The “Trump Trade” that this column postulated before the US election was running full steam ahead since Nov 7. The bet I did not take was that Elon Musk could be the biggest winner, as pointed out, along with his legion of believers and shareholders, who were further inspired by how he had been given a role in the incoming administration. Together with Vivek Ramaswamy — they will run a yet-to-be-established “Department of Government Efficiency”. Its acronym spells out “Doge”. Perhaps it is a coincidence, but it reminds one of the 2021 bubble involving meme coins when cryptocurrency Dogecoin saw a price surge after Musk declared Tesla would accept the coin as payment for some of its merchandise.
Since my return from Japan, the triumphant return of Donald Trump (Chew On This, Issue 1164, Nov 18) has been the topic at almost every event and conversation. Some of the talk came from crypto bros who developed a conscience after being richly rewarded by their long hold and beliefs since the Crypto Winter of 2021 but were concerned about the implications for the rest of the world. Bitcoin, for one, has shot up over around a third to a record of above US$90,000 ($120,933).
Some comforted themselves with the notion that there are potentially two good things for the rest of the world from an impending Trump Administration that comes with full Trifecta powers (with Republicans controlling the Senate and House and also dominating the Supreme Court).
First, it will erode the extremes of some woke movements, where individuals take offence at everything and demand equity — and not just equality — to atone for past societal sins. I am all for balance and gradual change because extreme views are not helpful for social progress, especially if they deepen fissures and fracture societies. As Isaac Newton figured out in his Third Law of Motion — every action has an equal and opposite reaction.
Second, there is the hope that Trump will win a Nobel Peace Prize. Ukrainian President Volodymyr Zelensky has started to sound less defiant, and German Chancellor Olaf Scholz has talked to Russia’s Vladimir Putin about ending the war with Ukraine.
If it comes to pass, some of the food inflation caused by that disruptive and disastrous war — coming to three years next February — could be positive for the rest of the world, especially emerging countries. This point was raised by an old British friend from Oxford on his trip back to Singapore, where he was based in a consulting business for several years before heading back. He was not alone in this view, although I wonder about the unintended political consequences beyond the economic benefits for Europe from funding this defence right at their doorstep.
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I am also less sure about the Middle East peace plan. Trump’s unequivocal support for Israel may scare off Iran, but an emboldened Prime Minister Benjamin Netanyahu may escalate an already complex and deep-seated, multi-generational problem with its neighbours.
In Asia, Trump’s chumminess with North Korean Supreme Leader Kim Jong Un may keep the Korean peninsula peaceful, and his willingness to consider all options in any cross-strait deal may mute Taiwanese domestic calls for independence from mainland China for now.
If there is a Pax Americana — a period of global peace and economic prosperity policed by an active US superpower after the Second World War — this moment will be one because of the sheer uncertainty of what to expect among the big powers. However, it will be a worrying one, where a more isolationist America First could leave smaller states vulnerable to threats of violence from bigger states if international law is disregarded with impunity as the US changes its domestic laws and norms.
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A mercurial Trump, combined with “genius” Musk, who allegedly joined Trump’s call with Zelensky and was sent on a secret mission to talk to Iran and even Russia, could be a potent combination. However, whether the outcome is favourable depends on where and what one stands for.
Payday and Mayday
In the immediacy of the election results, Tesla’s share prices lifted by 15%, immediately nudging up Musk’s fortune by US$20 billion to US$285 billion in one session. It has gone up further since, ensuring Musk is well on his way to being worth a trillion dollars. However, depending on where he throws his wealth, this could result in a lot of good or bad.
When Musk was pictured at Trump’s Mar-a-Lago resort in Palm Beach last week with Argentina President Javier Milei, two of his private companies saw a jump in valuation. This may be due to their business models or as a show of support for the business interests of the world’s richest man, who is on his way to getting richer.
Private investors in SpaceX, which provided access to some private market investment platforms here, should be cheering as, according to The Financial Times, some existing shares may be sold in December, valuing the company at US$250 billion — up from US$210 billion earlier this year.
