Oil Falls on Israel-Iran De-Escalation, Tesla Rolls Out the Robotaxi, & Trump Media’s Buyback Grift

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2:17So if you want to be successful in business, My advice to you, forget about AI, forget about big tech, build some expertise around refrigerators and dish soap. That's what people care about today. That's what it takes to get ahead. Money markets matter. If money is evil, then that building is hell. The show goes on! The folks are never watching. So, so. Welcome to Prof G Markets. I'm Ed Elson. It is June 24th. Let's check in on yesterday's market vitals. The major indices all rose around 0.9 % as the markets eyed a path towards de-escalation in the Middle East. Meanwhile, crude oil futures fell more than 7%.

2:58More on that coming up. The yield on 10-year treasuries dropped after a Federal Reserve governor said she'd favor a rate cut in July. Energy stocks climbed on news that New York will build the first new nuclear plant in more than 15 years. And finally, shares of hims and hers shed a massive 35 % after Nova Nordisk ended its partnership with the company. Okay, what else is happening? The US attacked Iran over the weekend, striking three of the nation's key nuclear sites. All three sustained severe damage, according to the Pentagon. Soon after the attack, President Trump said, now is the time for peace.

3:36However, Iran quickly vowed to hit back at American interests, saying there would be, quote, no return to diplomacy until it had retaliated. Less than 24 hours later, Iran launched strikes on a US military base in Qatar, and Iran's foreign minister added that the attacks would have, quote, everlasting consequences. Meanwhile, Israel's leadership told its citizens to be prepared for a long campaign. And this just in, Monday evening after markets closed, Trump announced that Israel and Iran agreed to a tentative ceasefire set to go into effect at midnight Washington time. However, there is still a lot to be learned about how the markets moved prior to the ceasefire.

4:16So let's get back to the episode and we'll see if this ceasefire holds. So a lot of heavy stuff in there. The question we have to ask is how did the markets react? Because as we discussed last week, the markets are a great prediction machine. And if we want to know what happens next, well, the best place to look would probably be the markets. So how did markets react? Well, surprisingly, they didn't react that much at all. Gold closed up 0.3 % to$3 ,377. The S &P 500 closed up 1%. Even defense stocks were muted. Lockheed Martin closed down 0.2%. Northrop Grumman and Raytheon each closed up around 1%.

5:00Most surprisingly, though, was oil, which fell more than 7 % on Monday. And that is very surprising because in a situation like this, where there are actual debates happening over whether or not the US has initiated a war, some people say this is a war, others say, no, this is just a targeted attack. Either way, you would expect the markets to have the opposite reaction. You would expect a decline in the stock market, a huge jump in gold, which is the safe haven asset. And given the fact that this is Iran, which accounts for 4 % of the global oil supply, you'd also expect a huge jump in oil prices.

5:37But we got none of that. None of that happened. In fact, the opposite happened. And the question is why? Our producer Claire spoke with Rebecca Babin. She is the senior energy trader at CIBC Private Wealth. Let's hear what she said. So I think over the weekend, we had this uncertainty about how Iran would respond, right, after the U.S. kind of formally engaged in the conflict. And when we talked last, right, we were talking a lot about the Strait of Hormuz, and that was very much still in play as what people saw as a potential option for them to target. And that has a direct impact on energy prices and crude flows.

6:15So the fact that what we saw today was Iran respond to attacking kind of a military base and not energy infrastructure kind of has taken that tail with getting really fat and big as an event and kind of reduced that probability. So we said, okay, we're really nervous. We think there's a 35 % chance that 20 % of the oil flows that we consume on a daily basis may be impacted if this happens. And now we're saying, okay, we think that's a much smaller probability today. But it looks like for now, Iran does not want to go after energy infrastructure. That doesn't make this conflict any more easier, more palatable from a social angle.

7:00But from an energy impact, the market is saying, I need to take down that geopolitical risk premium that I priced in over the weekend and over the kind of weeks as this has kind of been building. So what would you say are the odds of Iran actually going that far and targeting energy facilities? That's a really good question. I think the odds are below 15 % that they go there. But this conflict has been anything but predictable. So the reason we're not much lower than where we are now, because if you look at a chart, we're actually still up 7 % or 8 % from where we were before Israel initially attacked Iran, right?

