Silver banana goes to…

In this issue of the peel:

• 🏠 Mortgage rates fell again, hitting their lowest point since October and prompting a bump in mortgage applications.

• 📉 Markets cooled off a bit Thursday after starting the Santa Claus rally early this year.

• 🤝 Elon Musk and Vivek Ramaswamy spent the day strategizing with bureaucrats on Capitol Hill—something I wouldn’t wish on my worst enemy.

Market Snapshot

Banana Bits

• Elon and Vivek took their DOGE pitch to Congress, essentially explaining to Congress members why their jobs would become obsolete. 

• There are now 544,000 401(k) millionaires, according to recent data from Fidelity.  

• Boeing is trying to cop a plea in regard to the disaster of a year they’ve had, but the judge isn’t buying it.

• The market is gearing up for a consequential jobs report. Find out what investors are expecting.

• Elon Musk’s xAI side hustle raised $6 billion in its most recent funding round.

The Daily Poll

Previous Poll:

Marvell vs. Nvidia—Can They Compete?

Amazon gives Marvell a chance: 18.5% // Nvidia stays miles ahead: 31.5% // Investors need diversification: 22.8% // AI stocks are too inflated: 27.2%

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Macro Monkey Says

Mortgage Rates Back On The Move

As a child, my Christmas dreams were filled with clothes, Xbox controllers, and every toy my heart could imagine. 

But as I grew into adulthood, my wish list transformed, pared down to a modest 30-year mortgage in a thriving or at least promising neighborhood.

What Happened?

As a millennial, I have first-hand experience with how brutal the housing market has become. The lack of affordability has created a massive generational gap in homeownership. 

But, we celebrate the small victories. Mortgage rates continue to trend in the right direction (for consumers, not banks) and have been at the lowest point since October. 

The Numbers

The average rate on a 30-year mortgage sits at 6.69% compared to 7.03% this time a year ago. 

Nice! However, if you expand that viewpoint to include the preceding five years, you’ll see that rates stood at 3.68%. But at least we’re trending in the right direction!

Costs for 15-year mortgages also eased to 5.96% from 6.20% a year ago, according to Freddie Mac. 

Several macroeconomic dynamics influence the trajectory of mortgage rates. While the Fed doesn’t directly impact housing, its policies are heavily influential. As the Fed raised rates several times between 2022 and 2023, borrowing costs for banks increased. 

Banks and lenders passed on these costs to consumers, leading to higher mortgage rates.

Apart from the Fed, the supply/demand imbalance plays a major role. Typically, high demand + low supply = rising home prices. 

When demand exceeds supply, prices go up, and as a result, lenders can charge more. At this point, you might be saying to yourself, “Demand doesn’t seem that high,” and you’re right. 

Especially when taking into account the massive gap in affordability outside of Baby Boomers and Gen X. Simply put, younger people, who make up the vast majority of citizens, can’t afford homes. 

This is reflected in the fact that the median age of first-time home buyers has risen from just over 29 years old in 2000 to 38 years old today.

So, what gives? If affordability is low, which means demand is low, why do prices continue to rise? The other side of that equation is supply, and the chart below shows how much housing supply has shrunk throughout the years. 

Due to a combination of older people living longer and staying put in the same house for much longer, we’re contending with a situation of extremely low supply, keeping prices artificially high.

The Takeaway

While mortgage rates have taken a welcome dip in recent months, the broader challenges of the housing market remain. 

The supply-demand imbalance, compounded by affordability issues and generational shifts in homeownership, continues to drive up prices and lock out many younger buyers. 

For millennials and Gen Z, the dream of homeownership feels more like a moving target, inching further out of reach with each passing year. 

But we’ll celebrate the small wins—because even a modest rate drop in this market feels like a Christmas miracle.

Career Section

Question

When an application for a program asks you to detail your individual experiences, is it ok to copy and paste the role description from your resume, even when it asks you to also submit the resume?

Answer

It’s fine, but I think the better approach is to rephrase a bit so you can use the space to your advantage, highlight your biggest achievements, and write in prose instead of bullets.

But in the end, it probably won’t make a huge difference either way, so if you’re tight for time, it’s ok.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

American Airlines (AAL) 16.80% 

• The airline industry is so back. Airline stocks have been through a lot over the past few years. First, the pandemic diminished travel demand to basically zero. Then, the world reemerged from the pandemic, and as airlines started making some money back, they got smacked in the face of rising oil/gas prices.

• AAL, in particular, went through a sh*t show of its own creation that began when the company tried to bring more business-class travel in-house. This ended up being a terrible decision and led to the dismissal of its former Chief Commercial Officer.

• Today is a new day, and Wall Street is excited about recent updates from United, Southwest, and American Airlines. The company raised guidance for next year, citing that “the pricing and revenue environment has continued to improve” ahead of 2023. In addition to strong demand and more controlled prices, America’s new loyalty credit card is also helping bring in more cash.

SoundHound AI (SOUN) 31.33%

• SoundHound isn’t a household name, and most people probably had no idea what it was before yesterday’s killer performance. But even prior to that, the stock had been quietly surging and was up over 150% in the last month.

• The voice conversation AI provider inked a pretty good deal with restaurateur Torchy’s Tacos. Torchy’s will utilize AI ordering and customer service technology at all 130 of its locations. SoundHound’s software has been integrated specifically into Torchy’s menu and has the capacity to manage 100% of incoming calls and questions regarding menu items, store hours, and allergen information.

