Breitbart Business Digest: Is Twitter Musk’s Loki?

Norse mythology has a colorful warning about the danger of distraction derailing an important project.

According to the Icelandic scribe Snorri Sturluson, the Vikings believed that the gods of Asgaard once employed the services of a mysterious smith to build a wall around Valhalla. The gods promised the smith the hand of Freya, Valhalla’s local beauty queen, if he could build the wall in a single winter aided by no other man. They had no intention of giving over Freya because they believed completing the project in that time was impossible. They were, as we would say today, shorting the smith’s ability to finish the wall.

Aided by his powerful stallion, however, the smith came very near to finishing the wall. Yet before he could do it, Loki transformed himself into a mare and seduced the giant’s horse into chasing him far off into the hills. Without his horse, the smith despaired of completing the project. He then flew into a rage, revealed himself to be a jotun—a kind of fiendish giant—and was struck dead by Thor’s hammer.

This story was brought to mind by the dramatic sell-off on Tuesday of shares of Tesla. Shares plunged 12 percent to $877, pushing Elon Musk’s fortune down by around $25 billion and the market capitalization of Tesla down by $128 billion. After initially rallying on Wednesday morning, the shares sank back down toward where they closed the day before, eventually settling at $881.51, up just half a percentage point or so. Tesla shares are off by 27 percent or so from their November highs.

One of the primary explanations for the plunge is that Tesla investors are worried that Musk will be distracted by the pretty mare of Twitter. “Tesla shareholders can’t be happy that Musk will have to divert even more attention away from winning the electric-vehicle race,” Oanda analyst Edward Moya wrote in emailed comments. Certainly, the commentary online and on the financial news television shows seemed worried the stallion of electric cars had been lured away from his primary task.

The problem with this notion is that Musk was already in charge of  SpaceX, the Boring Co., and Neuralink. It strikes us that building rockets and planning to put people on Mars is far more complex and distracting than purging Twitter of its leftwing internal culture of censorship, authenticating its users, and tossing the bots. For that matter, building hyperloops and implanting chips in human brains is likely a harder lift. If investors are willing to tolerate these distractions—if that’s what they are—then balking at Musk owning Twitter would be odd. If anything, investors should probably feel relieved that the matter was resolved so quickly. Surely, a hostile takeover bid would have been a bigger distraction.

Another explanation for the plunge is that investors were worried that Musk might have to sell billions of dollars worth of his shares to fund his equity stake in the deal. That would mean more shares floating out there among investors, which could be considered a form of dilution and put downward pressure on the price of shares. The problem is that it is not real dilution—the shares were held by Elon—and his willingness to sell them should not put anything more then temporary pressure on the valuation of the company. It’s not as if anyone is worried the company’s biggest insider is selling because he is worried shares are overpriced. If he sells to fund the Twitter acquisition, that’s not a reason to doubt Tesla’s value. Finally, Tesla issues lots of equity through secondary offerings. If investors are fine with that, Musk selling shares probably is not a big worry.

There are also potential positives from Musk’s ownership of Twitter. He will now control a giant platform through which he can market Tesla, which famously spends no money on advertising. Twitter could become Tesla’s preferred medium for countering bad press from self-driving disasters, for example. Nothing in using Twitter in this way would violate Musk’s dedication to having it be a free speech platform. It would just be a free speech platform partially sponsored by the world’s largest car company by market capitalization. Town square brought to you by space ships, tunnels, brain chips, and electric cars.

There is one potential danger that has gone largely unremarked. Owning a free speech platform sets up Musk for a clash down the road with the various world powers that vigorously oppose free speech. The most important of these, both in terms of its extreme opposition to free speech and its value to Tesla, is China, of course. Even though Twitter no longer operates in China, it seems likely that Musk will sooner or later find himself confronted with demands from China that he curtail free speech on Twitter that offends the national honor of China. The price of noncompliance could be a loss of the Chinese market for Tesla. Would Musk stand up for his principles even if it cost Tesla sales in China? If investors fear the principles could win this clash, the sell-off would make sense.

GDP and Surging Imports

The trade deficit in goods exploded higher in March, jumping nearly 18 percent from the record high in February to $125.3 billion. This raises the odds that tomorrow’s GDP figure could show that the economy officially contracted in the first quarter. Economists were already expecting growth to slow to a one percent annual pace thanks to the omicron surge and ongoing supply chain problems. Once you are that low, it does not take much to knock you into negative territory.

The better than expected wholesale and retail inventory numbers may offset the trade figures. According to the Atlanta Fed’s GDP model, they perfectly offset each other. It projected 0.4 percent growth yesterday, and that was unchanged on Wednesday.

If the economy does register a first-quarter contraction, that will put the Federal Reserve in the uncomfortable position at its meeting next week of most likely hiking into negative growth. We think the Fed will likely look past the headline number and hike anyway, pointing to sky-high inflation and an ultra-tight labor market.

Even a one percent growth number will make it harder for the Biden administration and its establishment media allies to continue with the claims that the economy is actually doing great and that the public’s dissatisfaction is evidence of a delusion. The establishment media’s palpable frustration at the public’s refusal to disbelieve its own eyes—which see the higher gas prices, higher grocery prices, and higher credit card bills—in favor of the narrative will only grow more extreme.

Unlike the smith’s stallion, however, the public is refusing to be distracted from reality by the establishment media’s Loki performance.