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Lacking Sense & Making Cents

🛫 Americans finished 2024 with an all-time performance of our national pastime, spending money. Find out why 2025 is already looking like a banner year below.

January 14, 2025

Silver banana goes to…




In this issue of the peel:

  • 🛫 Americans finished 2024 with an all-time performance of our national pastime, spending money. Find out why 2025 is already looking like a banner year below.

  • 💉 OG Howard Hughes meets new as Bill Ackman looks to take over the real estate developer. U.S. Steel has a new situationship, and Moderna needs a new pandemic. Finally, Zuck put the nail in Quantum’s coffin.

  • 🌐 The Consumer Electronics show took place last week. Read below to check out some of the coolest inventions that will almost definitely never get made. 

Market Snapshot

Banana Bits

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  • Why pitchbooks are shrinking while deal competition is rising

  • What boutique teams can do to stay ahead of their bulge bracket counterparts

  • How to automate your work in PowerPoint and Excel to impress your MD

Save the date:
📆 January 30th
⌚ 10:30 am EST
⌛ 45 minutes

Macro Monkey Says

Finishing Strong (And Rich)

One of my favorite ways to learn new things is by giving other people advice and watching what happens. 

It’s Risk Management 101—before you try something new, make sure to crowdsource the consequences. Just don’t ask about the lawsuits in my inbox.

Anyway, I’d advise you apes to follow a similar strategy, but based on the last few weeks' consumer spending and sentiment reports, y’all have already mastered the craft.

Let’s get into it.

What Happened?

We don’t ask a lot from consumers, not a single cent, in fact, but we do ask that they at least try to make sense.

However, there’s absolutely none to be found when comparing the spending data in Bank of America’s latest monthly Consumer Checkpoint with the sentiment data dropped by the Federal Reserve Bank of New York yesterday.

But we can still try to find some.

The Numbers

According to Bank of America’s internal data from last month, debit and credit card spending rose 2.2% annually in December.

I can’t be certain, but I think there’s some kind of event that happens in December that causes us to increase our spending.

That’s why, in the above graph on the left, you see a spike at the end of each calendar year. 

Although December 2024’s 2.2% annual spending growth slowed compared to December 2023’s >3% growth, that’s still a healthy figure, especially coming off of November’s 0.7% YoY rise.

That additional spending was powered, fortunately, by continued strong wage growth. One of the fears coming into the Holiday season was that wage growth would slow to a point where consumers would count on credit as much as Santa this December.

However, as we can see below, that clearly wasn’t the case. Spending across all income cohorts grew more than 3% last month and posted the highest annual print since this summer:

Equally important to how much we’re spending is what we’re spending on.

To no surprise, items like clothes (common for gifts) grew 8.5% compared to November, while spending on gasoline (consumers tend to travel more for Holidays) rose 3%.

Spending on smaller items had no trouble at all this Holiday season. Meanwhile, larger purchases—like durable goods—didn’t see the same strength despite what consumers were saying.

According to sentiment polls from the University of Michigan and the NY Fed, consumers were gearing up to spend big on high-ticket items late last year.

In the first graph above, we can see that the popularity of the belief that right now is a good time to buy larger ticket items because prices are set to rise has gone more vertical than a SpaceX rocket.

Secondly, we can see that 3-year inflation expectations among consumers jumped to 3% from 2.6% in November, while 1 and 5-year expectations for inflation stayed mostly the same. 

So, even in the context of 1) higher spending growth, 2) higher wage growth, and 3) feeling like now is a good time to buy large ticket items, consumers still aren’t doing it.

As a percentage of income, consumer spending on durable goods is below that of 2022, back when everyone thought a recession was as imminent as Joe Biden’s dementia.

The Takeaway?

Look, we’re in a pretty good spot if I’m tweaking this much over a slight reduction in durable goods spending.

It’s interesting to watch consumers do the exact opposite of whatever they say they’re gonna do, like spend more on durable goods.

But I guess that’s why you apes, and everyone else, are so good at my learning method already. Clearly, we all told each other to go buy high-priced durable goods, but this time, no one listened to each other.

With spending up 2.2% in December on strong wage growth, 2025’s looking alright.

Career Corner

Question

I got connected with a VP at JPM, and when I requested to connect on a call, he replied and said, " Let's talk on LinkedIn." Now, I am not sure how many questions I can ask or how much is too much in a test format, and above all, I am not sure how to take the conversation and convert it to a potential phone call. Any suggestions?

Answer

It could be that he doesn't want to chat via email and prefers his recruiting conversations over LinkedIn (not company email). Just continue the conversation on LinkedIn, remind him who you are and that you've already connected via email, and ask for a phone call.

Head Mentor, WSO Academy

What's Ripe

Howard Hughes Holdings (HHH) 9.5%

  • It’s almost poetic. The ghost of Howard Hughes just shook hands with the modern Howard Hughes as the late billionaire’s eponymous firm is partnering with Bill Ackman.

  • Well, it’s more like the ghost of Howard Hughes is being bought by the modern Howard Hughes. The future is now, old man, with Pershing Square coming in hot, offering $85/sh.

