Category: Business
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2024 Week 22

Notes, thoughts and observations - Compiled weekly

The Chevron deal is a move for Guyana in forging its own direction.

Anything short of a lower residential real estate price will help new buyers

Mergers and acquisitions ramp up with both T-Mobile and ConocoPhillips.

Drug prices are starting to pump the brakes on GL2, even as companies like Eli Lilly expand production.

Meanwhile Elon Musk continues to inspire the confidence of investors, even if his business aresosing their luster.

TOPICS

Energy

OBSERVATION - American energy getting a piece of the action

  • (Moby)
    • Guyana’s president welcomes Chevron’s bid to buy into $150bn oil project
    • The acquisition, pending a shareholder vote, could significantly impact the region’s oil industry and economic development.

Residential Real Estate

  • (Bill Mcbride)
    • It has been 18 years since the bubble peak.
    • National Index (SA), was reported as being 72% above the bubble peak in 2006.
    • However, in real terms, the National index (SA) is about 10% above the bubble peak

OPINION - Program like this is trying to expand home ownership to people of lower means. What really helps them is a price correction.

  • (MishTalk)
    • One of the Biggest U.S. Lenders is Offering 0%-Down-Payment Mortgages for First-Time Home Buyers
    • first-time home buyers and people earning at or below 80% of an area’s median income
    • UWM (UWMC) will give eligible buyers a second-lien loan of up to $15,000, in the form of down-payment assistance, for 3% of the home’s purchase price.
    • “The aspect of this program that makes me nervous is the silent second mortgage,”
    • Not Like 2008?!
      • We don’t have massive liar loans like we did in 2008. But mortgage affordability is the lowest ever, and unemployment is starting to tick up.
    • Mortgages are explicitly for people who make 80% or less of an area’s median income.
      • In general, such borrowers have no down payment, if any savings at all, and many are already likely on the edge.

Mergers and Acquisitions

OBSERVATION - More consolidation

  • (CNBC)
    • T-Mobile announced yesterday it will acquire most of US Cellular’s wireless operations
      • Including around 4.5 million customers and 620 stores, in a $4.4B deal.
      • Deal includes US Cellular retaining 70% of its spectrum and 4,400 telecom towers, while leasing about 2,100 towers to T-Mobile.
      • Transaction has been approved by US Cellular’s board and is expected to close by mid-2025
      • Deal comes after T-Mobile purchased Mint Mobile owner Ka’ena Corporation earlier this month and merged with Sprint in 2020.
      • Unlikely to face significant regulatory challenges, unlike AT&T’s failed $39B merger attempt with T-Mobile in 2011.

OBSERVATION -M&A activity in energy very high

  • (Seeking Alpha)
    • The consolidation wave in the oil and gas sector is not letting up, with ConocoPhillips agreeing to acquire Marathon Oil in a $22.5B all-stock deal.
    • The U.S. is currently producing over 13M barrels of crude per day, which is way more than any country on the globe, including Saudi Arabia.
    • The output growth has helped tame gas prices and, perhaps more importantly, undermined the influence of OPEC and Russia following the invasion of Ukraine in 2022.
    • Dealmaking in recent months has seen Hess shareholders approve a $53B sale to Chevron, as well as Exxon’s all-stock transaction for Pioneer Natural Resources, which was valued at $60B.
    • Endeavor Energy Partners confirmed a $26B offer from Diamondback Energy, Occidental Petroleum announced a $12B agreement to buy West Texas producer CrownRock, while APA inked a deal to purchase smaller rival Callon Petroleum for $4.5B.

Life Extending Technology

OBSERVATION - Face pressure against high cost of the drug, could impact future margins.

  • (Moby)
    • Eli Lilly Expands Indiana Plant with $5.3 Billion Investment Amid Growing Demand for Weight Loss Drugs
    • Brings the company’s total investment in the site to a record $9 billion, marking the most significant manufacturing investment in Eli Lilly’s nearly 150-year history.
    • Plant, expected to start operations by the end of 2026 and scale up through 2028
      • Focus on producing the active ingredient tripeptide, which is crucial for these incretin drugs that help regulate appetite and blood sugar.

AI and ML

OPINION - Betting on the man, not the technology

  • (Moby)
    • Elon Musk’s AI Startup Raises $6B
    • investors including Fidelity, Sequoia, Andreessen Horowitz, and Prince Alwaleed Bin Talal.
    • This funding will support the development and expansion of AI technologies within the company.