Meanwhile, xAI, Musk’s AI start-up, raised US$5 billion and almost doubled its valuation to US$45 billion from months ago. As this happened over the weekend, Microsoft Corp was added as a defendant in an ongoing dispute between Musk and ChatGPT owner OpenAI. Musk is accusing Microsoft, a key investor in OpenAI, of operating a monopoly. A spokesperson for Open AI declared that “Elon’s third attempt in less than a year to reframe his claims is even more baseless and overreaching than previous ones. Microsoft may be poised to fall, even if it is one of the Magnificent Seven if hedge funds start betting against it”.
Investors surfing the crypto and US market rallies must brace themselves for a wild roller-coaster ride. Already, a few sideswipes have taken place in sectors that have done well since the pandemic.
For example, healthcare and pharmaceutical stocks and investors found themselves in a state of panic after the appointment of vaccine sceptic Robert F Kennedy Jr. The fear towards his views about public health was secondary to investors who sold first in anticipation of the (still unknown) administration’s views on dealing with public healthcare matters.
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As a cynical banker said to me, perhaps we should all buy consumer companies that manufacture bleach, like Clorox or Procter & Gamble. This refers to some of the initial Trumpian solutions to kill the Covid-19 virus, which included injecting the body with this cleaning agent.
The (im)morality of markets
That said, there is no morality in markets that use price discovery and the market mechanism to allocate resources to the industry facing the strongest demand. Rational investors should rightly allocate their resources where they see the largest potential returns. Any economics student will, however, tell you that the basic assumptions of a rational man in economic models do not always apply (and hence the field of behavioural economics). However, Jerome Powell, chairman of the US Federal Reserve, is deeply rooted in trying to second-guess the markets second-guessing the Fed in predicting behaviour and trying to set expectations.
They will also recognise that the allocation of public goods, basic education, healthcare, defence and public transport cannot be solved simply through a free market. Today, as rigour is being put behind pricing mechanisms for carbon to impede global warming, there is clear recognition that rules and regulations and International agreements, which COP29 members attempted to set in Azerbaijan recently but ended with a whimper, are essential.
In an era of America First and Trumpian Climate scepticism — some pro-China conspiracy theories say this is to hold China back, much like their lead on electric vehicles. I find that far-fetched. It is simply an expression of pure American Capitalist (and political) culture that money talks. It is right first to grow the economic pie, or else there is nothing to redistribute, but at what cost and trade-off? Hence, globalisation orthodoxy and the focus on sustainability for corporate purpose and business are not merely about responsible reporting.
In his landmark treatise The Wealth of Nations, even Adam Smith recognised that the market mechanism can fail and that sensible regulations are needed. As Lisa Gilbert of a non-profit consumer rights group founded by perennial presidential candidate Ralph Nader says, Musk’s various businesses have regularly run afoul of the very rules he will be in a position to attack in his new “tsar” position. “This is the ultimate corporate corruption.”
Brokeback Mountain
For those riding the Trump Bull and hoping for more Musk paydays, the only certainty is the uncertainty of what will come. With the combination of political (Trump) and corporate (Musk) power, a presidential pulpit to lead popular opinion augmented by Musk’s X (the renamed social media platform Twitter), and Musk’s wealth, there seems like nothing to stand in the way of a generation of change that is coming to America and ipso facto the world.
There are many similarities between them. They are unashamed egomaniacs, full of self-belief, and dismissive and disrespectful of rules, regulations or conventions. As Chew on This postulated last week, it could break the gridlock that has paralysed American politics and divided government, or it could go very badly wrong — if they do not end up falling out first.
In the afterglow of Trump’s electoral success early this month, there is much love for now. It might go on for a while as mutual benefits last. There is little talk about ring-fencing Musk’s business interests or any conflict when he takes up his government post. From the way Trump has used his hospitality assets in Florida and Washington in the past, it is probably viewed positively as an alternative to the “deep state” that is declared to be undermining the Maga agenda.
Should there be a lovers’ tiff between these two titans, I dread where markets would go so I would rather seek to play no part in Trump trades, for or against. I only know that I do not know what this heralds for America over the next four years.
Chew Sutat retired from Singapore Exchange Stock Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
