Click here for the PDF: The Weekly Beacon February 23 2024

We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.

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This weeks issue: Discover stock, Capital One stock, Merger in financials, Regulations and the DOJ,Financials sector analysis, Credit card industry, Visa, Mastercard, Russia invasion, China, East versus West, China buying U.S. farmland, China stocks, China attempts to limit short selling, Berkshire Hathaway stock, Buffett top picks 2024 for stock market, Occidental Petroleum stock, Chevron stock, Apple stock, Nvidia earnings, AI chip sales, Nvidia forecast 2025, Nvidia price forecast, Nvidia valuation.



Huge ‘potential’ deal in the financial sector

Over the long weekend, Capital One and Discover Financial agreed on a $35 billion deal that would see Capital One acquire Discover Financial in an all-stock deal. The deal will see Discover shareholders receiving 1.0192 Capital One shares for each Discover share, a 26.6% premium over Discover’s closing price on Friday. The deal will reportedly create $2.7 billion in pre-tax synergies in 2027. The deal is expected to be completed at the end of this year or early next year.

Discover’s stock jumped on Tuesday on this news:

Capital One, the U.S. consumer bank backed by Warren Buffett plans to acquire a major U.S. credit card issuer which they hope will help them create a global payment giant, something that they hope could potentially compete with Mastercard and Visa. The deal would create the sixth-largest U.S. bank by assets. The deal will cut overall costs, add scale, and utilize the benefits of Capital One credit cards with Discover’s network.

The deal is 2024’s largest in the M&A world. However, for those who expect a quick and easy completion of this deal, we would warn that regulators might have something to say that could impede the deal. Antitrust regulators will likely have concerns about one of the country’s largest card issuers buying one of its largest payment networks. The deal will have to be approved by the Federal Reserve and the Office of the Comptroller of the Currency. The DOJ’s antitrust division could also raise anticompetitive concerns while the Consumer Financial Protection Bureau could sound the alarm over how this new company could impact consumer costs.


Click here for the PDF: The Weekly Beacon February 23 2024