Morning Brew Daily
Fed Workers Weigh Trump’s Buyout Offer & Tesla Sales Struggle in Europe
Thu, 06 Feb 2025
Episode 513: Neal and Toby chat about the deadline of Trump’s resignation offer to federal workers and whether the legality of the deadline will hold up or not. Then, banks are able to sell off $5.5B in debt backed by X, thanks to rejuvenated investor interests for the Musk social media company. Meanwhile, Tesla continues to struggle in European markets as sales drop double-digits in Germany, France, and the UK. Also, Neal shares his favorite numbers on US wealth, women talking more than men, and a very expensive violin. Lastly, a roundup of headlines from the day. 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. Check out https://wise.com/business for more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative, involves a high degree of risk, and has the potential for loss of the entire amount of an investment. Cryptocurrency holdings are not protected by the FDIC or SIPC. APY as of 1/16/25, offered by Public Investing, member FINRA/SIPC. Rate subject to change. *Terms and Conditions apply. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What is Trump's buyout offer to federal workers?
Then Tesla's sales across Europe took a nosedive as Elon Musk dives deeper into the region's politics. It's Thursday, February 6th. Let's ride.
Chapter 2: How did beavers solve a construction problem in the Czech Republic?
There's been so much talk about government efficiency here in the U.S., but over in the Czech Republic, they're absolutely chewing through red tape. And that's all thanks to some cost cutting beavers. Here's the story. So there's this nature park where local authorities have been trying to build a dam for seven years to restore water areas.
But the project has been frustratingly held up over getting the necessary building permits to start construction. Enter a family of eight beavers who in two days built a dam that humans have been trying to set up since 2018, and it was in the perfect spot. One environmental official said beavers always know best.
The places where they build dams are always chosen just right, better than we can design it on paper. They estimate that the beavers, who have now become famous, saved the government $1.2 million. That's Doge done right.
You know who has no time for bureaucratic delays? It is beavers. Fun fact about beavers, when they create dams, they also create special pools that are conducive to growing their favorite food, which is this leafy green shoots. So they aren't just building a dam, they are also building a farm at the same time. So look at them stimulating economic activity. But here is my galaxy brain, take Neil.
Those beavers actually just destroyed $1.2 million of GDP for the Czech Republic doing construction without a permit. So maybe it's time to rethink how we calculate GDP to include unpaid labor from animals like beavers. Now a word from our sponsor, Wise Business. Neil, between us two, who is the more responsible one?
Well, you once showed up to work without your computer, so I'm going to go with me.
Unfortunately, I have to agree with you, which is why I am such a fan of Wise Business. It is like the Neil of international payments. Always prepared, always reliable.
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Chapter 3: What are the legal challenges to Trump's federal worker buyout?
It handles multiple currencies, connects you to your accounting software, and has no hidden fees. Plus, it's devilishly handsome. Okay, I said you're responsible, not a supermodel. Just remember your computer, okay? Wise can always save you.
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Today marks a big test for President Trump and Elon Musk's plans to dramatically shrink the federal workforce. It's the deadline for more than 2 million federal workers to decide whether they will accept the deferred resignation offered to them. To recap how we got here, last week, most federal employees were sent an email with the subject line, a fork in the road.
It gave them the option to resign by today and still get paid for another eight months until the fall. It's one of the centerpieces of the Trump administration's push to cull the federal workforce. It remains to be seen how many people will actually take the offer. So far, the Trump administration said that at least 40,000 employees have taken the deal, about 2% of the federal workforce.
That's much lower than the goal of a 5% to 10% reduction set out by the administration. And one hang-up that could be keeping federal workers from leaving their jobs... It's unclear whether this move is legal. Three unions that represent more than 800,000 federal workers have filed the lawsuit seeking a restraining order to halt the deadline.
Or in more practical terms, the employees might be hesitating to resign because they're not sure whether they can trust the government to keep paying them and make good on this promise or what their job prospects might look like after resigning. So a whole lot of question marks, but a big day for the millions of people employed by the government.
Yeah, you have started to see people warning federal employees to not accept the offer because one possibility is the workers don't get paid the full term and then file lawsuits against the government saying, hey, wait a second, you were supposed to pay me this.
But then if the actual offer in the first place was unlawful, then there's no legal recourse against something that wasn't legal in the first place. So yeah, there's a couple of things that this offer potentially violates. One is the Anti-Deficiency Act. This is a law that prevents the government from promising money in excess of what Congress has allocated.
And remember, Congress has only funded the government through mid-March. We're going to have another one of those big budget meetings, not through the end of the fiscal year, not through the end of December where these payments would go. So they're saying we can't even... You can't promise money that hasn't been allocated yet. So that's one issue.
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Chapter 4: What is the financial status of Elon Musk's social media company X?
And then there's this other federal provision that says you're not allowed to pay federal workers on paid leave for over 10 days. And the idea is you don't want to pay federal employees for not working. It's actually a very Dogean law if you think about it. So those are the two kind of legal issues that go against this fork in the road offer.
Right. And that March 14th, the government would shut down, in which case federal agencies wouldn't be funded and employees would be furloughed. So that is a major question mark. I mean, employment lawyers, their phones must be ringing off the hook. And I think
From what we understand, the general consensus is that they're advising employees to not take the offer based on all of the big legal questions that you raise. The administration pushes back, saying that Trump signed an executive order giving agencies more leniency and to providing more administrative leave for federal workers in order for this to comply. So big questions here.
And the another one is that how many of these workers would have resigned anyway? I mean, if you look at the national attrition rate, natural attrition rate for the government workforce, it's six percent a year. So two percent is lower than that, obviously. And how many of these workers would have been a part of that six percent turnover that the federal government has anyway?
