Silver banana goes to…

In this issue of the peel:

• 🦅 Patriotism = waking up at 6 am for work. Services are steady, but manufacturing is still struggling. America’s holding it together—just about.

• 🚀 Palantir’s soaring with defense deals; Reddit’s profiting out of nowhere. Meanwhile, Marqeta and Ferrari are falling flat.

• 🍌 Stock markets don’t care who’s in the Oval Office. History shows politics rarely influence long-term market returns. So keep your portfolio moves focused on profits, not politicians—Thanksgiving dinners can handle the politics.

Market Snapshot

Banana Bits

• Nvidia closed Tuesday as the official most valuable company in the world.

• If you care, here’s the WSJ’s electoral vote tracker, as I’m almost certain we won’t know who the 47th POTUS is by the time you read this.

• Google searches for “who is running for president” spike on election day as highly attentive Americans lock into some in-depth last-minute research.

• The November jobs report is already looking a lot better as Boeing’s machinists accept a 38% raise to end the strike.

• A casual reminder of that time Sam Bankman-Fried built an election trading system at Jane Street and lost $300mn.

• The pain continues at Super Micro, down more than 17% after-hours on further 10-K delays and weak guidance.

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Macro Monkey Says

How To Save America

What’s your real civic duty?

We only vote to elect a President once every 4 years, but electing to wake up and create shareholder value is a daily choice we all face. 

Dragging yourself out of bed at 6am fueled by nothing besides stimulant abuse and an addiction to social status—now that’s patriotism. But, in October, only 2/3rds of the economy was on board.

Let’s get into it.

The Numbers

Yesterday, the Institute for Supply Management (ISM) released its October Purchasing Manager’s Index report on the U.S. Services sector. This comes on the heels of the ISM’s release last Friday of the same report focused on the Manufacturing sector.

In Q3, Services made up ~66.1% of U.S. GDP, leaving the remainder to Goods, of which Manufacturing provides an effective proxy. 

Great to see Services showing resilience, but manufacturing is still having a harder time than most of us with mental math.

October was the 21st month in a row of a continually expanding Services sector, last falling below 50 in January 2023. 

(Keep in mind—Readings above 50 signal expansion within the sector, while below implies a contraction. Below 42.5 generally signals an economy-wide recession.)

The headline Services Index decreased by 0.2 to 55.0, marking the second consecutive month of declines, but it remains well above economists' estimate of 53.7.

9 of the 10 Services sector subcomponents (try saying that 3 times fast) were in expansion territory, with the backlog of orders index the only reading below 50. However, 8 of the subcomponent indexes worsened from the prior month.

Employment and supplier deliveries carried the index. Employment, in particular, was a bright spot as this subindex declined in September.

However, more importantly, declines in new orders, new export orders, and prices signal weakening demand for Services.

Speaking of weak demand, let’s go to the expert, the Manufacturing sector.

Basically, the Bizarro version of the Services sector, Manufacturing, has been in a technical contraction for nearly all of the last two years, spending only one month above 50, which was back in March at 50.3. 

Last month, the total Manufacturing PMI declined from 47.2 to 46.5, a fresh low since July 2023. 

8 out of the 10 subindexes remain contractionary, with only the Prices and Supplier Delivery indexes expanding in October.

Although in contraction territory, the individual performance of the subindexes improved more on the Manufacturing side.

4 of the 10 subcomponent indexes increased from the prior month. 5 declined and the Imports index was unchanged from September.

Unfortunately for consumers, prices led the way within this sector. But, when paired with New Orders and New Export Orders, both of which increased in October, this could signal a strengthening demand for goods.

Declines in Production and Employment are at least partially tied to the Boeing machinist strike, so, in theory, these should already be improved in November considering a deal with management has been reached.

The Takeaway?

Despite how the vibes around the election may have us feeling, Uncle Sam is still doing alright. 

Weighing these two indexes together by their respective contributions to GDP,  we get a combined Manufacturing and Services PMI of 51.12. Now, that measure is probably meaningless, but we like to f*ck around here at the Daily Peel.

If you really want to help save America, make sure to stop on our way to the voting booth and order a new refrigerator or 777 MAX plane or something. 

F*ck saving democracy, we’re all about saving the economy.

Career Corner

Question

I am applying for an Equity Research role (that I believe fits me well despite focusing on IB). The position is 1 week old and has over 100 applicants; would I stand out if I wrote an interesting statement as asked by LinkedIn? ("mark as top choice")

Answer

I don’t have a strong view of these LinkedIn applications, but I assume marking them as your top choice can’t hurt. But also, importantly, you should be networking! That will likely have a bigger impact than whether or not you check this box.

And strong interview prep with a strong stock pitch will go a long way! (Also, as an aside, you can’t trust the number of applications on LinkedIn—some submissions are completely unqualified, and some are bots)

Head Mentor, WSO Academy

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What's Ripe

Palantir (PLTR) 23.38%

• It’s truly poetic to see the most techno-war stock in the most techno-war country ripping on election day. The Defense Department’s budget always wins, so Palantir ain’t mad.

• In fact, winning DoD contracts like Project Maven is exactly what led Palantir to grow revenue 30% annually to $726mn, beating estimates for $705mn.

