GraniteShares | July 17th, 2024

Today's insights are provided by GraniteShares. Learn more about their 2X leveraged long (TSLR) and short (TSDD) Exchange-Traded Funds to get exposure to Tesla.

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GOOD MORNING

Here's everything you need to know today: Marc Andreessen and Ben Horowitz, partners at VC mega-fund A16Z, have reportedly told employees they plan to fund a Trump PAC. The same guys who created funded cutting-edge innovations are now cozying up to a former president who thinks windmills cause cancer.

The rightward pivot on Sand Hill Road comes just the day after former Silicon Valley VC J.D. Vance was picked as Trump’s running mate, giving libertarian Big Tech players the blueprint they needed to swing MAGA. Vance, who has publicly embraced crypto and not taxing the rich, will almost certainly be the go-between for Trump’s campaign and tech billionaires who have watched the IPO market implode under the Biden Administration and are sitting on so much dry powder capital that they essentially need Trump back to take a sledgehammer (with a small handle, we assume) to regulation and let them get back to selling investors on Blue Aprons and WeWorks.

And in totally unrelated news, Elon Musk is packing up X and SpaceX's California headquarters and heading to Texas in the wake of the Sunshine State’s newly-passed trans student privacy law… and also taxes, but that’s not a very engaging tweet.

Let’s dive into more detail below.

Politics aside, America’s debt is reminiscent of a blindfolded parade

BREAKING NEWS
While the United States continues to reel from the shocking events of Saturday's attempted assassination of former President Donald Trump, one data point that continues to rise (sorry, President Biden, the numbers are not looking great right now) is U.S. national debt which, at the time of writing, is about to crack $35 trillion.

If we are going to point fingers, let’s look at some recent Treasury numbers. The data shows that gross federal debt rose by about $7.8 trillion during Trump’s term. Biden’s first three years have added $6.32 trillion to the debt. If we add the nonpartisan Congressional Budget Office’s projection of a $1.582 trillion deficit for Biden’s fourth year, we get a grand total of $7.902 trillion for Biden’s four-year term.

Politics aside (we'll get into that), as consumer credit card debt hits an all-time high after an all-time high, with delinquencies on the rise, there is a sense that American debt is the blind leading the blind at this point.

WHAT HAPPENED
A quote often attributed to Thomas Jefferson feels fitting when discussing politics past and present Presidents' promises of fiscal responsibility and debt: "An educated citizenry is vital for survival as a free people."

So, let us educate you.

Our chart, which uses data provided by the Office of Management and Budget, shows that former President Trump and President Biden are nearly neck and neck when it comes to the debt they have accumulated under their presidency, with Biden projected to pass Trump at the end of the four years. What's shocking is the apparent spike during George W. Bush ($4.3 trillion) and how former President Obama more than doubled it to $9.5 trillion while both held two presidential terms.

When looking at Trump and Biden's estimated ten-year debt impact of policies approved around the time of enactment, things get even more complicated.

Under Trump, 77% of the approved debt came from bipartisan legislation, compared to 29% under Biden. In their first two years, Trump approved $2.2 trillion in debt, while Biden approved $4.9 trillion. Significant COVID-19 relief spending was notable for both, with Trump's second two years including $3.6 trillion for relief and Biden's American Rescue Plan adding $2.1 trillion. Trump's net spending increases totaled $5.9 trillion with $2.5 trillion in tax cuts, whereas Biden's net spending increases were $4.3 trillion with negligible tax changes. Public debt rose by $7.2 trillion during Trump's term and has grown by $6.0 trillion under Biden. Trump's executive actions added less than $20 billion to the ten-year debt, while Biden's have added $1.2 trillion.

Overall, Trump maintained bipartisan support and did have lower executive debt additions despite higher overall debt growth (often measured by the debt-to-GDP ratio which is at 123.26%). Biden had a slew of crisis responses his administration had to deal with and made efforts at deficit reduction like the Inflation Reduction Act. Still, high partisan debt (Build Back Better Plan/American Rescue Plan) and executive additions were major dings on his presidency thus far.

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BREAKING NEWS
Retail sales data gave Wall Street a pleasingly cold shower Tuesday morning by staying flat in June, despite the economy showing more red flags than a J-Lo engagement announcement.

So what’s happening? Why are Americans spending like a newly engaged J-Lo when all we seem to talk about is how inflation is joking demand?

Well, if you look at recent trends in retail sales data and the fine print in what the big banks reported in their most recent earnings over the last few days, it seems that Americans might already be spending the September rate cut that hasn’t been confirmed yet.

WHAT HAPPENED
The all-knowing economists were betting on a 0.3% drop in spending (thanks, Bloomberg). But in a twist that left the abacus jockeys scratching their heads, May's revised retail sales had a little glow-up to 0.3% from the original 0.1% (thanks, Census Bureau).

Today, June's retail sales (excluding the ever-volatile auto and gas sectors) decided to show off with a 0.8% increase, dunking on the consensus estimates of a measly 0.2%. And the control group – you know, the part that actually matters for GDP – strutted in with a 0.9% jump in June, juuuuuust a bit higher than the predicted 0.2%.

