🔬Ozempic Has a New Challenger, EVs are Tricky, and Much More

“Pain + Reflection = Progress”
- Ray Dalio, Principles

“It's all about bucks, kid. The rest is conversation”
- Gordon Gekko

Table of Contents

Hot Headlines
Joke Of The Day
A.M. Allocations:
- From Diabetes to Dieting: Zepbound Challenges Ozempic for the Slimming Crown
- Ohm My God: The Shocking Impact of Labor Costs on EVs
Trivia
Market Movers
Market Update

Hot Headlines

CHINA/US MILITARY RELATIONS - Presidents Biden and Xi Jinping are poised to announce the resumption of military communications between the U.S. and China at the upcoming APEC summit, a move aimed at reducing the risk of military misunderstandings and enhancing stability in U.S.-China relations. This development follows China's suspension of these channels last year in protest of Nancy Pelosi's Taiwan visit and recent indications from Chinese officials, including Foreign Minister Wang Yi, of their readiness to reopen communication lines. Finally some non-terrible news about global warfare! (Axios)

If only…

EUROPEAN RECESSION - Former European Central Bank President Mario Draghi predicts a near-certain recession in the euro zone by the end of 2023, citing economic contraction and inflation challenges, but anticipates it won't be deep or destabilizing due to the region's low unemployment. Belgian Governor Pierre Wunsch echoes these concerns, noting the euro zone is facing a mild form of stagflation due to tighter monetary policies and downward growth risks. Europe looking like it’s gunna be the canary in the coal mine for the global economic woes. (Bloomberg)

DISNEY’S NOT IN A FAIRY TALE - Disney is facing numerous challenges including a struggling streaming business, declining attendance at Disney World, and tensions with Florida Governor Ron DeSantis, contributing to its stock dropping to a ten-year low. Despite these issues, the company reported increased revenue in its parks division and is planning major investments in theme parks and a full acquisition of Hulu. Amidst executive shakeups, Disney is actively seeking a successor for CEO Bob Iger, who returned unexpectedly to lead the company through this turbulent period. (CNN)

BIGGER BRICS - The BRICS - originally Brazil, Russia, India, China, and South Africa - has expanded to include six more countries (Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE), aiming to challenge the global influence of the G7 and reduce the dominance of the US and the dollar. In 2001, the BRICS represented 19% of global GDP. By 2040, with the new member countries, this is expected to be around 45%. This expansion, prioritizing political objectives over economic criteria, marks a significant shift in global economic and geopolitical dynamics.

CORPORATE LAYOFFS ARE INCREASING - Several major corporations are initiating layoffs and restructuring as a response to the current economic challenges. Companies like Delta Air Lines, Citi, Virgin Galactic, Citigroup, and Bayer have announced job cuts and operational changes due to factors such as high interest rates and geopolitical instability, illustrating a broader movement among large businesses to streamline operations in a fluctuating economic landscape. Recent economic data, including a rising unemployment rate and slowing job growth, reflect these corporate trends. While these developments are part of the Federal Reserve's strategy for a soft economic landing, a surge in layoffs could risk a more severe economic downturn. (Barron’s)

(CNBC) Caesars reaches deal with Las Vegas union to avoid strike - Deal inked with the Culinary Union and Bartenders Union…two things I didn’t know were things. MGM Resorts and Wynn Resorts are still in negotiations.

(Politico) Trump widens lead over Biden in new CNN poll

(Yahoo) Hollywood actors strike is over as union reaches tentative deal with studios - I’d forgotten this was even still happening.

(NBC) GM recalls Cruise driverless cars for software update after pedestrian dragged in California - 14 thousand sensors and not one of them can detect an adult sized human under a fender?

(NBC) 10 Gambino crime family members arrested on racketeering, other charges - Fugget About Ittt!

(Yahoo) Warner Bros. Discovery plunges 16% as CEO warns of 'generational disruption' to media

“This is a generational disruption we’re going through. Going through that with a streaming service that’s losing billions of dollars, it’s really difficult to go on offense,” CEO David Zaslav said during the earnings conference call, somehow managing to sound simultaneously whiney and inept.

Joke Of The Day

There’s a surgeon, an architect and an economist. The surgeon said, ‘Look, we’re the most important. God’s a surgeon because the very first thing God did was to extract Eve from Adam’s rib.’ The architect said, ‘No, wait a minute, God is an architect. God made the world in seven days out of chaos.’ The economist smiled, ‘And who made the chaos?’

A.M. Allocations

From Diabetes to Dieting: Zepbound Challenges Ozempic for the Slimming Crown

• The FDA has approved Eli Lilly’s tirzepatide, sold as Zepbound, for weight management in adults with obesity or overweight and related conditions. This expands its use beyond Type 2 diabetes treatment where it’s currently sold as Mounjaro.