• EPS of $0.10/sh beat estimates for $0.09/sh too. FY’24 revenue guidance was raised, helping shares boom despite an already-lofty NTM P/E ratio of ~100x, now ~118x.

Reddit (RDDT) 12.58%

• It’s a pretty huge flex to be the 6th most searched term on Google this year as Reddit has become, but an even bigger flex to have done it without becoming profitable.

• Reporting earnings on Tuesday, shares took off as the social media site reported a surprise profit of $0.16/sh vs the $0.07/sh loss that was expected.

• Revenue beat estimates, too, up 68% YoY on a 47% increase in daily active unique users. AI brings a dual benefit as the firm can license out its content for training while attracting users from people seeking answers from fellow humans.

What's Rotten

Marqeta (MQ) 42.52%

• Falling 80% from their peak wasn’t nearly enough for Marqeta. The firm said, “Hold my beer” on Tuesday and brought their all-time return to -45.52%.

• The payment card management firm barely beat on EPS and “missed” on sales by $100k. Payment processing volume grew 30% YoY while revenue grew 18%.

• But weak guidance threw the baby out with the bathwater. Q4 revenue is expected to rise only 10-12% against prior guidance of 17%.

Ferrari (RACE) 7.18%

• If only it was easy to cheat on earnings as it is in their F1 races. Unfortunately, simply building the fastest stock wasn’t an option for Ferrari in Q3.

• The luxury automaker missed on sales and earnings expectations despite delivering 6.5% YoY revenue growth and a 10.3% increase in adjusted EBIT.

• Pricing drove revenue growth as shipments of these borderline Veblen goods fell 2%, led by a 29% collapse in China. Sponsorship sales growth of 21% helped, but demand is threatened in the current macro backdrop, especially in China.

Special Election Day Stock: Trump Media & Technology Group (DJT) 1.16%

• I wrote below about Trump Media, which was up 15.7% by 2pm, but a subsequent selloff caused shares to end lower. Take that as you will…

• As if we needed further proof that this election is a scam, voting is over, and neither candidate was ever asked to walk the American people through a DCF.

• With a background in real estate, however, no doubt Trump could at least tell us how to determine a property’s cap rate, so that must be why shares are rising.

• The interesting aspect here will be found in how the stock trades post-election if we know who won by the time you read this. Unfortunately, you’ll have to stay tuned.

Thought Banana

The Stock Market Doesn’t Care

As proudly registered investors in the extreme wing of the S&P 500 party, the only election we talk about here at the Daily Peel Global Headquarters is which stocks you’re voting into your portfolio.

As a reminder, the S&P 500 doesn’t give a damn who's in office nor what color their tie is. Let’s dive in.

The Numbers

Shoutout to the Ritholtz Wealth Management team for the graphics. 

$1 invested in the S&P 500 back in 1901 would be $91,212 today—but only if you held through every taper tantrum, market meltdown, and political provocation over the last century-and-a-quarter.

Similarly, if you tried to time investing based on political party, you’d miss out on a lot of upside. The numbers might look different for the specific parties below, but never underestimate the element of randomness.

For example, The Great Depression wasn’t the fault of one political party or another. If you want to blame anyone, talk to the first 6 chairs of the Federal Reserve who allowed a credit and equity bubble to brew uncontrollably—not Coolidge, Hoover, or FDR.

Further, if you think one party or another is better at avoiding drawdowns in the equity market, think again, again.

Randomness is the key element in the relationship between politics and market returns, as the graphic below suggests:

With great returns comes great risk. Turning $1 into over $92k doesn’t come easy, even if you’re willing to wait 124 years.

During those 124 years, mainstream media outlets will fearmonger as extremely and often as possible to farm engagement, but you better not let that alter your long-term investing plans:

The Takeaway?

Take a deep breath and don’t do anything stupid. 

I’m not saying there’s never a reason to sell or change your portfolio allocation, but the political party of whichever corrupt overlord is in office shouldn’t be one of them.

Specific policies, such as the CHIPS / JOBS Act, can be a reason to reallocate, but you wise apes are too sophisticated to let something as brainless as politics f*ck up your future.

When I was an advisor, I can’t tell you how many people called in wanting to sell because of “Joe Biden’s inflation” or “Trump’s tariffs.” Every single one of them missed out on gains they and their families otherwise would’ve enjoyed.

The market’s least favorite thing is uncertainty, so simply knowing who our next President will be is a good first step to clear that up. 

Don’t be that investor. Save politics for Thanksgiving dinner.

Like we always say, our only investment advice is to buy low and sell high—best of luck with that.

The Big Question: Do you think Goldman’s forecast of 3% annual returns for the S&P 500 over the next decade is accurate? Why or why not?

Banana Brain Teaser

Previous

Three people each contributed x dollars toward the purchase of a car. They then bought the car for y dollars, an amount less than the total number of dollars contributed. If the excess amount is to be refunded to the three people in equal amounts. Each person should receive a refund of how many dollars?

Answer: $(3x-y)/3

Today

Carl averaged 2m miles per hour on a trip that took him h hours. If Ruth made the same trip in 2/3h hours, what was her average speed in miles per hour?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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