All of this holds up a streaky mirror to our current economy which is totally cooling off but also still chugging along with incredible strength. Pair this with June’s unexpectedly good CPI print (who saw that coming?), and the result is markets fully baking in The Fed handing out its first interest rate cut at the end of the FOMC’s September meeting.

And investors aren’t alone. According to Tuesday’s data, your most vapid wannabe-influencer friend from college is doing pretty much the same thing and snagging those $250 Jordan 4 retros before they even drop thanks to Uncle Jay Powell who they know is about to make money cheaper again.

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BREAKING NEWS
According to a website subtly named Global Firepower, the United States military ranked #1 for 2024 in basic global military might, thanks to its dominance in stats like number of military units, financial standing, logistical capabilities, and geography.

Since World War II, the potency of the U.S. military has been a national source of pride and comfort, maybe even justifying its average budget of about $750 billion a year, or 24 cents on every dollar paid in income taxes by U.S. taxpayers.

But what many Americans don't know is where a significant portion of that budget is spent. Because the U.S. Military should be wearing a sticker that says “Made in China.”

WHAT HAPPENED
Pew's May 2024 survey, a nationally representative sample of 3,600 respondents, indicates that about 40% of Americans view China as an enemy. This is a notable increase from 25% two years ago and marks the highest level in five years. Additionally, 50% of Americans consider China a competitor, while only 6% see it as a partner.

In his 2024 State of the Union, President Biden stated, "We're standing up against China's unfair economic practices. We're standing up for peace and stability across the Taiwan Straits."

In 2016 former President Trump was characteristically less nuanced saying, "We can't continue to allow China to rape our country, and that's what they're doing."

Pew’s findings reveal that 81% of U.S. adults view China unfavorably, with 43% holding a very unfavorable opinion. Roughly half of Americans believe limiting China's power and influence should be a top foreign policy priority.

In 2019, data analytics firm Govini was awarded a five-year $400 million contract from the government (i.e. taxpayer dollars) to deliver data, analysis, and insights into DoD spending. In nothing of a shock to anyone, Govini's findings were that the DoD’s core spending issue stemmed from a lack of U.S. domestic production capacity.

"With just 25 well-constructed attacks, using any of a variety of means, an adversarial military planner could cripple much of America's manufacturing apparatus for producing advanced weapons," the report stated with zero chill.

Govini also found a breakdown of America's "struggle to scale munitions" after Russia invaded Ukraine, revealing the DoD’s extensive reliance on Chinese suppliers for various key components that required the involvement of 305 separate Chinese suppliers.

Then there is the issue of semiconductors. Used in critical platforms and systems, like Ford-Class Carriers and Nimitz Class CVNs, the U.S. sources over 40% of the necessary semiconductors from China. This should offer a glimpse into why the President and his administration passed the CHIPS and Science Act in 2022.

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1. Fed Gives Preliminary Approval to Three Ethereum ETFs

The SEC has reportedly given preliminary approval to at least three spot Ether ETF issuers, with expectations for trading to commence next Tuesday. This development marks a significant milestone for the cryptocurrency market.

2. Amazon Prime Day Spending Expected to Reach Record $14 Billion

Adobe Analytics forecasts that spending during Amazon Prime Day will hit a record $14 billion, reflecting robust consumer demand and the popularity of the sales event.

3. Google’s $23 Billion Acquisition of Wiz May Spur Big Tech M&A

Google parent Alphabet’s strategic move to acquire Wiz for $23 billion could ignite a wave of mergers and acquisitions in the Big Tech sector, according to analysts.

4. GM Won't Hit 1 Million EV Target in 2025

GM CEO Mary Barra announced that the company will not achieve its production capacity goal of 1 million EVs by 2025 but remains optimistic about the growth of the EV market.

5. Berkshire Hathaway Stock Hits Record High

Berkshire Hathaway shares reached a record high, driven by gains in key holdings. Investors are advised to monitor significant chart levels following this milestone.

6. Bank of America's Q2 Profits Drop Amid High Interest Rates

Bank of America reported a 7% decline in second-quarter profits due to the impact of high interest rates on lending, though investment banking fees and trading revenue provided some relief.

7. Charles Schwab Stock Drops on Plan to Downsize

Charles Schwab's stock fell after CEO Walt Bettinger announced plans to downsize the company to maintain profitability, following lackluster Q2 earnings.

8. Tesla Delays Robotaxi Reveal for Design Changes

Elon Musk announced that Tesla needs more time to redesign the front of its Robotaxi, delaying the reveal but promising additional features will be showcased.

9. Microsoft Faces UK Antitrust Probe Over Inflection AI Hiring

The UK has launched an antitrust investigation into Microsoft's hiring practices from AI startup Inflection, scrutinizing the potential anti-competitive effects.

10. Morgan Stanley’s Q2 Earnings Boosted by Investment Banking Surge

Morgan Stanley's second-quarter earnings saw a significant boost from a 51% increase in investment banking fees, reinforcing a revival in Wall Street dealmaking activities.

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Today's insights are provided by GraniteShares. Learn more about their 2X leveraged long (TSLR) and short (TSDD) Exchange-Traded Funds to get exposure to Tesla.

Learn More About These Funds ➔