❓Riddle Me This - What has 2 thumbs, went public at a $120 billion market cap despite having sold 156 electric vehicles after 12 years in business, 3 years later is losing $107 thousand+ per EV sale, is a known credit risk, and just received $6 billion from President Joe Biden’s Energy Department? Rivian!

🧺 Marty Byrde Money Moves - I didn’t know Marty Byrde banked with Morgan Stanley. That was an Ozark reference BTW. Morgan Stanley’s $6 trillion wealth management division has been probed over insufficient anti-money laundering procedures. In a new cache of documents and interviews, MS has clients with ties to drug trafficking, terrorist organizations, and more.

🏢 Chips & No Dip - Remember when you were complaining about how unaffordable cars were during the pandemic, and everyone kept saying it was because of the semiconductor supply chain snags? Then, you had to nod along, but you didn’t fully know what a semiconductor was. Well, Intel is receiving $7.9 billion for US chip-plant construction, so you don’t have to feel dumb in front of your friends anymore. The plants will be built across Arizona, New Mexico, Ohio and Oregon, and is a result of the Biden administration's program aimed at reviving American chip-making.

🗣️ Context?

This past week, Trump did his best Meek Mill impression when  his “trigger fingers turned to Twitter fingers.” On Monday, President-elect Donald Trump posted on his social media platform, Truth Social, that when in office he would impose a 25% tariff on Canada and Mexico and an additional 10% on Chinese imports.

✈️ High level, what the heck is this?

A tariff is a tax on imports or foreign goods brought into the United States. There is a large misconception on who physically pays for the tariff, so let’s break it down: the American company that is buying the foreign goods pays the tariff directly to the US Treasury. Let’s say an American company buys tomatoes from Mexico, once the American company buys the tomatoes and they land in the US, the American company pays the tariff to the US Treasury.

✅ Why might it work?

1. Incentivize American companies to move foreign production to American shores

When the US imports more goods than it exports, we enter into what is called a trade deficit. Trump has been anti-trade deficit for his entire political career, and tariffs are his Excalibur or preferred weapon to fight against the deficit. As an American company, you either move production to American shores, pass along the cost of the tariff to consumers, or move production to a lower tariff foreign provider (costly to shake up the supply chain).

2. Negotiating leverage for other foreign policy initiatives

Trump has publicly stated the tariffs would aid in his efforts to crack down on illegal immigration and drugs. While these are the public reasons, I am sure there are some held a little closer to the chest. When threatening tariffs against another country, the other country will need to come to the negotiating table, given the US is a pretty big customer.

❌ Why might it not work?

1. Inflation

When the American companies pay the tariff, you don’t expect them to pay out of pocket, do you? They will likely pass this along to the end consumer in the form of higher prices. The cost for foreign goods will increase if the American companies have nowhere else to turn. I can quote a number of surveys about X% tariff will lead to $Y amount of increase in customer spend for the same basket of goods, but we go into inflation more in the next section, so I won’t bore you here.

2. Other countries can do the same to us

“Anything you can do, I can do better.” What happens when someone calls you stupid, you call them stupid right back. The same applies here (I understand that is a leap of an analogy, but bear with me). Other countries have publicly stated that they would impose similar tariffs if provoked. A supply chain shakeup is a massive switching cost for any company, so foreign countries will counter with tariffs of their own.

🟰 Conclusion:

Trump stated in his campaign that he would put a 60% tariff on China. In large part, the stances Trump has taken in the past were radical to draw attention from the other side of the negotiating table. The reduction to the 10% additional tariff is already signs of reduction from what Trump states vs. what actually happens. While the law does provide the President with broad authority when it comes to tariffs and Trump has shown in his 1st term his proclivity for tariffs, a trade war typically results in negative economic impact, so the market has been pricing in a discount to what Trump has stated and what will happen.

On Wednesday, the Federal Reserve’s preferred gauge for inflation, the personal consumption expenditures price index, increased 0.2% from September to October and showed a 12-month inflation rate of 2.3%, both in line with expectations.

🏦 What exactly does this mean?

The personal consumption expenditures (PCE) measures consumer spending and how much US households spend on goods or services in dollar amount.

The Bureau of Economic Analysis (BEA) calculates the dollars spent by consumers across goods and services both durable and non-durable to come up with the PCE. Then, the BEA reports their findings with a breakdown by category (motor vehicles, jewelry, furniture, etc. - link to table here).

After the PCE is tabulated, the BEA weights each good or service based on a variety of factors to come to a measure or index that better reflects the overall increase or decrease in consumer spending. This measure or index is the personal consumption expenditures price index (PCEPI) and is the preferred gauge for inflation.

