2/10/2025

Good Morning.

This Super Bowl a record 1.39 B was estimated to be spent on betting. In addition the introduction of prediction markets like Kalshi and Crypto.com is expected to facilitate millions in transactions as well. 

Reciprocal tariffs are expected to be announced by Trump. This would mean the U.S. would impose the same level of tariffs that countries impose on the U.S. this policy would apply to all nations. 

“I think that’s the only fair way to do it. That way, nobody’s hurt. They charge us. We charge them. It’s the same thing” (President: Trump) 

Gold broke an all time record reaching $2,909 oz wednesday. Many analysts are predicting gold will continue to rally. Inflationary pressure such as tariffs, geopolitical conflict, and increased central bank purchasing are contributing to this rally. Gold is up 8.83% YTD.

In today’s newsletter we will cover: 

• Markets

  •  Stock Indices 

  • Crude Oil 

  • 10-Year U.S. Treasury 

  • Earnings: PLTR, PMI 

• Trump going after carried interest

• U.S. Economic Data update

• Digital Assets Weekly Summary 

• Deal of the Week: BofA buy $9 B of loans form TD

• What to look out for this week!

Markets 

• U.S. stocks dipped at the start of the week as new tariffs and ongoing trade negotiations between the United States, Canada, Mexico, and China weighed on markets. However, indexes recovered some losses after certain tariffs were temporarily lifted, finishing the week with only slight declines.

• U.S. crude oil prices declined for the third consecutive week as escalating trade tensions fueled concerns about weakening demand. On Friday afternoon, the commodity traded around $71 per barrel, down from its recent peak of approximately $80 per barrel on January 15.

• The yield on the 10-year U.S. Treasury notes declined as investors reassessed inflation trends and the Federal Reserve’s policy outlook. Friday’s closing yield was around 4.49%, down from a recent high of 4.80% on January 13.   

Stock Earnings 

• Palantir (PLTR): Shares surged 38% on the week following earnings far ahead of wall street estimates. Palantir believes that it is uniquely situated to benefit from a new commoditized AI cost structure. “With the proliferation of AI models, the raw AI labor supply is exploding,” said chief revenue officer Ryan Taylor. The stock continues to trade at extreme multiples, top of the S&P 500 in terms of fwd p/e.

• Philip Morris International Inc (PMI): The tobacco giant known for Marlboro, surged to an all-time high after delivering earnings that exceeded expectations. This growth has been driven by their Zyn nicotine product. Zyn's performance has been exceptional, with a 25% year-over-year increase in smoke-free product volumes. U.S. shipments of Zyn surged 42% in Q4, reaching 165 million cans.

Trump going after carried interest

• Carried interest is a main form of compensation for general partners in hedge funds and private equity funds. It is usually a percentage of profits of an investment's performance. Carried interest on investments longer than three years is subjected to capital gains tax with a top rate of 20%. This is significantly lower if it were treated as normal income which is taxed at a top rate of 37%.

• This tax break was first enacted in 1954 by congress. There are billions of dollars at stake as private equity investments have ballooned in recent years. There have been multiple attempts to end this “tax break” by both parties but little progress has been made. Proponents argue it promotes innovation and long term investments. Critics argue that it unfairly favors special groups and should be treated like normal income. 

• In Trumps’ latest tax policy proposal he has proposed eliminating this tax policy and not treating this compensation as a capital gain. This could potentially raise billions in income for the government in a plan to offset the massive tax cuts he is planning. While past efforts to end this policy have failed Trump has the backing of both the Republicans and Democrats increasing the probability that this change could be enacted. This would be a major disruption in the payment structure of some of the largest investment firms.  

(explanation of carried interest Financial Times)

U.S. Economic Data update

Jobs Report January:

The Jobs report singles out a strong but slowing jobs market. December added 307K jobs, significantly more. This modest growth potentially allows the Fed to take more time before making additional rate cuts.

Digital Assets Weekly Summary

1. Bitcoin Strategic Reserve Tracker Update: Between February 2nd and February 9th, five U.S. states—Kentucky, Missouri, Iowa, New Mexico, and Maryland—introduced legislative bills aimed at establishing state-controlled strategic reserves for Bitcoin. These proposals reflect a growing interest among state governments in leveraging Bitcoin as a financial hedge and reserve asset. If passed, these initiatives could set a precedent for broader cryptocurrency adoption in state-level fiscal policies.

2. Microstrategy (MSTR) Rebrand: On February 5th, MicroStrategy (MSTR) announced its official rebranding to Strategy₿ (STRK). The company, long known for pioneering Bitcoin adoption among publicly traded firms, stated that it now positions itself as "the world’s first and largest Bitcoin Treasury Company." With over 450,000 BTC in its holdings as of January 27, 2025, the firm continues to advocate for Bitcoin as a superior store of value.

3. Notable Insights: 24/7 Advantage: Crypto Leads Market Reactions to AI & Trade Disruptions (Attachment): Over the past two weeks, financial markets have witnessed heightened volatility, with major headlines surrounding DeepSeek AI and escalating U.S. trade tensions with China, Canada, and Mexico. A key observation is how the cryptocurrency market has evolved into a crucial liquidity provider, offering real-time price discovery and immediate reactions to global macroeconomic developments—especially over weekends when traditional markets remain closed.

Link to full report: 24/7 Advantage: Crypto Leads Market Reactions to AI & Trade Disruptions, By Willam Le.

Deal of the week

Bank of America has agreed to buy a $9 B portfolio of residential mortgages from Toronto Dominion Bank. The Canadian banks’ U.S. retail division has a $ 434 B cap on its U.S. retail assets after regulators found it guilty of failing to prevent hundreds of millions in money laundering.  

In response TD has had to sell securities to comply with regulators. These residential mortgages are large loans by high credit borrowers. Their large size originally made these loans unattractive because of the increased amount of capital required by proposed new regulations, Basel 3. However because these new regulations are unlikely to come to fruition these loans will be less capital intensive and more lucrative to U.S. banks. (Bloomberg)

(TD Bank Assets in CAD)

What To Look Out For This Week!

Tuesday: Fed Chair J. Powell testimony to Senate Banking Committee, Earnings Coca-Cola 

Wednesday: CPI (January)  

We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Founders: Ben Banchik, Zachary Singer

Additional Contributors: Willam Le

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