Good morning.
We’re wishing safety to all our readers in Florida amid Hurricane Milton’s landfall. A useful, recent tech nugget that applies to any household with an iPhone or a Google Pixel 9, especially for those sheltering today: You can contact emergency services without a phone connection or Wi-Fi.
With an iPhone model 14 or newer, you can reach out with Apple’s Emergency SOS via Satellite. If you have the newly released iOS 18 operating system installed, you can also send text messages with a satellite connection. With a Pixel 9, you can contact emergency services with Google’s Satellite SOS.
No carrier support is required in either case, but you will need to be outside with a clear view of the open sky for messaging to work — so only try it when you are not exposed to immediate risk. The Sunshine State will shine bright again soon.
Mining Giant Rio Tinto Bets on Lithium Rebound With $6.7 Billion Acquisition
Rio Tinto excavated deep into its pockets Wednesday to place a wager on the future of lithium.
The British-Australian mining giant announced plans to acquire US lithium miner Arcadium for $6.7 billion, a deal that would transform it into the world’s third-largest miner of the metal essential for everything from electric vehicles to mobile phones. The deal has the benefit of immediate customer relationships with General Motors and Tesla.
Buy the Dip
Only two years ago, lithium prices were at all-time highs, riding a wave of market enthusiasm for the metal’s essential place in the green energy transition or, more specifically, its place in rechargeable EV batteries.
But a dreaded one-two punch of oversupply by China — which US officials allege is a “predatory” attempt to wipe out competition — and a decline in electric car sales outside of China has sent prices tumbling roughly 80% in the last 12 months. Chris Ellison, the managing director of Australian miner Mineral Resources, told the Australian Broadcasting Corporation last month that this is one of the toughest times to be in the lithium industry. And now Rio is not just buying in, but at a heavy premium: The all-cash offer represents a 90% increase over Arcadium’s closing price on Oct. 4 and a 30% increase over its volume-weighted average price since it was established via a merger of Livent and Allkem in January. What gives?
- For one, Rio will add lithium mines and facilities in Argentina, Australia, Canada, and the United States, plus a fleet of prestigious customers including BMW, GM, and Tesla. The new capacity comes in handy for Rio, whose planned lithium mine in Serbia has sparked environmental protests; politicians are debating whether to shut it down.
- As a $112 billion global mining giant with a portfolio that includes iron, aluminum, copper, diamonds, and salt, Rio can afford to absorb and fund growth at Arcadium with little impact on its overall business. Arcadium is also relatively financially-efficient, with an adjusted EBITDA margin of 39% in the second quarter.
Secret Bargain? Blackwattle Investment Partners, an Arcadium shareholder, blasted Rio’s all-cash offer as “opportunistic” and said it believes the company is worth closer to $8 billion. The firm plans to vote against the takeover offer.
This Tiny Company is Quietly Powering the Transition to AI
Both Amazon’s Jeff Bezos and ARK Invest’s Cathie Wood agree — this tech, which sits at the very foundation of the AI revolution, presents a massive opportunity for investors.
Even Warren Buffett, the oracle himself, has said the tech will have a “hugely beneficial social effect.”
We aren’t fans of hyperbole, but Cathie Wood recently attempted to quantify the addressable market, claiming it’s a $80 trillion opportunity by 2030.
The Motley Fool has prepared a report on this tiny tech company at the epicenter (no, not Nvidia), that practically no one is talking about.
CVS, UnitedHealth Want Nothing to Do With Lina Khan
It’s the postseason, so of course everyone is blaming the umpires.
In September, the Federal Trade Commission filed a lawsuit against the three largest pharmacy benefit managers (PBMs) in the US — UnitedHealth, CVS, and Cigna — alleging they artificially inflated insulin prices. Now, the pharmacy middlemen are striking back. On Wednesday, the trio of PBMs asked FTC Chair Lina Khan and two other deputies to recuse themselves from the trial due to alleged biases.
