Coyote Blog

I have made no secret of my opposition to Trump's tariffs.  They are absolutely terrible economic policy, though that is a legislative and political issue and not one to be addressed by courts.  What was an issue for courts was whether the President actually had the authority to unilaterally issue such sweeping tariffs.  I and many others questioned that authority from day one:

The power to set tariff's is enshrined in the Constitution (that document Republicans used to care about) as a power of Congress. Weak-kneed and lazy Congresses have delegated some of this power to President's, but only very narrowly. The picture is complicated and illegal actions by the President can be hard to review in court. But looking at the 4-6 major delegations to the President of tariff authority, it is difficult to see that any of them apply simultaneously to every country on Earth and every single product manufactured anywhere. Certainly there is no precedent for them being enacted by the President on anything but a far far narrower basis (eg steel from China).

A three-judge panel from the US Court of International Trade (which I will confess I never heard of but apparently has jurisdiction over such issues) made up of two R-appointed judges and one D-appointed judge unanimously overturned the tariffs and issued a permanent injunction against them.

The Constitution assigns Congress the exclusive powers to "lay and collect Taxes, Duties, Imposts and Excises," and to "regulate Commerce with foreign Nations." U.S. Const. art. I, § 8, cls. 1, 3. The question in the two cases before the court is whether the International Emergency Economic Powers Act of 1977 ("IEEPA") delegates these powers to the President in the form of authority to impose unlimited tariffs on goods from nearly every country he court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.

Good.  I believe that some of the various injunctions against Trump actions are weak and will likely get overturned -- they seem to be more legislative actions than legal ones -- but this one in my mind is rock solid.  I thought Biden's unilaterally forgiving a trillion dollars in student loans was pretty lawless but if anything Trump's "liberation day" tariffs may have been even less legally justified.

Many Republicans have gone all-in on publicly eschewing everything they previously believed in to support Trump on these tariffs, and many have got to be breathing a silent sigh of relief that the court did their work for them in shutting this down.  Though kudos to Rand Paul who is the only major Republican that stuck to his principals and attempted legislative overrides.

Speaking of Republican reactions, I have been particularly irritated at the reality defiance of those who claim that the recent rise in the stock market and consumer confidence are a vote of confidence in Trump.  Here is an example from the previously-willing-to-challenge-Trump folks at Powerline.

For the last four months, essentially every “news” outlet has devoted pretty much every news story to trying to undermine the Trump administration. Among other things, they have tried to persuade us that the economic sky is falling because of President Trump’s policies–whatever those policies may be, and whether or not they have even been implemented. This has made consumers a little nervous, but not nervous enough.

Thus, the May consumer confidence numbers came in today, and they are awesome....

That is why the stock markets are up sharply today.

This is absurd.  The stock market and consumer confidence both crashed - hard - with the imposition of Trump's tariff's.  They have risen each time Trump has backed off, delayed, or scaled back these tariffs.  The market will almost certainly rise again today on the news of the court case.  I guess that is a political strategy of sorts -- announce economy-stomping actions early, watch the market and public confidence tumble, and then take credit for the improvement when you roll back the terrible actions.  This is the equivalent to banging your head on the wall because it feels good when you stop.

I lost a fair bit of money shorting Tesla ($TSLA) stock until I realized that its stock price was absolutely untethered to reality.  And we see this today as the stock is currently up 4% following yesterday's miserable earning report.  The "growth" stock with a P/E ratio of 111 reported its 9th straight quarter of flat revenues and 12th straight quarter of essentially flat to down profits (source CNBC).

There is a nice Cramer cameo in the movie Ironman where he screams "that's a weapons company that doesn't make weapons."  Tesla is the growth company that doesn't grow.  So of course, without growth, the Tesla stock fans are driving up that triple digit PE even higher

The only explanation seems to be statements from Elon at the earnings unboxing session yesterday:

Musk has been telling investors in recent quarters to focus less on the core business as it exists today and more on a future of autonomy and robotics.

In October, Tesla drummed up excitement among fans by showing off an early prototype version of a Cybercab at its “We, Robot” event. However, Tesla still does not produce robotaxis. Instead, the company sells a premium version of its partially automated driving system called FSD, short for Full Self-Driving (Supervised)....

While Tesla did not give specific guidance for this year, the company said, “we expect the vehicle business to return to growth in 2025.” It also reiterated plans to “unlock an unsupervised FSD option” eventually and said it expects to “begin launching” its driverless ride-hailing business “later this year in parts of the U.S.”

Wow, every CEO should try this after bad results.  "Focus less on the business as it is today and more on a vague, unspecified vision of how it might be better in the future."  This is the same sort of Musk handwaving we have seen for years.  The full-self-driving promise dates well back pre-COVID.   Honestly, having seen the state of FSD on Teslas, I fear for the residents of Austin where Musk claims there will be robotaxis in action later this year**.   I found this to be the most interesting piece of hopium:

The company’s stock price has rallied sharply since Trump’s victory in November as investors bet that Musk’s influence would lead to both favorable policies and less oversight of his companies.

Seriously?  In his first executive orders Trump has killed most of the mandates and subsidies on which the company has relied.

** Footnote:  You know where there are lots of robotaxis in action and have been for years?  Phoenix.  Waymo has become a fixture of the Phoenix and Scottsdale streets.   Everyone here loves them.  Yesterday I tried to get a picture but I was too late, but near my home there were three waymo's side by side going up the boulevard.  Go to any fancy club that attracts a lot of young people, like the bar on the roof of the new Global Ambassador Hotel, and you will see one Waymo after another dropping (mostly) young women off.   Women love these things because they feel safer without the driver.  I love them because they are about the only thing I see every day that looks like what I was promised about the future when I was a kid.   Musk has a long way to go to prove his camera-only sensing approach can match the LIDAR-rich Waymo strategy.

Postscript:  I know this will seem crazy, but it is possible to have mixed feelings about an individual:  people are not all Mother Theresa or all Hitler.  Musk's management of Tesla really irritates me and some things, like his fake Saudi tender offer or the SolarCity buyout, strike me as straight-up fraudulent (how many solar roofs were sold last quarter, Tesla?)  But I love everything that SpaceX is doing and I think Musk has done great work shining the light on certain issues from government waste to grooming gang coverup in the UK.