• Zepbound, a weekly injection, targets weight loss by activating GLP-1 hormones - just like Ozempic. It differs, however, in that it also activates GIP hormones, which are believed to be another tool in the arsenal to promote weight loss.

Explainer: Not everything is yet known about how GLP-1 and GIP work, but what is known is that they mimic the actions of two incretin hormones: GLP-1 is focused on the upper gut and GIP is on the lower gut.

Working together, they help stimulate insulin secretion after eating, and help reduce appetite. GIP even goes a step further and has shown signs that it improves the way the body breaks down fat and sugar, potentially offering additional weight-loss potential.

• The effectiveness of Zepbound in clinical trials positions it as a strong contender against Novo Nordisk’s Wegovy and Ozempic. With a burgeoning obesity drug market projected to reach $100 billion by 2030, Zepbound's approval establishes Eli Lilly as a significant player. Despite its high list price of about $1,060 monthly, savings programs aim to enhance accessibility.

• Eli Lilly's focus on expanding production and ensuring supply, in contrast to current shortages faced by competitors like Ozempic, may give Zepbound a competitive edge in meeting the high demand in the weight loss medication market.

• I did a deep-dive on Ozempic a few weeks back which adds some helpful context into the sales and investment side of the weight-loss game: The Skinny on Ozempic.

Ohm My God: The Shocking Impact of Labor Costs on EVs

• The transition to electric vehicles (EVs) is facing unexpected challenges, with higher labor costs and less efficiency than initially anticipated. EV assembly is nearly as labor-intensive as that of traditional internal combustion engine vehicles, contrary to previous assumptions of reduced labor requirements.

• Recent union agreements with leading automakers such as Ford, General Motors, and Stellantis have resulted in significant wage increases. These agreements are substantially elevating labor costs, thereby influencing the economic feasibility of EV manufacturing.

  

• The dynamics of battery production, a crucial component of EVs, are being impacted by unionization efforts. Joint ventures between major automakers and technology partners like LG Energy Solution and Samsung SDI are particularly affected, leading to complex labor negotiations and potential cost implications.

• Despite the hurdles in manufacturing and increased labor costs, the market share of EVs continues to grow. States like California and Colorado are witnessing a significant uptick in EV sales, reflecting strong consumer interest and a steady commitment from the automotive industry towards electrification.

Trivia

Today’s trivia focuses on the Hudson’s Bay Company…

1. In what year was the Hudson's Bay Company founded?
   A) 1610
   B) 1670
   C) 1701
   D) 1759

2. How many acres of land did the Hudson's Bay Company own through its Royal Charter at its peak?
   A) 10 million acres
   B) 100 million acres
   C) 1.5 billion acres
   D) 5 billion acres

3. How much did the Hudson's Bay Company sell its department store group, including Lord & Taylor, for in 2006?
   A) $50 thousand
   B) $1.08 billion
   C) $5.5 billion
   D) $25 million

(answers at bottom)

Market Movers

Winners!

• Roblox (RBLX): [+11.8%] Q3 bookings surpassed expectations with higher DAUs, hours engaged, and average bookings per DAU; management noted strong growth in western Europe and eastern Asia, alongside improved margins due to slower spending.

• Extra Space Storage (EXR): [+10.6%] Good Q3 earnings and decent guidance.

• Upwork (UPWK): [+10.5%] Beat Q3 earnings, raised guidance, announced buyback.

• Clear Secure (YOU): [+9.0%] Beat Q3 bookings, revenue, and EBITDA.

• Axon Enterprise (AXON): [+6.1%] Q3 results beat expectations in TASER and Software & Sensors.

• New York Times (NYT): [+6.0%] Q3 results outperformed in EPS, operating income, revenue, and margin; advertising revenue grew in both Digital and Print; total subscribers exceeded 10M, with a ~17% quarterly increase in Digital adds.

Losers!

• Upstart Holdings (UPST): [-27.3%] Q3 earnings and revenue fell short due to credit losses; Q4 outlook reduced; challenges noted in the subprime consumer sector and loan purchasing.

• Warner Bros. Discovery (WBD): [-19%] Q3 revenue slightly below expectations; Studios outperformed, Networks underperformed due to weaker advertising; weak advertising outlook.

• Robinhood Markets (HOOD): [-14.3%]: Q3 EPS slightly better, revenue below expectations; increased total operating expenses for 2023; a 16% decline in monthly active users to 10.3M.

• Lucid Group (LCID): [-8.1%] Q3 EPS exceeded expectations, revenue fell short; FCF declined year-over-year; 2023 production outlook revised to 8,000 - 8,500 vehicles from over 10,000; concerns raised about revenue, gross margins, and industry slowdown.

Market Update

Trivia Answers

1. B) 1670

2. C) 1.5 billion acres

3. B) $1.08 billion

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