I’m a bit lost. I can still remember as a child staring out at the Ballycotton Lighthouse as it guided battered yachts to safety during the Fastnet Race disaster of 1979. Fast forward to today and there’s another potentially calamitous “storm” brewing for the most basic concepts of accepted facts and truth. Worryingly, there’s increasing evidence that the “lighthouse” of global leadership on rules of law and common values has gone dark. Orwellian dark. I know we’ve been here before with White House Press Secretary, Sean Spicer, and bonkers claims of inauguration crowds for Trump 1.0 but the second coming of Trump is a whole new level of autocratic demands to “reject the evidence of your eyes or ears.” That’s Orwell, not the White House.
It would appear that “their final, most essential command” this week is to NOT read the time-stamped texts of the US Secretary of Defense on the unsecured Signal mobile chat app shared with 16 other US security chiefs (plus one mistakenly added journalist) and conclude that this was the most embarrassing and dangerous self-inflicted security failure by US institutions in decades. The cover-up and spin-fest since the Atlantic magazine scoop has witnessed equally incompetent and criminal attempts to parse the meaning of “war plans” and “attack plans”. To be clear, the key “ground truth” in this intelligence near-miss is that advance information on a military mission puts US military personnel in danger. But here we are.
Donald Trump has given a press briefing stating the US “has to have Greenland” and his Kremlin keeper, Vladimir Putin, is dovetailing on message beautifully by saying “Trump’s plan to seize Greenland is serious”. Doesn’t that sound like two mob bosses agreeing ‘territory’? Yes, but don’t ask the lawyers. Leading law firm, Skadden Arps, has just “agreed” to provide $100m of pro-bono work for initiatives supported by the White House in order to avoid adverse targeting by a regime irked by previous “woke” cases taken by Skadden. So, do we all surrender as democracy dies in darkness? Well, there are other Signals to watch with possibly more impact than a Houthi-Yemen air strike mission. In fact, their potential impact could be sufficiently influential to trigger “lighthouse” leadership, even change. I’m looking at three Signals in particular.
First, as we head towards the Trump self-styled “Liberation Day” of trade tariffs imposed globally, we watch the money or flow of same. Some might think the enormous switch by investment institutions out of US equities (down 5% year to date) to international equities (eg. German Dax up 15% year to date) is a big deal. It is. But, equity markets could be due a “rotation” anyway after 15 years of US dominance and, frankly, more challenging valuations when economic leadership veers into cult lunacy territory. The awkward fact for the Trump crime gang is that foreigners own $16 trillion of US stocks and they are selling them even quicker than Tesla shares. However, the bigger more worrying signal is in the debt (or credit) markets. As we regularly say, debt(bond) markets can really intimidate as they can cause proper global economic damage. So, when I look at the ‘plumbing’ of the financial system and corporate debt (credit) data, I’m seeing signs of cracking and stress. The jargon monoxide will involve terms like “spreads”, “VIX”, “call options” and “default pricing” but, take it from me, this is where the intimidation of the Trump White House is beginning.
Second, how long will Trump’s ‘broligarchs’ go along with his trade war when there is possibly a far more consequential technology “war” exploding across our screens every day? My sense is that there could be a calculation that trade wars are a dangerous commercial distraction. Check out the latest data from Stripe. Software companies (SaaS) were always the uber-growth leaders, with Stripe analysis showing the median time for the top 100 software/SaaS start-up companies to reach $5m of recurring revenues was 37 months(data from 2018). But, there’s a new growth monster in town. Stripe data (2024) shows the top 100 AI start-ups hitting that $5m milestone in….. 24 months. You might have read that executive suites across the USA have been paralysed by indecision due to erratic Trump economic policy. Indeed, M&A deal activity has fallen to the lowest in a decade and year-to-date is down a whopping 30% on last year. However, the story in start-up world is very different. In the first quarter (Q1) of 2024 there were two start-ups acquired for more than $1 billion (unicorn status). In Q1 this year, there have been ELEVEN $1 billion plus start-up acquisitions. In fact , the total value of these deals this year has been more than $54 billion or 10x the activity value of Q1 2024. It’s all driven by AI and cloud infrastructure(including Google’s largest ever deal with Wiz) but when you see the latest text-to-image generation of OpenAI and the “Ghibli” craze you’ll definitely feel something’s up. But not the Tesla share price…
Finally, and Elon Musk might think I’m being “mean” (while he cuts social security support for the elderly) but Tesla’s share price is worth watching. The DOGE whisperer in the Oval office says he’s leaving government ‘service’ at the end of May. However, for Tesla and its shareholders, post its $800 billion share price meltdown, the value destruction pain may not end in May. The brand damage of embracing right-wing extremism has been staggering to witness but the end-game could be no less dramatic. The recent deal to sell X/Twitter to xAI (this x stuff is tiresome isn’t it) has been seen as a way for Musk to avoid margin (debt) calls on Tesla shares he has pledged as security on cross-company loans. The trigger for those margin calls was reportedly a Tesla share price of $120 per share (vs today $263 per share) but I’m not sure the pain point has been removed. The market value of Tesla is still more than $800 billion compared to Ford at less than $40 billion. Let’s not forget it’s a car company where a balance sheet and cash flow can implode if sales/revenues go into reverse. Last year revenues had a small 1% decline… but this year? Watch revenues closely, and watch Musk.
This might seem like a random set of signals to watch but sadly, there’s one emerging truth re US leadership. Money talks, not values nor principles. The Japanese (Nikkei) stock market has kicked off the week with a 4% wipe-out and we can only wonder when the men with the money (and the loans) pay a visit to the White House. We might have to wait a bit, but I’m hopeful the money will find that “lighthouse” moment.
