Silver banana goes to…

In this issue of the peel:

• 📈 Stocks took the hint from Jay Powell’s remarks at a New York Times event and continued marching higher.

• 🪙 Blockchain bros and Web3 warriors got another win as Trump named cr*pto advocate Paul Atkins as SEC Chair.

• 💼 BlackRock makes a power play into the credit market with its $12bn HPS acquisition.

Market Snapshot

Banana Bits

• BlackRock dishes out $1.3bn to retain HPS employees. That checks out to $1mn per employee.

• United Healthcare CEO targeted in fatal Manhattan shooting.

• A stowaway woman who somehow snuck onto a flight from the US to Paris is coming back home.

• South Korea’s President declared martial law, undeclared it, and then faced calls for impeachment all in one day.

• Wikipedia just released the most visited pages in 2024. Before you ask, yes, Diddy made the list. Check them out here.

The Daily Poll

Previous Poll:

Is Gen Z's love for “Buy Now, Pay Later” concerning?

Yes, debt trap: 63.1% // No, just flexible: 7.2% // Maybe, risky spending: 20.7% // Gen Z will manage: 9.0%

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Macro Monkey Says

In Powell We Trust

The New York Times hosted their DealBook summit, which comprised a motley crew of individuals ranging from Jeff Bezos to “Call Her Daddy” podcast host Alex Cooper. The guest with the most impact on the markets was none other than Jerome H. Powell.

What Happened?

Powell sat down with the NYT Wednesday, discussing a range of topics, including his one-sided beef with Donald Trump, who famously stated that Powell has the best job in the world because he “gets to show up to the office once a month and flip a coin.” 

Gotta admit that’s pretty hilarious. 

To his credit, Powell averted the messy drama and managed to keep himself clean from political pontification, stating that he was “not concerned” that Trump’s administration would erode the Fed’s independence despite his frequent attacks on the central bank.

Outside of the piping hot political tea, we got insights into the Federal Reserve’s inflation-fighting strategy as well as future interest rate adjustments. He emphasized the Fed’s commitment to returning back to its 2% inflation target while acknowledging the challenges of balancing economic growth and financial stability. 

The most noteworthy part of the interview was Powell’s acknowledgment of the strength of the US economy, which he called the envy of other large economies around the world. 

Based on metrics like GDP growth and Unemployment data, the economy is in a strong position despite higher interest rates. 

Powell also outright said that the Fed is looking to take a less restrictive stance on rates—a rousing endorsement for a guy who is typically coy about such things. 

GDP Growth Chart

With markets pretty much pricing in a rate cut this month, the real conversation turns to what happens over the course of 2025. And since the economy is humming along, the Fed can be much more cautious in its decision-making. 

Wrinkle In The Plan

Trump’s tariff plans add a bit of spice to the mix. The picture isn’t so clear when you consider the fact that imposing tariffs on our top 3 trading partners could stoke inflation and throw bond yields out of whack. 

Powell said there are still too many unknowns for the Fed to be making decisions about 2025 right now, but his comments about the strength of the economy are what’s sticking. Equities rejoiced in what he had to say and continued the bull run.

Unemployment Data Chart

The Takeaway

Jerome Powell’s DealBook appearance was a masterclass in balancing optimism with caution, and markets clearly liked what they heard. 

His candid acknowledgment of the US economy’s strength and hints at a less restrictive monetary stance in 2025 have set a positive tone for investors. 

Yet, the landscape remains uncertain, with potential curveballs like Trump’s tariff plans threatening to disrupt the stability Powell has worked to achieve. As the Fed navigates these complexities, Powell’s steady hand and measured approach remind us why, for better or worse, “In Powell We Trust.”

Career Corner

Question

I have a question about networking and applying for positions on the website. Should I apply to a firm first and then connect with employees to set up calls, or should I reach out to employees at the firm, connect with them, and schedule a call before applying for a position? What would be the best strategy? Could a mentor assist me with this?

Answer

It depends on specific roles and timelines. Ideally, it is great to network before applying, but if the application is open, you need to submit it. You don’t want to be left out of the process just because you were too late! Most of these applications are rolling, so if you wait too long to apply, you could miss it entirely.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

Marvell Technology (MRVL) 23.19% 

• Uh Oh, not great news for Nvidia. Marvell is breathing down its neck, and investors are starting to pay attention. Ok, ok, that is an exaggeration. To be fair, Nvidia is still the clear-cut winner in the space, but MRVL’s stock reaction post-earnings highlights investors’ desire to find another AI play.

• Nvidia is like the LeBron James of the chip industry. With an 80% market share in GPUs, they are the clear-cut dominant player for a while. But like the NBA, which needs to find the next generational talent, investors are looking for the next AI winner so that they don’t have to put all their eggs in one Nvidia basket.

• Marvell announced a 5-year partnership with Amazon, which is a big deal considering Amazon is one of the large hyperscalers of AI, spending billions of dollars per quarter to scale their products and services. Mizuho Analyst Jordan Klein says that the semiconductor company could be “the next AI winner.”

• Years ago, Nvidia’s stock would surge 20%+ on positive earnings news. Today, the company kicks ass on every report but barely budges, even sometimes trading down. That is a clear signal of the level of concentration risk in the stock. Investors are clamoring for another worthy competitor to the behemoth. 

Roku, Inc. (ROKU) 9.58%

• Sometimes, the rumor is more entertaining than the truth. That might be the case for Roku, which surged on M&A rumors prompted by a Needham Analyst who believes the shares could be acquired at a “hefty” premium.

• The competition is heating up in ConnectedTV, and conglomerates are looking to leverage data better for their marketing purposes. For example, Walmart purchased Roku competitor Vizio to sell advertisements more effectively.

