Silver banana goes to…

In this issue of the peel:

• 💸 Everyone’s on the naughty list in 2024, at least according to the latest consumer spending data. Don’t let the headline strength fool you…

• ☀️ Turns out pivoting from fintech to defense is worthy of an 8-fold increase, while Goldman’s newest crush caught a much-needed bid. Meanwhile, EVgo got hit with a big share sale while MicroStrategy’s fate hangs in the balance of BTC.

• 🍌 The Platinum Banana Awards are back. Wall Street’s most prestigious annual award show kicks off today, starting with the 2024 CEO of the Year.

Market Snapshot

Banana Bits

• What to expect from JPow and the FOMC at today’s meeting.

• AI isn’t taking your job. In fact, it’s already adding 2,000 roles at Salesforce.

• Japan tries a new experiment to increase its birth rate—a four-day work week.

• Canada’s long-time Prime Minister, Justin Trudeau, is reportedly considering resigning from the position.

• Japanese automakers Honda and Nissan have begun merger talks.

• Affirm shares slipped after the firm announced firm plans to raise a firm $750mn through a firm offering of senior convertible notes.

There’s a lot to learn from lower middle-market deals.

They continue to represent a large chunk of private-target M&A activity, and—as a result—they offer unique insight into the M&A market overall. You just need to know where to look.

This report is where to look.

It analyzes key aspects of lower middle-market transactions and compares them with the broader M&A landscape to help you hone your negotiation approaches, whether you’re working on a $50 million deal or a $5 billion deal.

Deal structures, PPAs, earnouts, escrows, and more—it’s all covered. Download the report now to see how small deals can be a big deal when it comes to informing your M&A work.

Macro Monkey Says

Welcome To The Naughty List

Spoiler Alert: No one’s getting what they wished for this holiday season unless you were shameless enough to ask your parents, I mean, *Santa, for a brand new car.

We’re all on the naughty list, at least according to the latest Retail Sales report. Consumer spending is showing signs of strength and weakness, similar to how you feel the morning after winning a case race.

Let’s get into it.

What Happened?

Yesterday, the Census Bureau released the latest data on consumer spending via the November Retail Sales report.

Keep in mind—consumer spending drives more than 2/3rds of U.S. GDP. So, this is an important report, but because it only measures spending on goods and going out to eat, it’s not as holistic of an indicator as, say, the PCE report.

But that won’t stop me from losing my mind over it.

The Numbers

Total consumer spending increased by 0.7% in November, which was above expectations of 0.5%. But that’s where the good news stops.

As the ugliest chart in finance shows us above, almost all of last month’s gain was driven by a 2.8% increase in spending on autos. Excluding spending on cars and car parts, retail sales grew just 0.2% in November.

Annually, total retail sales increased 3.8%. That’s below the historical average annual growth rate of 4.7% but above November’s 2.9% growth. In real terms, retail sales grew 1.1% for the year.

But that’s not the issue. The problem emerges when we exclude autos and look under the hood at each retail sales category.

Of the 13 categories, spending on 5 decreased in November while the remaining 8 moved in the right direction. Leading the decline was Miscellaneous Store Retailers, down 3.5%, but it’s difficult to parse a theme here given the variability in discretionary spending items.

Some of the most discretionary items, like bars and restaurants and clothing and accessories, saw spending decline 0.4% and 0.2%, respectively, in November.

Meanwhile, other discretionary categories like spending on hobbies, furniture, and electronics all increased, up 0.9%, 0.3%, and 0.3%, respectively.

The only discernible difference from my view is that the discretionary spending categories that increased appear more likely to be purchased for someone else—gifts to give this Holiday season. But that doesn’t account for the decrease in apparel spending.

Randomness is an everpresent element, but really, what we’re trying to figure out here is whether November’s report is a cause for concern.

What This Means

With inflation back on the rise according to the latest CPI report and the FOMC set to cut rates another 25bps later today, the question of “what the hell is going on?” can’t help but arise.

Headline consumer spending is strong, lending itself to the argument that further rate cuts might be less necessary than previously thought. However, spending growth ex-autos is anemic, suggesting further cuts could help spur demand.

That’s the basic predicament this report presents. It likely won’t be enough to overturn the seemingly pre-made call that a cut is coming, despite the fact that the odds of no cut more than doubled after the report was released:

In the longer term, the concern centers on real retail spending growth. Since the peak in April 2021, retail sales have been completely flat after adjusting for inflation. In fact, the $228.99bn in real dollars spent last month is 1.9% lower than in April 2021.

Consumers are spending the same amount of money but getting fewer goods and services for those dollars. This is the decline in purchasing power in action, brought to you by our old friend, inflation.

The Takeaway?

I hope everyone wanted a Cybertruck for Christmas because it looks like there’s gonna be a helluva lot of them wrapped under the tree next week.

U.S. consumer spending remains strong but is showing signs of deterioration and has yet to recover in real terms from more than 3-years ago. 

Further rate cuts may help, but with employment holding up strong, JPow needs to step cautiously to avoid retriggering inflation.

Career Section

Question

I am currently going through full-time training with Financial Edge for my analyst program. As the contents of the training have started to get more theoretical and technical, I was curious how firms interpret our grades/progress on this training.

Answer

If you want to do a good job in training, grades matter.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

Nukkleus (NUKK) 754.68%

• You gotta do something pretty crazy to get a single-day rise this crazy. Pivoting from a fintech firm to a global defense leader via a single acquisition definitely counts as crazy.

