Finance

Fintech firm Dave came back from the brink of collapse, turned profitable and has consistently topped Wall Street analyst expectations.
It’s the top gainer for 2024 among U.S. financial stocks, with a 934% year-to-date surge through Thursday.
Fintech firms like Dave and Robinhood are the most promising heading into next year, according to JMP Securities analyst Devin Ryan.

Jason Wilk
Source: Jason Wilk

Jason Wilk, the CEO of digital banking service Dave, remembers the absolute low point in his brief career as head of a publicly-traded firm.
It was June 2023, and shares of his company had recently dipped below $5 apiece. Desperate to keep Dave afloat, Wilk found himself at a Los Angeles conference for micro-cap stocks, where he pitched investors on tiny $5,000 stakes in his firm.

“I’m not going to lie, this was probably the hardest time of my life,” Wilk told CNBC. “To go from being a $5 billion company to $50 million in 12 months, it was so freaking hard.”
But in the months that followed, Dave turned profitable and consistently topped Wall Street analyst expectations for revenue and profit. Now, Wilk’s company is the top gainer for 2024 among U.S. financial stocks, with a 934% year-to-date surge through Thursday.
The fintech firm, which makes money by extending small loans to cash-strapped Americans, is emblematic of a larger shift that’s still in its early stages, according to JMP Securities analyst Devin Ryan.
Investors had dumped high-flying fintech companies in 2022 as a wave of unprofitable firms like Dave went public via special purpose acquisition companies. The environment turned suddenly, from rewarding growth at any cost to deep skepticism of how money-losing firms would navigate rising interest rates as the Federal Reserve battled inflation.
Now, with the Fed easing rates, investors have rushed back into financial firms of all sizes, including alternative asset managers like KKR and credit card companies like American Express, the top performers among financial stocks this year with market caps of at least $100 billion and $200 billion, respectively.

Big investment banks including Goldman Sachs, the top gainer among the six largest U.S. banks, have also surged this year on hope for a rebound in Wall Street deals activity.

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Dave, a fintech firm taking on big banks like JPMorgan Chase, is a standout stock this year.

But it’s fintech firms like Dave and Robinhood, the commission-free trading app, that are the most promising heading into next year, Ryan said.
Robinhood, whose shares have surged 190% this year, is the top gainer among financial firms with a market cap of at least $10 billion.
“Both Dave and Robinhood went from losing money to being incredibly profitable firms,” Ryan said. “They’ve gotten their house in order by growing their revenues at an accelerating rate while managing expenses at the same time.”
While Ryan views valuations for investment banks and alternative asset manages as approaching “stretched” levels, he said that “fintechs still have a long way to run; they are early in their journey.”
Financials broadly had already begun benefitting from the Fed easing cycle when the election victory of Donald Trump last month intensified interest in the sector. Investors expect Trump will ease regulation and allow for more innovation with government appointments including ex-PayPal executive and Silicon Valley investor David Sacks as AI and crypto czar.
Those expectations have boosted the shares of entrenched players like JPMorgan Chase and Citigroup, but have had a greater impact on potential disruptors like Dave that could see even more upside from a looser regulatory environment.

Gas & groceries

Dave has built a niche among Americans underserved by traditional banks by offering fee-free checking and savings accounts.
It makes money mostly by extending small loans of around $180 each to help users “pay for gas and groceries” until their next paycheck, according to Wilk; Dave makes roughly $9 per loan on average.
Customers come out ahead by avoiding more expensive forms of credit from other institutions, including $35 overdraft fees charged by banks, he said. Dave, which is not a bank, but partners with one, does not charge late fees or interest on cash advances.
The company also offers a debit card, and interchange fees from transactions made by Dave customers will make up an increasing share of revenue, Wilk said.
While the fintech firm faces far less skepticism now than it did in mid-2023— of the seven analysts who track it, all rate the stock a “buy,” according to Factset — Wilk said the company still has more to prove.
“Our business is so much better now than we went public, but it’s still priced 60% below the IPO price,” he said. “Hopefully we can claw our way back.” More

Warren Buffett poses with Martin, the Geico gecko, ahead of the Berkshire Hathaway Annual Shareholder’s Meeting in Omaha, Nebraska on May 3rd, 2024.
David A. Grogan | CNBC

Warren Buffett went on bit of a shopping spree in the stock market before Christmas, picking up shares of Occidental Petroleum among others during a swift December sell-off.
Berkshire Hathaway purchased additional 8.9 million shares in the Houston-based energy producer for $405 million through transactions Tuesday, Wednesday and Thursday, pushing its stake above 28%, according to a regulatory filing late Thursday night.