7:45So we've taken about, I'm going to just round it here, half the premium out from where we were before this conflict kind of escalated from. So it's not a non-zero, but it's significantly less. And I think the way crude is trying to price this is who benefits from them going after energy infrastructure. And that's the key. It doesn't really hurt us as much as it hurts their main customer, China. It doesn't hurt the U.S. as much as it potentially hurts its Middle Eastern neighbors, right? You close the Strait of Hormuz, you crush China, who's the biggest importer of crude oil in the world, and the main buyer of Iranian barrels.

8:28So that then, and they've been very neutral about how they've responded to this whole conflict. And you don't want to, you know, necessarily hurt your ally as much as you hurt your enemy. And so I think that's the calculus that the market is doing right now is, do they really benefit enough by taking that dramatic action? And those probabilities are coming down. It doesn't mean it's zero. I want to be very clear. This is not a zero probability. This is a reduction. So look, I think what we're learning with this Iran situation is the following. Many of us are very frightened by what is happening.

9:04And I think that is completely fair. But the investment community is also being pretty unequivocal in its message. And that is that World War III, the thing that everyone keeps talking about, is not on the table right now. That's the message from the markets. And I think that's important to think about, especially over the next few weeks, where we're going to be seeing a lot of headlines that look, quite frankly, very scary. I mean, your TV, your social media, your group chats, they're all going to be popping off with messages and memes and conversations about how World War III is just around the corner.

9:39And I think it's very difficult to not get wrapped up in that and to not let it affect you on a day-to-day basis. But on this issue in particular, I do think it's very important to prioritize not what social media is telling you, not what Tucker Carlson's telling you, or your second cousin who's the new self-proclaimed expert on the Middle East, I think you should ignore all of that and focus on what the market is telling you. And right now, the market is not very worried about this. And I'm not saying that that means that you shouldn't be worried, but I do think that that is something that you should just keep in mind.

10:19Tesla officially launched its robo-taxi service on Sunday. The launch was on schedule, per Elon's most recent comments on X. But it also comes more than a decade since Elon talked about the Tesla Robotaxi for the very first time. Shares rose roughly 9 % on the news. So it finally happened. The Robotaxi is, as of this weekend, officially a reality. But as with all Tesla events, there is an important question here. And that is, how real is this reality? Was this a legit launch? Or was it, as Scott predicted a couple weeks ago on this podcast, a fake launch or some sort of marketing stunt? We're going to get to this event, and it's going to be a bunch of jazz hands with bullshit like the Reboven or robots or, I don't know, flamethrowers.

11:09He's going to pull out anything he can out of his ass to say, hey, look over here and ignore the fact we are still way off from autonomous driving. And the answer is something in between. I don't think jazz hands would be a fair assessment of what happened over the weekend. You know, the robotaxi was operating. They had 35 Model Ys on the ground driving around Austin. Also, the passengers did pay. They paid$4.20 per ride, but still they paid. So this was a launch, and it was a commercial launch. It wasn't just a stunt. But there were a significant number of caveats that Tesla is going to have to address before they expand this.

11:52For one, and this is the most important in my view, every vehicle had a human Tesla employee in the passenger seat, and the job of that employee was to act as a safety monitor. So yeah, they were autonomous, but was it completely autonomous? No, not really. There was still someone in the car. Also, the operating area was very small. It avoided highways and airports. The geofencing was very much confined. They also said it cannot operate in the rain, so the weather conditions have to be perfect. And then the final detail is that the only customers who were able to use it were a handful of pro-Tesla influencers who were invited to try it out.

12:36And they all sat in the car and they live-streamed the experience. So in sum, yes, a launch, a successful launch, but still a ton of shortcomings. If I had to summarize, this was about the bare minimum they needed to demonstrate that the RoboTaxi exists and that it is operational. So why then did the stock jump 9 % after that news? I mean, that is a pretty big jump. That's roughly equivalent to the market cap of Starbucks. So was it actually impressive enough to warrant that increase? Well, let's see what Paul Miller, Vice President and Principal Analyst at Forrester Research, had to say on this.