  • That’s a ~38% premium to Friday’s close. Billy Boy already owns more than 1/3rd of the real estate development firm, first investing $250mn in 2010 and earning a whopping 35% since then (2.2%/yr) since then.

U.S. Steel (X) 6.1%

  • The last time the U.S. and Japan went this hard on each other was at Pearl Harbor. After President Biden blocked a deal for Nippon Steel to buy U.S. Steel, other American buyers are lining up.

  • Cleveland-Cliffs, another large U.S., is teaming up with Nucor, the country’s largest steel producer, in a 3-way trade set to upset everyone equally.

  • The proposal, announced Monday, would involve Cleveland-Cliffs taking over U.S. Steel and, as part of the deal, selling its Big River Steel brand to Nucor.

  • The goal is to avoid the antitrust scrutiny that killed Cliff’s last bid. Adding in a “hell of highwater,” U.S. Steel’s friends really don’t want it to move to Japan.

What's Rotten

Quantum Stocks (QBTS, RGTI, IONQ) 33.6%, 32.3%, 13.8%

  • Well, that was fun while it lasted, huh? We thought we could end the AI bubble by swapping it out for a quantum bubble, only to find out they were both as alive as Schrodinger’s cat.

  • Except, on the quantum side, the cat clearly ate the poison. Stocks like Rigetti Computing and others got hammered (and not in a fun way) thanks to comments this weekend from Mark Zuckerberg.

  • Like Nvidia CEO Jensen Huang last week, Zuckerberg said on a little podcast called The Joe Rogan Experience that the technology is still “a decade plus out.”

Moderna (MRNA) 16.8%

  • Since the populous tapped out after their 17th or 18th booster shot, Moderna has really struggled to latch onto something anywhere close to as hype as the pandemic.

  • That issue was put in the spotlight on Monday. Deciding to be honest, for whatever reason, the biotech firm lowered its 2025 sales guidance by $1bn.

  • Revenue is expected to clock in at $1.5-2.5bn this year, down from the $2.5-3.5bn expected. Maybe this bird flu thing going around can spread into a worldwide pandemic, though—there’s always hope!

Thought Banana

CES 2025

It’s hard to find a group of people who fanboying each other harder than Silicon Valley tech bros.

Which kinda makes sense. I’m sure it was hard growing up without friends, and it is cool when you can build your own. And ironically enough, that’s exactly what went on at CES this year.

Let’s dive in.

What Happened?

The Consumer Electronics Show (CES) is a conference held annually in Las Vegas to make sure we start every year with a reminder of the coming AI apocalypse.

It’s a chance for companies to display some of their coolest, most cutting-edge tech. Many of the items on display don’t ever actually end up hitting the shelves—it feels like they almost never do—but it’s fun to see where that $10bn in mystery capex went.

Show Me The Show

Usually, the show is stolen by Sony, Lenovo, or some insane new concept car. Once again, this year was no different.

One of the coolest ideas for a truly original product came from Sony, with a demonstration of their location-based entertainment experience.

The initial demo was, comfortingly, based on HBO’s The Last of Us, a quasi-zombie-apocalypse show. Basically, it allows users to feel like they’re participating or “playing” a game-like version of this piece of media.

Another cool and original idea came from Lenovo. The laptop maker announced the world’s first ”rollable” laptop (it’s not what you think), allowing the laptop’s screen to expand by 2 inches with the click of a button. Now, if only they could make that for…

Anyway, Lenovo’s rollable laptop was declared the “Best In Show” by The Verge.

Honda, mid-merger with Nissan, rolled out this joke of a car that will almost certainly never get made, probably just to spite Elon because it looks exactly like what a Tesla should look like.

For most of these companies, CES offers a pulse-check on product ideas that require cutting-edge (a.k.a, expensive) tech. It allows them to figure out which projects are DOA in addition to hyping up investors’ thinking of the long-term cash flows these products could engender.

Now, for a few of the other coolest products courtesy of Rowan Cheung on X:

The Takeaway?

Automation seems to be the clear theme of the year.

And it’s no wonder why. Adding “.ai” to your domain name seemed to immediately confer to you $350bn of market cap last year. To actually be able to demonstrate that ability could drive further multiple expansions.

We’ll see if any of these products come to life. Personally, I can’t wait to try out that mirror. That’s just what I need—my mirror to tell me that not only am I fat, but I’m also diabetic, arthritic, and probably need to floss.

The Big Question: Which products from CES 2025 did you think were the coolest? Will any come to market? Which will make the most money for shareholders?

Banana Brain Teaser

Previous

If a(a+2) = 24 and b(b+2) = 24, where a ≠ b, then a+b = ?

Answer: -2

Today

The profit P, in dollars, for any given month at a certain company, is defined by P = I - C, where I represents total income in dollars, and C represents total costs in dollars for the month. For each of the first 4 months of the year, C = I + 32,000, and for each of the next 3 months, I = C + 36,000. If I = C + 10,000 for each of the 5 remaining months of the year, what was the company’s total profit for the 12-month year?

Send your guesses to [email protected]

❝

Software is eating the world, but AI is going to eat software.

Jensen Huang

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Happy Investing,
David, Vyom, Ankit & Patrick