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Market Musings - April 10, 2018

We continue our blog series: Market Musings, Volume 2, Edition 14, giving our (hopefully not too random) thoughts on recent goings-on in the markets. Today, we present "Ties that Bind: Interesting Parallels and Connections Among Elon Musk, Eddie Lampert & Donald Trump".

Without further ado, we present the following interesting connections between Musk, Trump and Lampert:

1. EDUCATION: Sears CEO Eddie Lampert and President Donald Trump's Treasury Secretary Steve Mnuchin were roommates as undergrads at Yale in the mid-1980s. (In addition, Mnuchin has invested in Lampert's hedge fund, ESL, and served as a director on Sears' board for 12 years according to his Senate confirmation testimony (source).) Trump and Elon Musk both attended the University of Pennsylvania for their undergraduate degrees (although, obviously, they were separated by many years). Thus, all three are bona fide Ivy Leaguers.

2. VISIONARY STATUS: Eddie Lampert was in the mid-to-late 2000s considered the next great market whiz, a visionary who combined Sears and Kmart into one entity, with the result being its stock price soaring from $10.50/share in May 2003 to $133/share in April 2007, or a 12.7X increase in just under 4 years (a CAGR of around 90%). Meanwhile, Elon Musk in the mid-to-late 2010s was considered a real-life "Iron Man", a visionary who combined Tesla Motors and Solar City into one entity, with the result being its stock price soaring from $32/share in May 2012 to $305/share in April 2018, or a 9.5X increase in just under 6 years (a CAGR of around 45%). [Contra: Eddie Lampert was considered an iconoclast at the time for refusing to reinvest capex in his stores, while Elon Musk was considered an iconoclast at the time for spending like a drunken sailor on capex in his factories, while Trump has been considered an iconoclast for spending like a drunken sailor on pretty much everything.] Finally, in the mid-to-late 1980s, Trump was considered a visionary in the real estate field, especially following the publication of his bestselling book The Art of the Deal. (Note that Trump even has a painting of himself on the wall at Mar-a-Lago which is entitled "The Visionary"...)

3. REALITY DISTORTION FIELD: Lampert, Trump and Musk all appear to have employed some form of "reality distortion field" (made famous by Steve Jobs) in their professional careers. Lampert has been in denial about the economic decline of Sears for the past decade and consistently refuses to acknowledge reality, stating each year when announcing record annual losses and cash burn that the "transformation" of Sears is making progress and just about to take hold (it never is). Trump is legendary for his denial of reality, apparent losses and defeat (namely, business failures and bankruptcies [he called his near brush with personal bankruptcy in the early 1990s as his "blip"], "grab them by the -----" tapes, defying long odds of becoming the nation's 45th chief executive, his hairline, etc); he has seemingly perfected the art of positive thinking (that if you repeat something enough to yourself and others, it will eventually become reality). Finally, Musk has made a career out of staring down the naysayers, constantly engaging in reckless financial gambits and massive risks (note that Tesla almost went bankrupt in 2008 and again in 2013), with his companies living far beyond their financial means. Perhaps being a "visionary" means that one simply cannot accept at a fundamental level the mundane "reality" that normal people take for granted. In any event, reality distortion has worked wonders for both Musk and Trump professionally. (Contra: It has been a disaster for Lampert, although he remains incredibly wealthy nonetheless. Does this presage the future downfall of either Musk or Trump?)

4. IMMENSE WEALTH: Lampert, Trump and Musk are all billionaires, worth (according to Google) and $1.6B, $3.1B and 19.5B, respectively (note that that odds of becoming a billionaire in the United States is over 600,000 to 1). Below is a picture of Lampert's Florida mansion:

5. FEEDING AT THE GOVERNMENT TROUGH: Trump and Musk each made their fortunes by exploiting funding and tax breaks from the government. Trump's real estate empire was largely due to government-financed housing projects in the 1960s and 1970s and tax abatements in the 1970s and 1980s. Musk likewise has relentlessly exploited government tax breaks, loans and credits for electric vehicles and other renewable energy projects; in addition, SpaceX is largely financially reliant on government contracts to launch satellites. (Contra: Lampert has apparently foregone such government largesse.)

6. FAMILY: Trump and Musk have each have been married three times and each have five children. (Contra: Lampert has only been married once and has three kids.) Below is Musk with his offspring (sans ex-Wife #1, aka "The Starter Wife", who is the mother of all five):

7. IT'S GOTTA BE THE HAIR. Trump and Musk have miraculously managed to re-grow their hair since appearing to go mostly bald in early adulthood (more reality distortion?) (Contra: Lampert appears to be slowly yet surely going bald over time.) Should we take some insight from this? Namely, that men who can re-grow their hair clearly possess superpowers?

CONCLUSION: We are not quite sure what to make of the foregoing parallels and connections between these illustrious three gentlemen, Musk, Trump and Lampert. Something's clearly up, though...

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