The PCEPI increasing to 2.3% means that, across the broad basket of consumer goods and services, prices have increased by 2.3% year-over-year. This means the same basket of goods and services was cheaper last year at the same time than they were this year.

🧑 Why does it matter to me?

1. The Fed uses this metric to track inflation

The Fed has been in a fight against inflation for a long time. In 2021, the PCEPI was at 7.0%, which was way too high. The Fed targets a healthy rate of inflation of 2.0%. To meet their target rate, the Fed has a few tools at their disposal, but mainly, they use interest rates. Over the past few years, the Fed increased interest rates as a way to cut down on personal consumer spending and lower the PCEPI. We have been getting closer to the 2.0% magic number, and as a result, the Fed has cut interest rates to achieve a “soft landing”. With the most recent reading at 2.3% (up from September and above the 2.0% rate), the Fed could be incentivized to hold off on another interest rate cut.

2. Your spending power just went down

When money sits in your bank account, it loses power. The same goods you bought last October are now 2.3% more expensive (oversimplifying a bit, I know). Even though your $100 in your bank account still reads $100, because it hasn’t grown in value and inflation has taken place, the $100 figuratively lowers in value as the goods you would’ve bought increase in cost. So, how do you protect your spending power? Inflation hedges. An inflation hedge is when you invest in an asset, like a stock or real estate (wink, wink), that returns higher than the rate of inflation. Meaning, if you invest in a mogul property that returns 18.8% on average a year and inflation is 2.3%, your spending power has actually increased because it has beaten inflation.

🏡 What’s the outlook for mogul homes?

Every second your money sits in your bank account, it is losing power. Use real estate as an inflation hedge with mogul. As you are paid rental income monthly and the properties appreciate in value, you are gaining buying power.

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• Bad Elon, no. Haven’t you learned from the last public pondering of buying a company? Guess not, Elon hinted at buying Dungeons & Dragons’ maker, Hasbro, with, you guessed it, a tweet.
• The second time we will mention a Drake rapper feud in the the newsletter, Drake is alleging Universal Music Group and Spotify helped “Not Like Us” achieve greater popularity and ultimately beat Drake in the rap battle
• First "Barbenheimer", then "Glicked", now "MoGlicked"? The box office was put to the test this weekend with Moana 2, Gladiator II, and Wicked.
• When your friends quit their jobs to wear vests, vape, and day-trade, bet they didn't think it would turn into a 23-hour workday. New 23-hour stock exchange set to launch in 2025.

I learned about this one from the Walter Isaacson biography of Steve Jobs (another great book, but will get to it later). Curious about why Jobs listed this as one of his all time favorite books, I decided to take a look and became entranced by the theory laid out.

The book deep dives into why incumbent companies in an industry become stagnant and ultimately lose out to innovative companies that attack a small niche market and expand to compete with the incumbents.

The incumbents focus on perfecting their product that already resonates with a large audience. As a new, disruptive technology emerges, it initially performs worse than the incumbent product and only resonates with a small, niche audience. Because the incumbents see the disruptive technology as worse, they prioritize short term profits and avoid investing in perfecting the new technology.

As a result, innovative companies attack smaller markets with the new technology, until the technology improves and becomes a replacement for the incumbent’s product.

While it sounds complex, the author, Clayton Christensen, uses case studies to prove his point in a way that makes the book both a great read and a sharp warning for large companies.

⭐ 4.86 / 5.0 in my book (no pun intended)

1. “What do tigers dream of, when they take a little tiger snooze? Do they dream of mauling zebras, or Halle Berry in her Catwoman suit?”
2. “Gluten is a vague term. It's something that's used to categorize things that are bad. Ya know? Calories, that's a gluten. Fat, that's a gluten.”
3. “He never had the makings of a varsity athlete.”
4. “‘There must be some kind of way out of here.’ said the joker to the thief.”

The “elderly prime” experiment had college students form sentences using words they were given. Half the group was given words associated with the elderly, and half the group was given words associated with youth. The participants thought the experiment was over and had no idea the words were associated in the way they were.

After the experiment, they were thanked and told where the nearest elevator was. Unbeknownst to them, the participants were timed from the room to the elevator, and the ones that had “elderly” words walked materially slower to the elevator. This study helped prove humans frequently form implicit memories that are used automatically, without much effort or awareness on our part.

1. The Hangover (Ed Helms)
2. This is The End (Seth Rogen, Jay Baruchel)
3. The Sopranos (Junior Soprano)
4. All Along the Watchtower (Jimi Hendrix or Bob Dylan)