Good Morning! The U.S. GDP growth for Q4’23 just blew past forecasts with 3.3% growth. Meanwhile, PayPal CEO promised to shock the world on Jan 25th. The big reveal? Some AI features and cash back in the PayPal app. Investors were so shocked that the stock dropped 3%. For the first time, Apple snagged the top spot in China’s smartphone market. Meanwhile, the SEC is pouring cold water on SPAC mania and other ‘blank check’ companies. Plus 10 simple habits to supercharge your memory, and the ultimate guide to handling 6 cringy, awkward life situations.

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Private Equity After Suburban Millionaires

Private equity is coming after suburban millionaires in a push to grow their assets under management.

After a few down years for the industry, private equity firms are trying to get “mini-millionaires” - think the suburban households with $5-50 million in assets.

About 12% of American households have over $1 million. The majority of those with $5 million or more are over 55, having earned around $200k in their peak earning years.

Projections show that over half of households headed by college graduates, along with many small business owners, could accumulate $5 million by retirement - as much as 30% of US households.

If a private equity firm Blackstone can get an average of $1 million each from 1% of 40 million households, that’s $400 billion, about a 40% increase in its assets under management. And that’s just US investors. 

But just because wealthy investors might be able to invest in private equity. Does it mean they should? Research says private equity behaves like a levered investment in small-cap stocks. And Blackstone will provide investors with diversification across 15 private-equity strategies, hard to reach with traditional vehicles.

But while private equity outperformed public equity (on a risk and sector-adjusted basis before the financial crisis), it’s not a sure thing the strong performance will continue with public/private valuations converging and higher interest rates.

Takeaway: It's hard to know if private equity will be a good choice for wealthy investors with little performance history to analyze. And there could be some risks too, like illiquidity and leveraged equity exposure. But it seems like for the first time ever, the exclusive world of private equity is about to go mainstream for the suburban rich class.

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_HEADLINES

Top Reads

• Microsoft lays off 1900 workers, or nearly 9% of gaming division (CNBC)

• SEC is pouring cold water on SPAC mania (WSJ)

• U.S. GDP Q4 growth blows past forecasts (Axios)

• Airline stocks rise on strong earnings (YF)

• Ellison’s Skydance Media exploring acquiring all of Paramount Global (CNBC)

• Why domestic travel is so cheap in 2024 (Axios)

• Comcast tops revenue thanks to streaming, theme park growth (YF)

• Tesla set to erase $50 billion in valuation after Musk's sales warning (Reuters)

• Apple takes top spot in China’s smartphone market for the first time (CNBC)

• Record-high US stocks grow more expensive versus global peers (YF)

_{CAPITAL PULSE}

Markets Rundown

Stocks closed higher after positive GDP growth.

Movers & Shakers

• (+) American Airlines ($AAL) +10% as strong demand drives 2024 profit forecast.

• (+) IBM ($IBM) +9% because of strong AI demand.

• (–) Tesla ($TSLA) -12% after Elon Musk warned of slowing profit growth.

Private Dealmaking

• Suave Brands bought lip balm brand ChapStick for $510 million

• Sion Power, an EV battery developer, raised $75 million

• Infinite Roots, a food products developer, raised $58 million

• AiDash, a satellite platform for infrastructure operations, raised $50 million

• Torq, an automation platform for security teams, raised $42 million

• Anomalo, a data quality platform, raised $33 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

_{BOOK OF THE DAY}

The Paradox of Choice

Whether we're buying a pair of jeans, ordering a cup of coffee, selecting a long-distance carrier, applying to college, choosing a doctor, or setting up a 401(k), everyday decisions—both big and small—have become increasingly complex due to the overwhelming abundance of choice with which we are presented.

As Americans, we assume that more choice means better options and greater satisfaction. But beware of excessive choice: choice overload can make you question the decisions you make before you even make them, it can set you up for unrealistically high expectations, and it can make you blame yourself for any and all failures. In the long run, this can lead to decision-making paralysis, anxiety, and perpetual stress. And, in a culture that tells us that there is no excuse for falling short of perfection when your options are limitless, too much choice can lead to clinical depression.

In The Paradox of Choice, Barry Schwartz explains at what point choice—the hallmark of individual freedom and self-determination that we so cherish—becomes detrimental to our psychological and emotional well-being. In accessible, engaging, and anecdotal prose, Schwartz shows how the dramatic explosion in choice—from the mundane to the profound challenges of balancing career, family, and individual needs—has paradoxically become a problem instead of a solution. Schwartz also shows how our obsession with choice encourages us to seek that which makes us feel worse.

“We are surrounded by modern, time-saving devices, but we never seem to have enough time.”

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Homebuyers are Getting Older

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_{DAILY ACUMEN}

Communication

Alan Alda, acclaimed actor and science communicator, offers three rules for effective and empathic communication, applicable in various contexts from public speaking to heart-to-heart conversations.

Firstly, he advises making no more than three points, recognizing the limited capacity of short-term memory. By focusing on a few key ideas, communicators can facilitate better understanding and engagement.

Secondly, Alda suggests explaining difficult concepts in three different ways to provide a comprehensive and nuanced understanding. This strategy involves approaching ideas from various angles, offering a three-dimensional view for the audience.

Lastly, he emphasizes the importance of repetition, encouraging communicators to highlight key points three times, as repetition aids in transferring information from short-term to long-term memory.

In the realm of business communication, these principles become powerful tools. Limiting the number of points ensures clarity and prevents information overload in presentations or discussions.

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Short Squeez Picks

• 10 simple, neuroscience-backed habits that lead to better memory

• The best way to deal with 6 awkward life situations

• 9 ways to update your LinkedIn profile for 2024

• How to learn anything easily

• 9 ways you stop yourself from taking necessary daily action

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Memes of the Day