• That’s exactly what Nukkleus did by purchasing 51% of Star26 Capital for $26mn, giving the firm a 95% ownership stake in RIMON, a crucial component supplier of Israel’s Iron Dome defense system.

• Nukkleus can purchase the remaining equity down the line. But, markets love this pivot and the low acquisition price it carried. 

SolarEdge (SEDG) 16.64%

• As politicians and first-year analysts know very well, getting the right people to like you matters way more than being good at anything. SolarEdge learned that yesterday.

• Shares in the solar panel provider surged as the Street found out that Goldman has a crush on the company, double-upgrading shares from Sell to Buy.

• It’s a bold call as many anticipate a less rosy administration for renewables, especially those that rely on imports from China. But analysts called 2025 a “key inflection point,” so we’ll see how it plays out.

What's Rotten

EVgo (EVGO) 25.95%

• I hope their EV is charged because the only place this company needs to go is bankruptcy court. Maybe not yet, but that’s certainly the next stop if they keep doing sh*t like this.

• On Tuesday, an early investor in the EV charger maker announced plans to sell 23mn shares, or ~8% of total shares outstanding, via an underwritten secondary sale.

• EVgo isn’t raising funds or diluting investors through the transaction, but heavy selling pressure is induced and the signal to other investors isn’t a bright one.

MicroStrategy (MSTR) 5.41%

• MicroStrategy CEO Michael Saylor and famed GameStop trader Roaring Kitty have one clear thing in common: a degenerate love for pure gambling so strong it’s almost beautiful.

• MicroStrategy’s… strategy has been to issue zero-interest convertible bonds to raise cash in order to turn around and immediately buy BTC—a great move when prices are rising, but…

• At the time of writing, BTC is down just 1.7% from its peak, and that’s already contributing to an outsized 5.41% fall in the share price.

• If the stock isn’t trading above conversion by their maturity date, the firm’s virtuous cycle will turn vicious as they’ll have to sell BTC to pay principal balances, sending BTC lower, then the share price lower, and so on.

Thought Banana

The Platinum Banana Awards: CEO of the Year

Welcome back to everyone’s favorite time of year in The Daily Peel. With 9 trading days remaining in 2024, we’re ready to begin Wall Street’s most prestigious award show.

The Platinum Banana awards—everyone wants one, but only 9 superstar superlatives will be awarded this year, kicking off with the classic CEO of the Year.

Let’s dive in.

CEO of the Year

The goal of the highly esteemed, followed, and sought-after Platinum Banana awards are to highlight the Wall Street players that brought the most impact to markets, media, and the broader cultural landscape in 2024.

Past winners of the eminently distinguished CEO of the Year include legends like Sam Bankman-Fried in 2021, the FTX fraudster who stole ~$8bn, so winners know they’re in good company.

With no further ado, it’s time to give a big congratulations to The Daily Peel’s Platinum Banana award winner for 2024 CEO of the Year: Ryan Roslansky, CEO of LinkedIn!

Some call him the King of Cringe, but now that he’s won a Platinum Banana award, the LinkedIn CEO is far and away the most humbled & honored man on the planet.

Roslansky has been the CEO of LinkedIn, a subsidiary of Microsoft, since 2020. However, 2024 was a particularly standout year for the forgettable yet mandatory for all of us corporate elites and social media sites.

Some stats to highlight include:

• LinkedIn crossed the 1bn user threshold in 2024 and boasts 300mn monthly active users, making LinkedIn the 8th most popular social media site in the world.

• The platform saw a 45% YoY increase in video content consumed in 2024.

• Newsletters took off on the platform, more than tripling YoY as LinkedIn-native publications now boast 450mn subscribers (just a few more than us).

• Revenue grew 9.9% annually to over $16.37bn.

• The platform facilitates over 9k job applications per minute and over 1.5mn interactions per minute, significant increases from 2023.

Although he doesn’t have a publicly traded stock to hike on behalf of shareholders, Microsoft’s 22.54% YTD gain certainly doesn’t take away from his success.

This is a bit of a personal award, too. I don’t know if I’m just that much of a loser now or what, but I check and even scroll through LinkedIn like I’m on X or Instagram, just with more appropriate DMs.

That never would’ve happened before this year. Combined with the increased posts, applications, and interactions shown above, it’s clear LinkedIn is moving beyond the days of rigid, stuck-up, black tar cringe that have plagued the platform.

Not that it matters, but a few honorable mentions and runners-up for the CEO of the Year award include:

• Jensen Huang, CEO of Nvidia

• Linda Yaccarino, CEO of X

• Elon Musk, CEO of Tesla, SpaceX, etc.

• Doug McMillion, CEO of Walmart, and

• Dario Amodei, CEO of Anthropic

The Takeaway?

Congrats again, Ryan. If you’re reading this, throw me a “Top Voice” label under my name. I don’t post, but it’d be great to have something to show my mom that my degree wasn’t a total waste of money.

In 2025, expect LinkedIn to lean even harder into video and newsletter content. The platform is prioritizing quick-hit content, and as we enjoy the days of all-time highs in societal levels of brainrot, that strategy should bode well for the foreseeable future.

The Big Question: Can LinkedIn continue this success in 2025? What Other CEOs should we have considered?

Banana Brain Teaser

Previous

A total of s oranges are to be packed in boxes that will hold r oranges each, with no oranges left over. When n of the boxes have been completely filled, what is the number of boxes that remain to be filled?

Answer: (s/r) - n

Today

In the xy-plane, the origin O is the midpoint of line segment PQ. If the coordinates of P are (r,s), what are the coordinates of Q?

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

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