motion in 2025… unless Elon Musk sics DOGE on them.

The key here is to remember that markets don’t care about the outcome of an event in itself—they care about the outcome relative to expectations.

Personally, my only prediction for 2025 is a 500% return for the WSO Alpha portfolio… or an SEC investigation is launched. Stay tuned.

The Big Question: What are you betting on in 2025? Do you agree or disagree with any of these bets? Where are Kalshi traders the most wrong?

Banana Brain Teaser

Previous

A dance troupe has a total of 50 dancers split into 2 groups. The costumes worn by Group A cost $80 each, and those worn by Group B cost $90 each. Of the total cost of all the costumes is $4,270, what is the total cost of the costumes worn by Group B?

Answer: $2,430

Today

A doctor prescribed 18 cubic centimeters of a certain drug to a patient whose body weight was 120 pounds. If the typical dosage is 2 cubic centimeters per 15 pounds of body weight, by what percent was the prescribed dosage greater than the typical dosage?

Send your guesses to [email protected]

❝

The greatest lesson in life is to know that even fools are right sometimes.

Winston Churchill

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Happy Investing,
David, Vyom, Ankit & Patrick