Right. A lot of people said mainly the people who are leaving already had other job offers waiting for them. Because remember, even though 20,000 workers sounds like a lot, that is well within that, you know, 6% attrition rate that you mentioned. That being said, the White House has said that the number of deferred resignations is rapidly growing.
They do expect a big surge in these last 24, 48 to 24 hours. We are right. I
It's like when you send a party invite, no one replies until the very end. So it is true that you might see a huge spike today.
Yeah, so the fork in the road email was sent last week, but now we are really at that juncture. Lost in Elon's infiltration of the federal government is the fact that he is still operating multiple very large businesses, one of which is trending in the right direction, the other not so much. First up, the social media platform X is suddenly looking a lot healthier than it did a year ago.
For a while, it looked like the exit path for the Wall Street banks that funded Elon's acquisition of Twitter was going to be a turbulent one. His controversial moderation strategies led to an advertiser exodus, which caused the platform's value and the loans Wall Street held to plummet in value. So Morgan Stanley, Bank of America, and others started shopping around to offload those loans.
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Chapter 5: Why are Tesla sales struggling in European markets?
But the combination of Musk's Washington Connects and the growing intertwining of X with XAI, his artificial intelligence company, has investors interested again and banks breathing a sigh of relief.
Yeah, this debt sale is a very interesting education in how leveraged buyouts work. So we know that Musk paid $44 billion to buy Twitter at the time. Of that $44 billion, banks provided $13 billion in financing. Once the acquisition went through, now they owned all of this debt in this new company, typically when banks finance an acquisition, they quickly offload that.
They don't want to hold that debt for long. They quickly offload it to other investors who might be interested in investing in the company that they just helped take private. So typically, banks will shed this within months like they already have buyers lined up. This, in this case, I mean, it's been over two years. That's because these loans were underwater.
This company fired 80% of its staff and, uh, advertisers had been pulling away. Its finances were in the dumps. Now that it's creeping back up, Musk wrote in a January email that, uh, we are barely breaking even, which I guess is a positive is seen as a positive. So, uh, there's certainly momentum around this company a little bit due to Musk's relationships with the president.
So that's why banks were able to get maybe face value for this loan to dump it to investors who were pretty eager to buy into this company.
Another thing too, it may The banks that did take the risk on Musk look even better here. So you look at the names, Morgan Stanley, Bank of America, Barclays. These are the banks that lent the funds to Musk to complete the acquisition. And they're looking kind of smart now because one, they've been collecting these hefty interest payments.
And then two, a lot of people would say, oh, those loans are super underwater. But they just sold for 97 or 98 cents on the dollar. So they did recoup a lot of their investment. And hopefully why they maybe took the risk in the first place is that Elon owns a lot of businesses. He has a lot of influence when he is looking to Wall Street to fund something else or for help on something else.
He'll remember those banks that did take the risk on him. Suddenly, even though maybe a year ago you would have said, ah, not a great decision to fund this acquisition, now they're looking better if Musk is willing to do business with them going forward as the people who were by his side during this X acquisition. The other business Elon runs, lest we forget, is Tesla.
And that is not going as well. Car sales data from the first month of the year is coming in from Europe, and it looks like Europeans did dry Tesla January. Sales are way down in France, Germany, and the UK, as Europe emerged as a major headache for the carmaker on the heels of its recent financial miss. Tesla's sales were flaky as a croissant in France, dropping 63% from a year earlier.
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Chapter 6: How is Elon Musk balancing government involvement and business interests?
and we're all wondering why this is there are a couple of factors that could be at play one is that tesla is gearing up an updated version of its model y which is coming in march so consumers might be uh waiting on that the others increased competition we know that china has made a lot of inroads in europe not in the united states but there are a lot of chinese evs that have undercut the market there
The other is certainly it's hard to measure, but Elon Musk has been certainly dabbling in European politics. He's vocally supported an ultra far right, ultra nationalist party in Germany. And we saw a huge plunge of Tesla cars in Germany. He's also been beefing with the UK prime minister, Keir Starmer. He's used the platform we just talked about, X, to be this megaphone for him to
have a very strong opinion and controversial opinion in European politics. It's unclear whether this is a consumer response to his meddling in their affairs.
And I do think you have to dig deeper here and see, are EV sales just falling across the continent? In some cases, that is the case. In France, EV sales fell 6%. But I mean, again, Tesla sales fell 63%. So it's falling at a much quicker rate. But then you look at the UK and you're like, oh, Tesla just fell 12%. But EV sales were actually 35% higher in January 2025 compared to the year earlier.
So yes, the entire pie is growing, but Tesla is getting to eat less and less of it. So it's definitely a combination of all those factors. But Europe is still an important market for Tesla. I mean, it's an affluent sector of the world. They do sell a lot of cars there. So you don't want to see these 50%, 60% drops from these European markets.
So to start the show, we talked about Elon Musk's involvement in government. And then our next story was about Elon Musk's businesses. Obviously, it raises huge questions of conflicts of interest. The White House press secretary was asked about these conflicts of interest yesterday and what could be done to prevent Elon Musk from enriching his companies and himself personally.
through his involvement and the government. She said, this is Caroline Leavitt, she said that Elon Musk himself will determine if there are conflicts of interest. So there are no outside checks on this. Elon Musk will reportedly recuse himself from any conflicts of interest should they arise as determined by him.
Yeah, people have pointed out that self-determination of conflict of interest in itself is a conflict of interest. So it's conflict of interest all the way down. You know what isn't a conflict of interest? That's Neil's numbers, which is coming up next. This message, it's a paid partnership with Apple Card.
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