• Roku devices are currently being used in over 85mn households, which makes it a treasure chest of eyeballs and data. Any retailer would kill to have that type of information on consumers.

• While it’s just speculation, this is commonplace in the markets. Like the girl or guy who you don’t find attractive until somebody else wants them, companies can often garner much higher share prices from an acquirer than they can with current investors. Once someone comes in with a buy offer, the shares suddenly become more attractive in the market.

What's Rotten

Foot Locker (FL) 8.90%

• When the sneaker industry sprints, Foot Locker jogs behind at a leisurely pace to reap the rewards. The shoe retailer saw its shares take a hit after a mid-earnings report, lowering annual sales and profit forecasts for next year.

• While Foot Locker is a stalwart in its own right, in recent years, they’ve faced competition from the likes of On and Hoka, who are slowly stealing market share. As a result, they’ve decided to turn toward the company they rely on for the vast majority of their revenue: Nike.

• Management stated on the call that they are working closely with Nike to “emphasize its newer styles,” including Vomero and Air DT Max.

• This isn’t the first step the company has taken in response to competition from rivals. FootLocker purchased back 65% of its athletic merchandise from Nike in 2022 and 2023. 

Shift4 Payments  (FOUR) 12.43%

• While Shift4’s CEO is headed to the moon (literally), the stock is crashing out, at least in the short-term. Jared Isaacman, who led the payment processing company, was apparently also a private astronaut in his downtime. WTF?

• Isaacman, who is buddy-buddy with Elon Musk and has participated in several SpaceX expeditions, was nominated to take on an administrative role at NASA.

• Pretty cool news for their CEO, but investors seem to feel it leaves the company's future hanging in the balance. While Isaacman would not be required to sell his stake in FOUR, his day-to-day activities would be severely diminished.

• Wall Street Analysts have floated around Taylor Lauber, the current President and Chief Strategy officer, as the most likely replacement. For now, we sit and wait as Isaacman’s confirmation in the Senate will probably take some time.

Thought Banana

BlackRock’s Private Power Play  

Asset management firm BlackRock pretty much wants to own or at least touch every aspect of your life, from your house to your pension fund. 

Under Larry Fink’s guidance, the behemoth has amassed $10tn (yes, trillion) in AUM. It has spread its tentacles into almost every financial sector, including ETFs, Private Equity, Venture Capital, Retirement Services, and now private credit.  

What Happened?

At $10tn, growing a firm becomes much harder as there aren’t many products or services you don’t already provide, but they found one. 

For a small pittance of $12bn, BlackRock is acquiring HPS Investment Partners. The deal marks a strategic move to break into the private credit investing market and adds $150bn to their AUM. With this move, BlackRock is doubling down on its strategy of high-growth, high-fee, and low-risk sectors. 

Earlier this year, they purchased Global Infrastructure Partners, which means they’re now technically in construction as well?

Private credit investing has been around for ages but has gained widespread public recognition in the last few years. 

It has rapidly emerged as one of the most lucrative sectors in finance. As an investor, you are essentially lending money to small and middle-market private companies that couldn’t otherwise receive bank funding due to the level of risk involved. 

Because of this, investors can receive much juicer returns in the form of higher interest rates. 

Growth Surge

As more lower-market businesses are created, they require more diverse funding sources outside of legacy financial institutions. BlackRock estimates that the private credit market, which is valued at $1.5tn today, will reach $4.5tn by 2030.

Post-closing of the deal, which is expected to happen sometime in mid-2025, BlackRock will manage $220bn in private credit. 

This positions them to play catchup to quicker competitors like Apollo and Ares, who oversee $598bn and $335bn, respectively. 

Still, by joining forces with HPS, BlackRock will instantly become a top 5 player in the market. The deal is estimated to boost management fees by 35%

Employee retention is at the top of the firm's mind, as that is where the real edge comes into play. BlackRock hopes to maintain HPS' intellectual IP by retaining talented investors and traders. 

To that end, CEO Larry Fink has set aside $1.3bn for employee retention packages, which rounds out to $1mn per employee! 

Remember that when you reflect on how you spent your childhood playing 2K and Call of Duty instead of educating yourself about private credit investing.

The Takeaway

In its relentless pursuit of dominance, BlackRock is not just adapting to the evolution of finance—it’s orchestrating it. 

With the acquisition of HPS, BlackRock continues to redefine what it means to be an asset management powerhouse, extending its grip on the booming private credit market. 

The strategic play signals not only an appetite for growth but also a masterclass in long-term positioning. 

As private credit blossoms into a $4.5tn industry by 2030, BlackRock isn’t just joining the race—it’s sprinting to the front, leveraging its scale, influence, and new partnerships to become a top-tier player. 

Your portfolio, your pension, and perhaps even your city’s infrastructure might already bear the fingerprints of this $10tn titan. And now, with private credit in its arsenal, BlackRock ensures that if money flows through it, they’ll have a hand in controlling where it goes.

Banana Brain Teaser

Previous

Cheryl purchased 5 identical hollow pine doors and 6 identical solid oak doors for the house she is building. The regular price of each solid oak door was twice the regular price of each hollow pine door. However, Cheryl was given a discount of 25% off the regular price of each solid oak door. If the regular price of each hollow pine door was $40, what was the total price of all 11 doors?

Answer: $560

Today

A certain store will order 25 crates of apples. The apples will be of three different varieties—McIntosh, Rome, and Winesap—and each crate will contain apples of only one variety. If the store is to order more crates of Winesap than crates of McIntosh and more crates of Winesap than crates of Rome, what is the least possible number of crates of Winesap that the store will order?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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