During the same time frame, the Omaha-based conglomerate also bought about 5 million shares of Sirius XM for around $113 million as well as about 234,000 shares of VeriSign for roughly $45 million. These two stakes are much smaller in size, so these transactions could be made by Buffett’s investing lieutenants Todd Combs and Ted Weschler.
All told, Berkshire bought over $560 million worth of stocks over the last three sessions.
The 92-year-old legendary investor appeared to have taken advantage of a broad market pullback that made these stocks much cheaper.
Occidental shares have dropped more than 10% this month, bringing its 2024 losses to 24%. The energy company, once known for being founded by legendary oilman Armand Hammer, is Berkshire’s sixth-biggest equity holding. Buffett has ruled out a full takeover.

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Occidental Petroleum

The sell-off in Sirius XM has been more dramatic. The New York-based satellite radio company is currently in its six-day losing streak, falling 23% this month and 62% this year.

Berkshire started hiking this bet after billionaire John Malone’s Liberty Media completed its deal in early September to combine its tracking stocks with the rest of the audio entertainment company. Now, Berkshire’s stake has risen to about 35%. SiriusXM has been grappling with subscriber losses and unfavorable demographic shifts.
Internet name VeriSign has also had a rough year with its stock down 6% in 2024, significantly underperforming the tech sector. Berkshire first bought the tech stock in 2013 and hasn’t adjusted the stake in years. More

A television station broadcasts the Federal Reserve’s interest-rate cut on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Dec. 18, 2024.
Michael Nagle | Bloomberg | Getty Images

Wall Street’s fear gauge — the VIX — spiked by the second biggest percentage in its history on Wednesday, after the Federal Reserve jolted the stock market by saying it would dial back its rate-cutting campaign.
The CBOE Volatility Index surged 74% to close at 27.62, up from around 15 earlier in the day. That surge is the second-greatest in history, behind a 115% leap to above the 37 handle back in February 2018 when there was a blow-up in funds tracking the volatility index.

Arrows pointing outwards

Wednesday’s move comes after the central bank said it will likely lower interest rates just twice next year, down from the four cuts it projected back in September, alarming investors who wanted low rates to keep fueling the bull market. The Dow Jones Industrial Average tumbled by 1,100 points to its 10th straight loss.
Typically, a value greater than 20 in the VIX indicates a higher level of fear in the market. However, for most of this year, the VIX had been suppressed below that level, worrying investors who believed the market had gotten overly complacent.
The VIX is calculated based on the prices of put and call options on the S&P 500. A spike could indicate a rush by investors to purchase put options for protection in a decline.

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CBOE Volatility Index, 5 days

Still, there have been one other significant surge in the VIX in 2024. The third-biggest surge in the VIX in history occurred in Aug. 5, 2024, when fears of a U.S. recession, and a major unwind in the yen carry trade, spurred a roughly 65% increase in the VIX to close above 38. On an intraday basis, the VIX briefly topped 65 that day.
On Thursday, the VIX was last floating just above the 20 handle, down more than 25% from the prior day. More

WHY IS HOUSING so expensive? Explanations have tended to fall into two camps. One emphasises a gummed-up supply side: a range of restrictions on land use and NIMBY campaigners have stymied housebuilding across the rich world. The other camp focuses on demand: a long-term fall in real interest rates has bid up the prices of all assets. Cheaper credit means more expensive housing. Yet even as interest rates rose across the rich world in the early 2020s, prices barely budged. Why? A range of recent papers suggests that the interaction between fixed supply and changes in demand explains the puzzle. More

