Why the Trump Administration is Now Taking Equity Stakes in American Companies

SPEAKER_2 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:22)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, isn't it you who said for a long time that whenever the government does some of these deals, like with chips or maybe the early backing of Tesla, et cetera, aren't you always like, why didn't the government get equity stakes in these companies? Why are we just getting back sort of loans that are more or less the same amount of money we put in?

Tracy Alloway (0:41)

Yeah, I think I have said that. I mean, it seems like this weird sort of half ground where you are investing in a company without asking anything in return.

Joe Weisenthal (0:51)

Yeah, to be fair, they do have milestones and provisions and so forth, but yes, it does feel like some of these funding structures have been, I would say at least incomplete, to say the least, and the effectiveness has been inconsistent. All that being said, the Trump Administration, I'm an apparently big fan of yours, listening to you over the years on the podcast, with some recent deals, is sort of getting into the equity business in some way.

Tracy Alloway (1:16)

Yeah, so I've seen people describing this as more activist industrial policy, or state interventionist industrial policy. One thing I will say, for a president who seems to like calling other people communists quite a lot, he sure does enjoy owning the means of production.

Joe Weisenthal (1:33)

Yeah, there's certainly some scrambling, right?

Tracy Alloway (1:36)

Well, this is the other thing, the ideological scrambling has been interesting to watch, because you had people like Bernie Sanders, who were saying, well, the Intel deal is a great return for the American people. Then you had, I can't remember the name, but you had a Republican going like, this is the end of capitalism. So it's kind of funny to watch.

Joe Weisenthal (1:54)

It's super interesting, super confusing time. I'm not personally as bothered by the lack of quote taxpayer return on this stuff, mostly because I view the goal or failure is, is there going to be a public benefit? Are we going to have security because we could produce chips? Are we going to have security because we finance domestically mining of rare earth minerals and so forth? But these are like the big questions, and I think we should learn more about this sort of new approach and what's a continuation of what we saw under Biden, what's different, etc., whether any of this will work. Of course, by the way, we're talking about an Intel. So Intel specifically, the government has taken some sort of warrant or something. I'm not totally sure on-

Tracy Alloway (2:33)

They took shares, I think, almost a 10% stick.

Joe Weisenthal (2:35)

Yeah. And also MP, which is of course the great hope for whether the US could also mine or earth metals such as China. So pretty big deals and I think we should talk about them.

Tracy Alloway (2:46)

Can I just say, if you look at the HDS function on Bloomberg, you can see that the United States government is now listed as a top shareholder. And if you click into it, it says US Department of Commerce. I don't know why. I just find that so-

Joe Weisenthal (2:59)

That's amazing. I had not looked at that.

Tracy Alloway (3:01)

Yeah, it's kind of funny. And I don't know, I just have this vision of Howard Lutnick checking on his portfolio of Intel every morning.

Joe Weisenthal (3:08)

We're going to get an ETF. Actually, unironically, our old friend, Luke Kawa and Sherwood, he had a really good post yesterday pointing out the fact that, and it's very important, the shares of Intel and MP and one other one have done very well. So a lot of people are sort of making this trade of, why would you not be in the same trade as the US government and if the government does long Intel in some respects and the MP and given they're going to want to support their investment and see a return, why would you as a shareholder not want to sort of get ahead of that train or be on the same side?

Tracy Alloway (3:39)

Oh, wow. I'm looking at the Intel chart right now. It's gone up a lot.

Joe Weisenthal (3:42)

It's gone up a lot. So this is a meaty subject that we have to talk about further. So I'm very excited to say we have the perfect guest, someone who's been talking about this, someone who even recently contributed something to the Odd Lots newsletter specifically about the MP deal. We are going to be speaking with Peter Harrell. He's a non-resident fellow at the Carnegie Endowment for International Peace. He was also serving in the Biden White House, National Security Council, Economic Council, and he's going to talk us through these deals. So Peter, thank you so much for coming on Odd Lots.