13:15Yes, I think broadly the stock market is saying few. Tesla has been promising this for a long time. They've missed a lot of those promised launch dates for various things. And here, Elon Musk said, there will be robotaxis operating on the streets of Austin in the summer. and if you live in the northern hemisphere, as we both do, June is in the summer. So they have met their target. Some people might have hoped for more taxis. Some people might have hoped for them covering a bigger area. Some people might have hoped there wouldn't be a safety driver. But the promise was robo-taxis in Austin in the summer and they've met that promise.

14:00So the stock Mark has gone, job done. So look, we have to give credit where credit's due. Tesla has a robotaxi and it appears to work. And I think if you're a Tesla investor, that is big news. As I've said before, the biggest question mark for Tesla isn't Elon and his drug habits or his relationship with Trump. It's the robotaxi. That is what is driving the valuation. And so we should be honest, this was a great signal. But at the same time, you also have to be realistic about this business. And my sense is that many investors on Wall Street continue to be overly optimistic, overly idealistic about the prospects and the timeline of this business.

14:41ARK, for example, they believe that the RoboTaxi will generate over$600 billion by 2029, and that it'll also make up 60 % of Tesla's overall business. That just seems a bit too much to me. Dan Ives, who we've had on the podcast, he thinks that Tesla's market cap will double over the next few years, exclusively because of the robotaxi. Again, a bit much. I mean, we're 10 years in, and what we saw this weekend was a handful of influencers who paid$4 to ride in a car with a Tesla employee. And to me, that's not that impressive, especially when you compare it to Waymo, which is doing a quarter of a million paid rides every single week.

15:21So the path to success here, I think, is still quite difficult. There's still a lot that could go wrong, whether it's the technology or the regulation or even the competition in Waymo. But before we conclude, let's check in with Scott and see what he thinks of this Tesla launch.

15:42How's it going, Scott? It's going really well, Ed. Actually, is it going well? I didn't sleep that well last night. I'm a little tired, I'm a little moody, a little bitchy. My son's bummed me out. But other than that, everything's fine. Not going too well, it sounds like. Nothing that an edible in about three hours of Netflix can't fix. How are you doing? Yeah, that's exactly right. I'm doing quite well. I wanted to get your take on this Tesla launch, which you said, well, you predicted it was going to be jazz hands or that you thought it was going to be in some way sort of not really a real launch.

16:12But it was a real launch, kind of. They had 35 Model Ys driving around Austin. Your reactions? Well, just from a consumer experience standpoint, do you really want to get in a self-driving car when there's a stranger in the passenger seat the most appealing thing to me about self-driving is that i don't have to make small talk yeah or or look at some guy's air freshener or or yell at someone because i think he's not following ways i just and then feel bad about it i just don't i don't see why you'd want to get in a self-driving car with someone in the passenger receipt but anyways look they they have they have a real possible advantage here and it's the following that waymo is based on very expensive but very sophisticated lidar technology that is supposedly superior technology but doesn't come cheap yeah my understanding is these cars fully outfitted from waymo can run up to a quarter of a million dollars and tesla granted tesla is like at this point, you know, American intelligence, I don't know what to believe or not to believe.

17:20It's a little political humor there, Ed. They say they'll be able to produce cars for$36 ,000 with cheaper sensors and technology that is sort of adequate. And if they can do that, that's an enormous advantage. But what I would argue, if I were to bifurcate his universe right now, he is killing it in the first mover category you know first mover in evs first mover in low orbit satellites and launch capability spacex but his fast follower i'm pissed off i want to be in this business self-driving or automate autonomous driving or i want to be an ai he doesn't seem to be doing that well so i don't i'm somewhat bearish on the self-driving i think it's it's more than i thought it was going to be.

18:08They actually did launch. But it strikes me that this all comes down to whether the safety standards on this meet kind of a minimum viable product. Yeah. Well, I guess my question to you would be, at what point does it qualify as a minimum viable product? I mean, at what point do you think it's going to be fair to say, yes, They have a robotaxi. It works. They have a market. And the valuation should reflect that. When a credible third party with arms distance data says that this product is within striking range of acceptable safety standards. Okay. If they can put out a product. I mean, I used to drive a Renault Lefar.