THE BRAZILIAN real holds an ignominious title this year: it is the worst-performing major currency, down by more than 20% to a record low of almost 6.3 to the dollar. The situation has grown even uglier over the past week, with the sell-off accelerating despite several interventions by the central bank. More

GIVING IS BIG business. In 2023 Americans alone handed $557bn to charities, according to the Giving USA annual report. So identifying which charities are the most efficient in terms of good done per dollar given is important. GiveWell, a charity evaluator, tries to do just this, and currently recommends giving to four worthy organisations. How is this recommendation put together, and how good is it? More

THE LIQUIDITY crunch could not have come at a worse time. Usually, most of Hizbullah’s budget arrives on a plane in Damascus, the Syrian capital, with the country’s Iranian ambassador. The cash is then transported across the Lebanese border to the Shia militia. But on December 8th, just weeks after Hizbullah stopped fighting with Israel in Lebanon, Bashar al-Assad, Syria’s president and Iran’s ally, was overthrown. Iran evacuated officials and soldiers in Syria. Already financially emaciated, Hizbullah faces rebuilding deprived of its surest cash flow. More

Chinese autonomous trucking company TuSimple has rebranded to CreateAI, with a focus on video games and animation, the company announced Thursday.
Now, just over two years after CEO Cheng Lu rejoined the company in the role after being pushed out, he expects the business can break even in 2026.
CreateAI expects to lower the cost of top-tier, so-called triple A game production by 70% in the next five to six years, Cheng said.

Workers setting up the TuSimple booth for CES 2022 at the Las Vegas Convention Center on Jan. 3, 2022.
Alex Wong | Getty Images News | Getty Images

Embattled Chinese autonomous trucking company TuSimple has rebranded to CreateAI, focusing on video games and animation, the company announced Thursday.
The news comes as GM folded its Cruise robotaxi business this month, and the once-hot sector of self-driving startups has started to weed out stragglers. TuSimple, which straddled the U.S. and China markets, had its own challenges: concerns over vehicle safety, a $189 million settlement of a securities fraud lawsuit and delisting from the Nasdaq in February.

Now, just over two years after CEO Cheng Lu rejoined the company in the role after being pushed out, he expects the business can break even in 2026.
That’s thanks to a video game based on the hit martial arts novels by Jin Yong that’s slated to release an initial version that year, Cheng said. He anticipates “several hundred million” in revenue in 2027 when the full version is launched.
Before the delisting, TuSimple said it lost $500,000 in the first three quarters of 2023, and spent $164.4 million on research and development during that time.
Company co-founder Mo Chen has a “long history” with the Jin Yong family and started work in 2021 to develop an animated feature based on the stories, Cheng said.

The company claims its artificial intelligence capabilities in developing autonomous driving software give it a base from which to develop generative AI. That’s the next-level tech powering OpenAI’s ChatGPT, which generates human-like responses to user prompts.

Along with the CreateAI rebrand, the company debuted its first major AI model called Ruyi, an open-source model for visual work, available via the Hugging Face platform.
“It’s clear our shareholders see the value in this transformation and want to move forward in this direction,” Cheng said. “Our management team and Board of Directors have received overwhelming support from shareholders at the annual meeting.”
He said the company plans to increase headcount to around 500 next year, up from 300.

Cutting production costs by 70%

While still under the name TuSimple, the company in August announced a partnership with Shanghai Three Body Animation to develop the first animated feature film and video game based on the science fiction novel series “The Three-Body Problem.”
The company said at the time that it was launching a new business segment to develop generative AI applications for video games and animation.
CreateAI expects to lower the cost of top-tier, so-called triple A game production by 70% in the next five to six years, Cheng said. He declined to share whether the company was in talks with gaming giant Tencent.
When asked about the impact of U.S. restrictions, Cheng claimed there were no issues and said the company used a mix of China and non-China cloud computing providers.
The U.S. under the Biden administration has ramped up limits on Chinese businesses’ access to advanced semiconductors used to power generative AI. More