A Few Random Thoughts

It is that time of year where the business cycle has slowed down in the sense that there really is not much to focus on.

Yes, everything is still pretty much in flux as far as tariffs go, and earnings seem to be just as expected. The second quarter results will probably be better than expected as well. So, business wise, everything seems to be where it should be.

We can talk about the Fed and not much to say there I guess. The next meeting concludes on the 18th of this month and I think the expectation is that they will not do anything as far as rates go. Betting money is that they might wait ‘till the July meeting and then cut by 25 basis points.

None of this is all that interesting though.

What is interesting is this Trump-Musk battle of words. As you may recall, I had mentioned that I didn’t think this bromance was going to last. Maybe back in January or early February. Two powerful men with two extremely big egos can only sit on the same side of the table for so long.

As I have said a few times before, this Big Beautiful Bill is not a great idea. First, it’s a dumb name. Second, any bill adding to the deficit and not really improving all ships is a waste. The Republicans that back this monstrosity have thrown their hats into what could end up costing them their seats in the House and I think as time goes by, they will see that and probably pull their support. I do not think it will pass in it’s present form and maybe, just maybe, Elon Musk is right about this.

I am on Musk’s side because I think he has the balls to stand up to the President and explain to the American people that this bill will further diminish America’s role financially around the World.

The thing about this whole brouhaha is that it is diminishing the President a bit and it is hurting Musk as well. Fighting the President of the United States is not for the faint of heart. The power the man has directly and indirectly is enormous and I think Tesla’s stock has reflected that possibility.

Tesla losing over 140 billion dollars in value in one day I believe is a record. Granted, it has always boggled my mind why Tesla had such a high valuation in the first place.

I used my Statistic’s 101 education and did a little analysis. A comparison of sorts. Tesla has 5 models. Those models have roughly two choices for seats, wheels and power trains. maybe 6 colors. So doing some quick back of the napkin calculations, I think there are roughly 240 different choices overall. Easy to manufacture cars when there are only so many choices.

GM has roughly 12,000 choices overall. Profits are slimmer because of the complexity of manufacturing. Tesla doesn’t have that problem.

Mercedes? How in the World does this company make a profit. They have eleven versions of the same car. They have 23 versions of each line. They have 12 choices of paint, 8 options for each car as far as interior trim. I had to break out my scientific calculator and do some super stressful math to figure out the total possible combinations 2.3 to the 6th power.

Their is a point in here and that is that Tesla has a great business model and that is not because Elon Musk is stupid. He may be one of the brightest minds that this country has helped produce in decades. There is a reason why what he says carries a lot of weight. Yes, being the richest or one of the richest men in the World helps but this guy is smart and does not care about backlash.

The President wants NASA to rethink their relationship with Space X? Oh, Boeing can fill their shoes? Ha. How about Blue Origin?

In the race for space, it really isn’t that smart to eliminate or try to tie up the only company that actually succeeds. You can be vindictive and spiteful and the next thing you know you are partnering with the Japanese or worse still, the Chinese, to get satellites launched in space.

What about Starlink? The President wants to interrupt the company’s successes because he is mad at Elon? What about the fact that Starlink has done what the government and all of the private sector could not. It has connected people who were forgotten in the expansion of the internet. See how your base votes when you go out and cut their lifeline to the rest of the World.

Feuds between Presidents and titans have been going on for decades. They usually resolve their issues and everyone walks a way thinking they won. This feud has gotten nastier than most and this one probably will be resolved once both sides realize that their is zero to gain from keeping it going.

Now that Musk is the President’s bad side, it seems the left loves him again and the cars and dealerships are safe.

That should help the stock.

I was going to try and avoid doing anything on tariffs until we had some sort of closure. I really don’t know if that is ever going to happen. I have leaned into tariffs a little bit. I do think slapping our trading partners across the face will wake them up and they will try to work out something satisfactory. My gut tells me that there will be some successes as far as equalizing trade but the bigger issue is if we sign a deal, will the Trump Administration stick to it. The administration is not above changing course midstream. Accusing the innocent as well. They can call out any country and accuse them rightly or wrongly of violating whatever agreement in place. That is also part of the Trump playbook and I know that every country knows it.

He is notorious for signing deals and reneging on them. “Take me to Court” is his slogan.

It hasn’t happened yet, but just wait. That is phase two.

He may be able to push France around but I think he will have a harder time negotiating with the Chinese. Hopefully those negotiations will start in London today and something can be formulated. He won’t be able to undo what is done that easily because the Chinese, even with their present economic difficulties, can make things more difficult and more expensive for the US. We definitely are negotiating from strength but the Chinese are a different animal altogether. They can pull stunts as well as Donald Trump and at the end of the day, they are not to be trusted.

Maybe he will need to dig into a different part of his playbook with the Chinese and should it get resolved, I think you will see more and more resolutions going forward.

Hopefully, Tariff will only be the word for the first half of this year.