18:54It was a lawnmower with doors. If I got hit by a bike, there was a good chance I would get killed. There was absolutely no airbags. There was nothing between me and death in this lawnmower with doors. But because it had, at that point, enough safety that young 16-year-olds would buy this car, Renault could sell these cars. If this gets to a point where it, in fact, has consumer acceptance at a much lower price point, then he's got a competitive product. And then the next stage is kind of the stage two of this war is the price war between these two companies as they roll this thing out. So I think this is a tough one because this is an auto company trading at whatever it is, eight or nine hundred billion dollars.

19:42It should be worth 50 billion based on the jazz hands of autonomous driving and robots. Robots is even even Kathy Wood is going to have trouble keeping a straight face around this whole robot bullshit. So it's all about autonomous. I think consumers are more willing to get in dangerous vehicles than people think. I mean, look at, nobody knows, there could be another 10 Boeing aircraft disasters and people would still get in these things if they could get to Dallas for 76 bucks instead of 77. So people talk a big game about safety, but as long as this thing meets a certain level of standards, and if it is in fact dramatically less expensive to punch these things out, then the Waymo LiDAR technology, he will have a competitive product.

20:28Okay, final question for me. Do you hit the squat rack before or after you record the podcast? Well, if you'd seen my buttocks recently, you would need to ask that, Ed. No, this is all for show. I find if I just buy all this equipment, I get much bigger. Yeah, no, I've been, Ed, I'm telling you, Ed, It's not easy to look 59 and 7, 8 naked when you're 60. It's not easy. You're looking younger every day. You know it, my brother. Well, enjoy your night, Scott. Thanks, guys. Thank you. After the break, another grift from Trump Media. Stay with us.

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23:23We're back with Prof. G Markets. Trump Media and Technology Group announced a share buyback program yesterday. The company, which operates Truth Social, said it will buy back up to$400 million worth of its stock. They said it will improve the company's financial flexibility. shares rose 0.3 % on the day. Okay, Grift 101. This is another case of the president grifting his supporters to enrich himself. And let's just break down what is actually happening here. So, the first thing you need to understand is why companies do buybacks. I mean, what is a buyback? This is where you compensate your shareholders by buying your own shares to decrease the supply of the stock and therefore increase the stock price.

24:09And as we've discussed before, this is something that is generally done by mature, profitable companies. It's essentially the same as a dividend in the sense that you're taking the profits of your company and instead of reinvesting them into the business, you're just distributing them to the shareholders either in the form of dividends, which is a pure cash payment, or in the form of buybacks. So that's why companies do buybacks. And again, it only makes sense if you're a very profitable company, because if you're not profitable, then if you find some cash, you should be using that cash to try to get profitable, not to reward your shareholders.

24:47So that is why it is very strange that Trump Media Group, which posted more than$400 million in losses last year, is now announcing a buyback program. And it is even stranger when you realize that just last month, Trump Media Group raised$1.5 billion in an equity sale to supposedly transform into a crypto company. So the question then is, why would you raise money via an equity sale and then use the money you just raised to then reverse course and buy back$400 million worth of the equity that you just sold? What is the point in that? And in addition, why aren't you using that money to, I don't know, improve your business that is losing$400 million a year?

25:34And the answer, of course, is grift. This is the only explanation that justifies any of this, that justifies Trump siphoning off this money to enrich himself. Remember, Trump owns 60 % of the company. And this is actually almost exactly the prediction I made a year ago when Trump media went public via SPAC. If you remember, my view was that Trump needed to get his hands on nearly$200 million because of his civil fraud case with the state of New York. And the easiest way to do that would be to take his company public and then use the proceeds of the SPAC to enrich himself. The only difference is that I predicted that this would happen not via a buyback program, but via a dividend program.

26:16When they created the SPAC, they sold$300 million worth of shares to investors. and that money is sitting in the company right now in cash. So I think Trump, I mean, he's clearly aware of this. I think the question he's asking himself right now is, how can I get that cash out of the company? And the most logical answer to me, I think Trump media group's going to announce a dividend. They're going to give the money to shareholders. Trump takes 60%. It'll all be money that was in essence put up by his supporters who bought the stock. And he'll use that money to pay after the lawsuit. So it would be one of the greatest grifts ever.