Mad Middlemen
PBMs have long been in the crosshairs of monopoly-slayer Khan, who has become a political lightning rod. She has called PBMs “price gougers” in the past, and in 2022, attended an event hosted by the National Community Pharmacists Association — a group representing independent pharmacists who are quite vocal critics of industry giants. For UnitedHealth, CVS, and Cigna, it’s all evidence of a “prejudged” case by the regulator. In a motion seen by Reuters to dismiss Khan from the FTC’s in-house court trial, the defendants flagged the National Community Pharmacists Association event as evidence, writing that “attendees wore anti-PBM paraphernalia, including pins that vilified PBMs as ‘bloodsuckers’ and shirts depicting PBMs as vampires.”
It’s not the first time Khan has been targeted:
- Way back in 2021, Amazon argued that Khan must recuse herself from ongoing antitrust probes of the e-commerce and cloud computing titan, pointing to past comments criticizing the company as evidence of impartiality. Meta made a similar argument a year later.
- Both efforts failed, with Khan claiming she was advised that ethics rules left the decision of recusal up to her, given her lack of financial conflicts. In the Meta case, one FTC ethics official did recommend Khan recuse herself based on previous comments, though a Wall Street Journal investigation of public records found the official held as much as $50,000 in Meta stock at the time of the recommendation.
No Khan Do: Khan’s recusal in the PBM case appears unlikely, though the Biden appointee may not be in her office much longer anyhow. Last week, the WSJ reported that while seeking the Teamsters union’s endorsement, Vice President Kamala Harris’ campaign team would not promise to keep Khan as chair if she wins the election (the Teamsters ultimately decided not to endorse either presidential candidate). And on Wednesday, billionaire donor and campaign surrogate Mark Cuban suggested to Semafor he’d prefer Khan’s removal — sparking near-immediate backlash from the Democratic Party’s left flank.
Hurricane Milton Might Be the Costliest Hurricane Since Katrina
As Hurricane Milton makes landfall, Florida prepares for catastrophic damage.
The massive storm is expected to cause anywhere between $60 billion and $100 billion in insured losses. That would make it the most devastating hurricane since Katrina bulldozed New Orleans in 2005, and one of the costliest natural disasters in US history. Insurers are going to buckle under its weight.
‘Extremely Dangerous’
Experts are being extremely direct about Milton’s power: The National Hurricane Center is calling it “an extremely dangerous major hurricane,” and the head of FEMA is calling it a “deadly and catastrophic storm.”
The resulting damage is likely to stress both commercial insurers — who have already hiked premiums in many regions in Florida, while abandoning others altogether — as well as the state-run insurance system established to fill in the gaps:
- Credit-rating agency Morningstar DBRS projects that insured losses could mount to $100 billion, while BMO analyst Michael Zaremski says the stock market has priced in around $75 billion in insured losses.
- Citizens Property Insurance Corporation, the not-for-profit insurer established by the state in 2002, said in July it had $14.4 billion on hand to pay claims, though a spokesperson reiterated this week that the insurer “will always be in a position to pay claims.”
Hurricane Season: It’s enough to “likely make a dent in insurers’ profitability,” Morningstar said. Making matters worse, of course, is that much of the region in Milton’s path is still recovering from the damage wrought by Hurricane Helene just last week. That storm likely caused private market insurance losses of around $11 billion, Moody’s estimated.
Extra Upside
- Agree to Disagree: Fed officials were divided about whether introducing a half-percentage-point rate cut — which they ultimately supported — would be going too far.
- Out of Gas: Literally, that is. 20% of Florida gas stations have no fuel as demand has skyrocketed ahead of Hurricane Milton’s arrival.
- Invest in Kitchen Robots by 10/18: Fast food’s future = automation. That’s why Miso Robotics sold out initial units of their latest robot in one week. Invest in Miso before their raise ends October 18.*
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