Two Plus Two

I was browsing LinkedIn and came across the following set of headlines in the "LinkedIn News" feature.

It's an interesting disconnect. The point of the Trump Administration sending Elon Musk into aggressively (indiscriminately?) cut headcount and expenses in the Federal government is, supposedly, that overly high spending on wasteful, fraudulent and/or abusive line items is a drag on the broader economy. The Federal workforce is supposedly so bloated and inefficient that one can simply fire large numbers of people, and not really impact the functioning of the place in any way. Now, we know that last bit is somewhat off, since there have been at least two agencies where there's now a scramble to undo Mr. Musk's "management by random acts of chainsaw" approach.

But the disconnect between the headlines in red and those in blue is what stood out for me. The central promise of the Trump White House is that all of the things they are doing are going to lead to a greater demand for domestic labor, and accordingly, more and higher-paying jobs. So why aren't we starting to see that happen? It's understood that business and investors are, generally speaking, reactive to changes in government policy that they understand will be beneficial to them. Consider investor's recent moves concerning Mr. Musk's X, which may have managed to increase its valuation by a factor of 5 since the fall:

Investors betting on X are probably making a gamble on its leader, not its business — similar to how Trump’s financially struggling social media company, Trump Media & Technology Group (parent company of Truth Social), has a market value of more than $6 billion, even though its revenue for all of 2024 was just $3.6 million.

In other words, Mr. Musk is close to the President, and investors think that Mr. Musk is going to be able to parlay that into profitability for X that they will be able to share in, even though X's revenues are nowhere near the levels that they were at when Mr. Musk originally purchased Twitter. And investor confidence in Trump Media & Technology Group speaks for itself.

 So if investors are willing to put money in to X and Trump Media & Technology Group based simply on the fact that Donald Trump is President and Elon Musk a "Special Government Employee," why aren't investors expecting that the Trump Administration's actions will buoy and broader economy. I suspect it's because they aren't stupid. They understand the potential downstream benefits of investing in Elon Musk and Donald Trump as people. The companies are merely the vehicles for that.

President Trump's early moves in the White House aren't designed to drive aggregate demand in the economy. And the people who understand that, people for whom acting on faith has higher costs than they're willing to pay because they are judged directly on the financial performance of their investments, are behaving accordingly. President Trump and Elon Musk may promise viable returns; but they're not setting the United States up to follow in that.