Morning Brew Daily
Wall Street Exec. Tapped for Treasury Secretary & European EV Market In Trouble?
Mon, 25 Nov 2024
Episode 460: Neal and Toby explain why President-Elect Donald Trump chose former Hedge Fund Manager Scott Bessent for Treasury Secretary and what it means for the federal government's finance department. Next up, why was Indian Billionaire Gautam Adani was charged in a US bribery case, and the battery startup that lost $15 billion that could hinder EV progression in Europe. Then the winners of the weekend are box office hits 'Wicked' and 'Gladiator II', and then the game of Chess. Finally a look ahead at this upcoming week. Download the Yahoo! Finance App (on the Play and App store) for real-time alerts on news and insights tailored to your portfolio and stock watchlists. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Get your Morning Brew Book of Crosswords HERE: shop.morningbrew.com Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Turkey Pardon 02:15 - Scott Bessent Nominated for Treasury Secretary 08:15 - Gautam Adani vs DOJ 12:45 - EV Battery Maker Bankruptcy 17:45 - ‘Glicked’ at the Box Office 21:20 - New Look Chess 24:45 - Week Ahead Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Who was nominated for Treasury Secretary and why is it significant?
Yeah, Hindenburg, the short-selling firm, wrote this big report last year saying how they think that it's calling into question, basically, Adani's group, saying that his company was probably overvalued at that time. And so... Hindenburg's coming out of this looking pretty good because now you have this big indictment with more details coming out.
One thing, just to zoom out one more time, this probably isn't going to sink a donning group, but what it might do is kind of stain India as a destination for global capital, although a lot of people are saying there's a lot of tailwinds actually pushing money into India, so it probably won't have
any huge long-term catastrophic effects, but in the short term, it will kind of maybe dull the appeal of India as a destination for global investment. What is going on with the battery maker Northvolt? One of the best-funded startups in the world went bust over the past week when the Swedish company filed for bankruptcy after running out of cash to fund operations.
Northvolt was supposed to be Europe's best chance to compete with Chinese battery makers, raising $15 billion from investors to try and establish a foothold in the industry. But a turbulent year has all but sunk that dream.
Everything from falling demand for electric vehicles to difficulty scaling pushed the loss-making company into Chapter 11 bankruptcy instead of into the big leagues of battery manufacturing. The financials just weren't making sense. Northvolt reported losses of roughly $1.2 billion last year, with revenue of just $128 million.
On top of the math not mathing, Northvolt rushed expansion efforts, plowing forward with plans to build new factories in Canada and Germany, to go along with its main gigafactory in Sweden. But while it eyed new business, it couldn't keep up with existing demand, falling behind on battery deliveries and losing a $2 billion contract with BMW in the process. So yes, the idea sounded good on paper.
create a European stronghold for lithium-ion battery production, but it didn't quite work out that way.
It didn't, but they had every, you know, source of support that they possibly could have. They raised $15 billion in debt equity and grants. Every Western government was throwing money at them because to have a Western battery maker would be huge because all this industry... happens in China.
But maybe we're realizing why all the industry does not happen in the Western world, because it's really hard. You need to have a lot of know-how, a lot of capital to invest in making these plants. And it didn't seem like Northvolt really had the expertise. It was founded by two former Tesla executives. So you'd think that maybe they would have some sort of know-how
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Chapter 4: What are the upcoming trends in the Week Ahead segment?
And you mentioned there was a very intense competition that resembled almost, you know, Trump's old TV show, The Apprentice, for this position with a number of names throwing their hat in the ring, including Howard Lutnick, the CEO of Cantor Fitzgerald, who was the co-chair of the transition committee. He got tapped as the Commerce Secretary, which is maybe the B team of the Treasury Secretary.
But Elon Musk called Besant the business as usual choice. And he didn't mean that in a positive way. However, this is a business as usual choice. And that is what Wall Street wanted. They wanted someone who would not ruffle markets.
And with something like tariffs, which absolutely can ruffle markets, they were celebrating, as you mentioned, Jamie Dimon, the JP Morgan CEO, a bunch of other heads of global finance, thought this was a great choice for being business as usual and not ruffling the stock market as much as a very hawkish on tariffs choice would be.
One thing that has ruffled some feathers, though, is that Besant made some waves this fall when he did float this idea of replacing Jerome Powell with what he called a, quote, shadow chair, which is someone that Trump could like tab someone early for the position of leading the Federal Reserve, which could technically undermine Powell's position before his term ends in 2026.
That is a little bit... You keep saying ruffling feathers. That does ruffle some feathers because obviously the Fed is supposed to be insulated from this political conversation, this political maneuvering. So him saying that maybe we could... find some way around Jerome Powell to steer markets in the direction that Trump wants it to go is a little bit more of a, I don't know, extremist position.
But for the time being, I do think you're right. What the market wants is someone who is a little bit more level-headed in this role. And I think Besant, with his ties to Wall Street, is someone that will placate the markets and these big money managers for the next few months.
And you might be wondering, listening to this, what even does like a treasury secretary do? They are the top economic policy maker in the entire administration. A couple ways they've been called is a couple of nicknames is America's CFO, the quarterback of the economy, if you want to Get a football metaphor. They have oversight of the U.S. government debt market.
They're considered the chief bond salesman tax collection. So that could be huge come 2025 when there are huge tax negotiations and potentially new tax cuts coming in play and economic sanctions. The role is held currently by Janet Yellen, who has made headlines for parading around the world eating weird foods. And during the first Trump administration, it was Steve Mnuchin, a former president,
banker who was one of the few administrative officials during that administration to stay all four years. And he was the one who encouraged Trump to pick Jerome Powell as Fed chair. So we'll see how it plays out. Last week, the U.S. Department of Justice filed fraud charges against Gautam Adani, an Indian infrastructure tycoon who is one of the richest people in the world.
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