Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Elon Musk is Smart to get in bed with Trump

Even though it disgusts a lot of his fans, Elon Musk’s decision to serve on the economic advisory council to President Donald J. Trump (R-New York) is actually a shrewd and clever move.

Serving on the council is a smart strategy because it gets Musk access to the President of the United States with little or no expenditure or effort. During a talk at the 2017 TED Conference in Vancouver Musk admitted that his “work” on the council involves attendance at a couple of meetings a month.

In exchange for that Musk gets to lobby Trump on behalf of SpaceX, and Tesla Motors (NASDAQ: TSLA). He also puts Trump in the position of owing him a big favor.

How Musk’s Bromance with Trump Helps Tesla and SpaceX

Trump is not in a position to help SpaceX much; funding for space and military programs is set by Congress not the president. Yet the Donald is certainly in a position to hurt SpaceX big time – if he wished.

For example Trump could simply order the Pentagon to stop using SpaceX to launch spy satellites. The president might also have the power to throw SpaceX out of U.S. launch facilities like Cape Canaveral which would be catastrophic. Musk might be stuck with a big building full of rockets and space capsules which he would not be able to launch. Finally Trump could appoint a NASA Director that was hostile to Musk and actively working to sabotage SpaceX.

Tesla is also vulnerable to some Presidential actions. Trump can order the IRS to closely examine applications for tax credits for electric cars and solar homes.

Then there are government contracts, Tesla is planning to build trucks which it will probably try to sell to the Army. Federal agencies; some of which have large motor pools, would also be logical customers for the Model 3. Beyond that the military might be a customer for lithium batteries and PowerPacks from the gigafactory. The president and his appointees have the ability to block such contracts, which would be a tremendous revenue stream for the money-losing Tesla.

Finally there’s the recent purchase of 5% of Tesla by Tencent Holdings; a company with connections to the Chinese government. Trump said nothing about that – even though he might have made things very hot for Musk with a Tweet.

Musk’s Justification of his Trump Meetings is Nonsense

All this proves that getting into bed with Trump was a pretty smart; and perhaps logical, move for Musk. Unfortunately, some of Musk’s fans cannot seem to see that.

Tesla investor and venture capitalist Doug Derwin has spent $2 million on an “Elon Dump Trump” campaign. The campaign includes propaganda billboards, a petition and a website that urges customers to cancel Tesla orders.

Ironically Musk himself is making things worse with his sophomoric defense of the Trump relationship. As this really dumb statement reveals:

“In the meetings I’ve had thus far, I’ve argued in favor of immigration and in favor of climate change [policy],” he told TED curator Chris Anderson onstage. “That wasn’t on the agenda before. Maybe nothing will happen, but at least the words were said.”

This is pure nonsense, as Musk himself well knows. Trump and company are well aware of his arguments on those issues and they rejected them long ago.

The PR damage has been done, and there are only two workable responses: Elon either needs to keep his mouth shut; or explain how Tesla, SpaceX and the cause of electric vehicles benefits from the Trump relationship.

The Danger from the Musk-Trump Relationship

There are three huge dangers in the Trump relationship for Musk and his companies.

The first is that Trump will turn on Elon; this is entirely possible because Donald has a long history of attacking people who stick their necks for him. A prime example of this is the way he turned on Barrack Obama, even after the former president went out of his way to help Trump’s transition.

The other is that association with Trump will drive away potential Tesla buyers. Something Musk must consider is Tesla’s sales overseas; particularly in Europe where Trump is widely hated. Here at home the prime market for Tesla vehicles will be among soccer moms, younger people and affluent liberals – three groups that love to hate Trump.

A third danger Musk may face is that Congressional Democrats; or a future Democratic president, might try to punish Tesla and SpaceX for helping Trump. This is likely if either company starts profiting from huge government contracts signed by Donald. That would transform Musk from crusading visionary to corrupt elitist in the left-wing imagination. It would also make it real easy for Democratic politicians to shake Musk down for campaign contributions.

Fortunately there is a way Musk can head off such criticism. He can simply appear on U.S. Senator Bernie Sanders’ (I-Vermont) Facebook Live Show and talk about the dangers from global warming and the need for Basic Income. That would give Musk instant left-wing street cred at little or no cost.

Musk is going to have to figure out how to work both sides of the political aisle if he wants to achieve his dreams. It would be sad to see this great visionary’s career destroyed by association with anybody as corrupt and as vile as Donald J. Trump.