• This frees up time for Torchy’s employees to focus on food preparation and in-store service. This news is pretty exciting for investors as it opens a door of possibilities. Thousands of restaurants could adopt this type of software in the future.

• Like an unproven first-round NFL draft pick, SoundHound is trading off pure potential. The fundamentals almost seem to not matter for this company after the recent stock surge.

What's Rotten

AeroVironment, Inc. (AVAV) 15.88%

• The trend with this stock pretty much goes like this: Release any news publicly whatsoever, whether good or bad, and the stock gets hammered. AVAV is quite a volatile stock, with 20 moves of greater than 5% in the past year. Maybe they should just not say anything at all and hope that people forget they own the stock so that at least they won’t sell.

• Just a few months ago, the company secured a 5-year agreement with the US Army to become one of their weapons suppliers. Since then, the stock has done ok but is still 29% below its most recent high, and yesterday’s earnings created an even bigger hole to climb out of.

• The company’s Q3 earnings were a tale of two tapes. On the one hand, revenue easily blew past expectations. On the other hand, EBITDA missed significantly. Guess which metric investors chose to focus on. The metric that made the stock go down 16%. But what do I know? The market constantly overreacts to news. Price drops can sometimes create the best buying opportunities.

SentinelOne (S) 13.21%

• Two rules of markets. Rule #1: Sometimes, your absolute best just isn’t good enough. Rule #2: Investors will judge you more harshly than they judge other companies. If management at SentinelOne didn’t already know that, they sure found out yesterday.

• Oftentimes, you’ll hear of companies barely making a profit or even unprofitable companies flying high after earnings based on good vibes and potential. SentinelOne had a pretty decent quarter, reporting revenue that aligned with expectations. Not bad, but being a tech stock means getting compared to other hyper-growth SaaS companies.

• So you’re telling me that investors can set a revenue expectation for a company, and the company meets that expectation, but the stock still gets clapped? Yep, welcome to the world of investing! While analysts set their own expectations, in reality, they are looking for companies to exceed them. In the case of SaaS-based companies, they are looking for extreme surprises to the upside.

Thought Banana

Boeing’s Epic Crashout Part 2: Grounded Ambitions  

Remember the daily dose of negative headlines surrounding Boeing over the past year, each headline sounding more cringe than the one before it? 

Well, the company has finally transitioned from the court of public opinion and is now in the court of law, the only court that matters. 

What Happened?

Let's get caught up if you’ve been unplugged for the past year (I can’t blame you; in fact, I’m quite envious). 

Boeing has been experiencing a real-life version of “A Series of Unfortunate Events.” Several high-profile and embarrassing aircraft issues have created widespread uncertainty surrounding its quality control standards—for example, that time in January when the door of an Alaskan Airlines flight completely detached mid-air. 

What ensued over the next several months was a litany of technical and operational problems like stuck pedals, wheel detachments, and fuel leaks that placed passengers in immense danger. 

Now that I think about it, I probably shouldn’t have chosen this topic to write about prior to taking a flight tomorrow. 

If that wasn’t bad enough, employees went on strike to demand higher wages, which further dented profitability. All in all, Boeing reported $8.6 billion in YTD losses, compared to a positive $2.6 billion gain for the same period in 2023. 

These events led to the removal of CEO Dave Calhoun, and investors have been shedding exposure to the stock for several years, as seen in the chart below.

Chickens Coming Home To Roost

Now, Boeing has to face the music. The company has been attempting to get out of any serious criminal penalties by negotiating a plea deal with the US government. 

Under the terms of the deal, they would plead guilty to deceiving the Federal Aviation Administration (FAA) in the role they played involving two fatal 737 Max crashes.

This comes after Boeing had already pleaded guilty to conspiracy to defraud the US, for which it would pay an almost $500 million fine. However, the judge in this case ain’t having it and rejected the proposed plea deal. 

It’s clear that Judge O’Conner is worried about the optics of potentially letting the company off easy. 

Remember in elementary school when one little white lie led to another slightly bigger lie to cover up the initial one, and before you knew it, you were involved in a mass conspiracy? 

That’s kind of how I imagined this all blew up for Boeing. One tiny design flaw in a plane that gets overlooked eventually leads to relaxed quality control standards, ultimately landing you in a multi-billion dollar legal battle with the Department of Justice.

The Takeaway

Boeing’s struggles over the past year have gone from a series of cringe-worthy headlines to a full-blown legal showdown. 

The company’s failure to uphold safety and quality has left it reeling, with public perception, investor confidence, and financial stability all in question. 

While Boeing may have been able to dodge some of the consequences by negotiating plea deals, the courts have signaled that leniency won't be given easily, especially when the safety of countless lives is involved. 

Boeing's troubles are a stark reminder of how even industry giants can fall when shortcuts and negligence become part of the playbook. As the legal and financial repercussions continue to unfold, Boeing looks to regain the trust it once held in the aviation world.

Banana Brain Teaser

Previous

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?

Answer: 9

Today

Makoto, Nishi, and Ozuro were paid a total of $780 for waxing the floors at their school. Each was paid in proportion to the number of hours he or she worked. If Makoto worked 15 hours, Nishi worked 20 hours, and Ozuro worked 30 hours, how much was Makoto paid?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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