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Musk Alienated Both Dems and GOP, Simplify's Green Says · THE DAILY BRIEF

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  Speaker 1: I was on the Bloomberg on the HDS function. I
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  Speaker 1: think you have a very small holding in Tesla, maybe
• 0:05
  Speaker 1: thirteen thousand shares or so to clarify that for us,
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  Speaker 1: But your reaction is somebody that has exposed that name
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  Speaker 1: and Elon Musk forming a political party, how do you react.
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  Speaker 2: Well, very quickly, so simplify has a two x levered
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  Speaker 2: variant of the Tesla fund that provides access to that.
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  Speaker 2: It is a very small fund. As an investor in Tesla, however,
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  Speaker 2: I would would argue that this is not so much
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  Speaker 2: a choice that he has, but almost an inevitability at
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  Speaker 2: this point. He is Tesla is very closely has his
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  Speaker 2: SpaceX and related businesses from Elon Musk. They're very heavily
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  Speaker 2: tied into the political allocation machine, whether that is the
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  Speaker 2: Department of Defense and NASA through SpaceX, or whether that
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  Speaker 2: is through the environmental credits associated with Tesla and Solar.
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  Speaker 2: You know, this is a business that is deeply tied
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  Speaker 2: into the political framework. And at the end of the unfortunately,
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  Speaker 2: Elon Musk has now managed to basically alienate both Democrats
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  Speaker 2: and Republicans. Democrats by aligning with Trump initially in the
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  Speaker 2: anti woke movement, and now of course Republicans by breaking
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  Speaker 2: with Donald Trump and launching the American Party. I've drawn
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  Speaker 2: the analogy that this is much more like William Randolph
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  Speaker 2: Hurst than any form of traditional technologists. He's largely known
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  Speaker 2: at this point for his political and communications empire in
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  Speaker 2: the form of Twitter, the town Square. You know, that
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  Speaker 2: really seems to be setting the tone here, whether he
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  Speaker 2: is established.
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  Speaker 1: As opposed to as opposed to being the key inventor
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  Speaker 1: or the technical brain himself. Right. Like, the thing that
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  Speaker 1: we always go back to is that in many annual
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  Speaker 1: regulatory filings in the boiler plate, they will put Elon
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  Speaker 1: Musk is essential to this company and if anything were
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  Speaker 1: to happen to him, that would be to Tesla's detriment.
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  Speaker 1: But as I know, I've reported a lot on it, right,
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  Speaker 1: there are many talented, an influential, impactful people at that company.
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  Speaker 1: Even so, there is an element of key man risk
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  Speaker 1: from Tesla's own perspective. It's in the filings.
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  Speaker 2: Yeah, at the end of the day, the Tesla buyer
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  Speaker 2: is suffering from their car being keyed in a parking lot,
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  Speaker 2: not because of the technologists, but because of the chief
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  Speaker 2: executive officer, and you know, a leader of the company
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  Speaker 2: that is clearly a risk both from a management standpoint
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  Speaker 2: and a talent acquisition standpoint. He is a transformative figure
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  Speaker 2: to many in the technology space who dared to actually
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  Speaker 2: build stuff in a technology world that was largely focused
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  Speaker 2: around consumer apps. You know, but he is not the inventor,
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  Speaker 2: he is not the key technologist. What he is is
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  Speaker 2: the key spokesperson. And so the underlying behavior that is
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  Speaker 2: occurring here, it's not entirely clear that he has a
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  Speaker 2: choice to back away from the political sphere given the
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  Speaker 2: exposure that his businesses have. Whether this is reckless or
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  Speaker 2: not is ultimately going to be determined by the history books.
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  Speaker 2: We can't really know the ones. But with a deeply
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  Speaker 2: divided electorate, the threat of a third party does have
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  Speaker 2: the potential to disrupt elections, primarily hurting Republicans much more
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  Speaker 2: than it would likely hurt Democrats.
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  Speaker 3: This is a global company as well, and Michael, we've
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  Speaker 3: seen the impact in Europe that Musk's political affiliations have had.
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  Speaker 3: You then think about China, where real growth engine for them,
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  Speaker 3: But maybe China starts to look at the lessening in
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  Speaker 3: political weight that Elon has had with the administration backs
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  Speaker 3: away there, and then you've got competition. Do you remain
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  Speaker 3: as exposed to this name as little as it is.
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  Speaker 2: Well, ultimately, we have a fund that is dedicated to Tesla,
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  Speaker 2: so we will buy that just based on whether shareholders
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  Speaker 2: want exposure to that name or not through that fund.
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  Speaker 2: But at the end of the day, this is a
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  Speaker 2: business that, for the very first time in history, is
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  Speaker 2: actually looking at the potential for a sales decline. It
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  Speaker 2: has had extraordinary success in a few models. The model
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  Speaker 2: Y was obviously a huge runaway success, but it has
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  Speaker 2: an aging product mix. It has a significant new competition,
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  Speaker 2: particularly from Chinese companies coming in, and this is of
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  Speaker 2: course creating conditions under which the business itself is very
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  Speaker 2: much under threat. It has always been a bit of
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  Speaker 2: a mystery from a valuation standpoint, and so it's very
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  Speaker 2: hard to create a compelling argument for why you should
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  Speaker 2: be aggressively buying Tesla and now other than the desire
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  Speaker 2: to gain exposure to a very high volatility, high beta name,
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  Speaker 2: which has been one of the key characteristics that have
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  Speaker 2: attracted people to it over time.
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  Speaker 3: Yeah, Michael, give us the signal that you're getting from
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  Speaker 3: those that have wanted to get into your fund that
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  Speaker 3: have wanted the exposure to the volatility or to the
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  Speaker 3: mystery around you know, musk in and of itself, is
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  Speaker 3: that waned in any way in the current political environment.
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  Speaker 2: We haven't really seen it weane in any meaningful way.
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  Speaker 2: But the reality is is that most of these levered
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  Speaker 2: ETFs are simply offering investors a tool to access lower
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  Speaker 2: cost leverage than they could obtain through a margin account.
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  Speaker 2: You can get a two x levered exposure or at
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  Speaker 2: a fraction of the cost once you factor in management
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  Speaker 2: fees and the costs of the leverage that can be
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  Speaker 2: obtained in the institutional space. It's much less expensive than
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  Speaker 2: in trying to obtain that through margin or through options,
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  Speaker 2: and so the argument is very compelling if you want
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  Speaker 2: that levered exposure. The question is ultimately, do you want
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  Speaker 2: LeVert exposure to a business that really has gone somewhat
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  Speaker 2: ex growth and is now looking at a situation in
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  Speaker 2: which those political liabilities both in China where it's perceived
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  Speaker 2: as an American company at a time period where that's
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  Speaker 2: probably not particularly attractive Europe similar phenomenon, and as I mentioned,
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  Speaker 2: growing competition in the United States as well as the
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  Speaker 2: political headwinds make this a very challenging environment for Elon
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  Speaker 2: Musk