More Biden Bull and Tesla’s Crash Dummy Elon Musk

Navarro's Market Rap for the Week Ending January 26. 2-24

Hi. Peter Navarro here with the latest market rap for the week ending January 26, 2024.

Before we get started, I just want to thank everyone for their prayers and financial support!

For those of you who have indeed been watching, I was sentenced to four months in prison for an alleged crime that no senior White House advisor in the history of our Republic’s ever been charged with.

Joe Biden’s Department of Justice says I acted above the law in failing to respond to a congressional subpoena.  The funny thing about that – if you’re into gallows humor – is that during the course of the trial that very same Department of Justice had to admit that its own more than 50-year policy precludes the prosecution of senior advisors like me on the grounds that Congress does not have the authority to issue subpoenas in such cases because it violates the constitutional separation of powers.

At any rate, my case is going to appeal, and I have said from the very beginning that this is a landmark constitutional case of what legal experts call “first impressions” destined for Supreme Court review. Nothing that I have observed over the course of this trial has changed my view on the importance of this case, and I filed my appeal within minutes of sentencing.

The last thing I’ll say before we proceed is that if you want to help me with my legal fund and you are an UNPAID subscriber to the substack, the best thing you could do right now is to convert to a paid subscription.  Paid subscriptions provide folks with access to premium content and it’s well worth the investment.

In the meantime, as they say in show business, the show must go on, or in this case, the market analysis. So as Donald Trump loves to say, “let’s go!”

It was an extremely interesting week on the economic news front. The gross domestic product report for the last quarter of 2023 came in unexpectedly hot, and hotter than a firecracker, yet at the same time the inflation rate also surprised to the downside. The headline takeaways seem to be that, against all odds, the Biden economy is settling into Goldilocks territory where we are able to somehow grow at unparalleled rates and not ignite inflation.

Real GDP rose 3.1% for the year 2023 but it accelerated to 4.1% in the second half. At the same time, the PCE deflator, a favorite Federal Reserve inflation indicator, was up 2.7% for the year but just 2.1% in the second half of the year, signaling deflation.

If you look beneath the surface this good news, is also crystal clear that a lion share of the growth we are experiencing is coming from the federal government spending now coursing through American veins like crystal meth in an addict. History will look back on this particular period of time, as the Biden White House tries to pat itself on the back, as a period in which partisans engaged in the worst kind of Keynesian stimulus for the worst possible reason – to promote the reelection of Joe Biden.

Biden’s profligate, politically motivated fiscal stimulus is jacking up our national debt to danger Will Robinson levels. This is a theme I have been pounding on now for some months, but you have to remember here that the erosion of America’s balance sheet is, at least for now a slow moving process.

The other obvious observation here is that as both the NASDAQ and S&P 500 continue to move up in a bullish trend, much of this is tech and artificial intelligence driven and, for laypeople, that fact disguises a broader rot the rest of the American economy.

As for specific items that caught my eye, you may remember from last week’s substack my analysis of why Tesla is living on borrowed time because the smartest man in the world Elon Musk has dumbly put all Tesla’s eggs in a Shanghai basket and inevitably communist China will take those eggs and make omelets for the Chinese people, not Tesla shareholders. Tesla stock is in a precipitous dive – it has fallen for six straight weeks – as the company is reporting both big losses and an anything but rosy outlook at least in the near term.

Meanwhile the Houthis keep launching missiles at merchant ships in the Red Sea and at some point that’s going to put significant cost pressures on the sea lines that deliver us our goods. Working around such risk entails adding thousands of miles and many additional days to journeys.  Global supply chains will be strained and cost-push inflation will rise.

Last take: If these were normal times and the stock market indices were in a bullish trend because America was growing the old-fashioned way, mostly through private sector investment and ingenuity, rather than because of massive fiscal stimulus, I might be tempted to trade this trend on the long side. However, I continue to believe that it is safer to get reasonable yields on relatively short-term bonds and will wait patiently to see how this all sorts out. The choice is as always yours – bon chance.

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