Banananomics: The Geopolitics Of Elon Musk

While Brazil's attorney general, Jorge Messias, wrote Saturday night that Brazil needed to regulate social media platforms, Elon Musk could not resist trolling the country on his platform.

Inputs that matter: "We cannot live in a society in which billionaires domiciled abroad have control of social networks and put themselves in a position to violate the rule of law, failing to comply with court orders and threatening our authorities. Social peace is non-negotiable," Messias posted on X.

• NPR details: "On Saturday, Musk — a self-declared free speech absolutist — wrote on X that the platform would lift all restrictions on blocked accounts and predicted that the move was likely to dry up revenue in Brazil and force the company to shutter its local office."

• "He later instructed users in Brazil to download a VPN to retain access if X was shut down."

• Meanwhile, internet censorship hotspots are experiencing workarounds with Elon Musk's SpaceX Starlink satellite internet service.

• These portable boxes provide unrestricted access to the Internet through SpaceX satellites. They are often sold by non-licensed middlemen in restricted areas such as Russia.

The opportunity: "On battlefields from Ukraine to Sudan, Starlink provides immediate and largely secure access to the Internet," writes The Wall Street Journal.

• "Besides solving the age-old problem of effective communications between troops and their commanders, Starlink provides a way to control drones and other advanced technologies that have become critical to modern warfare."

• "There are almost 5,700 operational Starlink satellites now orbiting Earth, with 2.7 million customers and a new production facility in Texas."

Zoom in: Musk warned Brazilian Supreme Court Justice Alexandre de Moraes in a post on X late Monday that he will do a "full data dump" regarding the role the social media platform played in electing Brazilian President Luiz Inácio Lula da Silva (commonly referred to as Lula) in 2022.

• According to Quartz, Musk said he would only do that once all X employees were in a "safe place or otherwise not in a position of responsibility."

• Musk had earlier referred to de Moraes as "the dictator of Brazil," saying he "has Lula on a leash," prompting further questioning from a member of Brazil's Chamber of Deputies.

Between the lines: The United States, Russia, and over 100 other states are parties to the Outer Space Treaty (OST), which remains in force and can be understood as a de facto constitution for space operations.

• However, it only applies to countries and not private companies.

• As a result, the United States may be legally liable for the private activities of Starlink and SpaceX.

Follow the money: X's Global Government Affairs account shared Saturday that the platform had been "forced by court decisions to block certain popular accounts in Brazil" and would be threatened with daily fines if it did not comply.

• Elon Musk announced that SpaceX will provide free Starlink internet to schools in Brazil despite the Brazilian government's decision to suspend all contracts with the company.

Oil prices are rising, but volatility is not.

Inputs that matter: Bob McNally, former White House advisor, believes $100 oil is "entirely real."

• The chief investment officer of Andersen Capital Management, Peter Andersen, warns, "And as oil prices rise, certainly, you know, there is going to be an interpretation of that as inflation," possibly delaying the Fed rate decrease for June.

• West Texas Intermediate, the benchmark U.S. crude, closed in on $87 a barrel on Friday (+21.3% ytd). 

• Brent, the global benchmark, settled above $91 a barrel (+18.3% ytd). 

The opportunity: Moody's chief economist Mark Zandi told CNN, "Nothing does more damage to the economy more quickly than higher oil prices."

• According to Moody's, gas prices are a crucial variable in the November election.

• MarketWatch reports, "Oil appears to play a major role in this week's rise of the benchmark 10-year Treasury yield."

• "Much of that move is due to rising oil prices, a factor to which the breakevens are particularly responsive," noted John Velis, an Americas macro strategist for BNY Mellon.

Zoom in: Everything from sugar and cocoa to inflation and oil keeps increasing.

• The Street believes the U.S. will see $5 per gallon of gasoline by summer.

• The Motley Fool warns that we are facing the most significant drop in M2, the amount of spending money in circulation, since the Great Depression.

• "We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent," explains Federal Reserve Bank Chair Jerome Powell.

Between the lines: There is less fuel available for export.

• Reuters reports, "Russia's government has ordered companies to reduce oil output in the second quarter" and recently implemented a six-month ban on gasoline and diesel exports.

• Reuters explains, "The price gains reflect supply risks from attacks on Russian oil infrastructure and global shipping, as well as ongoing output cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+)."

• MarketWatch declares, "Global benchmark crude oil futures headed higher on Tuesday, finding support as hopes for a cease-fire in Gaza faded after Israeli Prime Minister Benjamin Netanyahu reiterated a pledge to invade the city of Rafah."

Follow the money: With oil prices rising, market analyst John Kemp reports that traders have been buying oil at the fastest rate since 2020.

• Bank of America increased its 2024 Brent and WTI price outlook this month to $86 and $81 per barrel, respectively, and said both were likely to peak around $95 a barrel this summer.

• "Analysts at the bank say that if oil prices rise above $100, central banks will not be able to cut rates due to the flow-through effect of higher inflation."

While oil and almost everything else moves upward, natural gas has fallen below the cost of production.

Inputs that matter: Since February, higher natural gas stocks, combined with a mild winter, have kept the U.S. natural gas benchmark, Henry Hub, below $2.00 per MMBtu.

• The U.S. is the world's largest LNG exporter.

• U.S. exports provide European allies with energy as they end their dependence on Russian oil.

• CNBC reported that The Department of Energy announced a pause on natural gas in January to evaluate the impact of the U.S. LNG boom on the climate.

The opportunity: The White House released, "President Biden has been clear that climate change is the existential threat of our time – and we must act with the urgency it demands to protect the future for generations to come."

• The United Nations 2030 Agenda includes 17 goals around poverty, equality, and climate that most nations are scrambling to achieve.

• For example, Canada's carbon price increase officially took effect on April 1, 2024, and is expected to raise gas prices by 350% before 2030.

Zoom in: Full-time work fell by 6,000 in the U.S., while part-time work increased by 691,000, including a 5.2% increase in the number of people needing to take multiple jobs.

• The Motley Fool warns that we are facing the most significant drop in M2, the amount of spending money in circulation, since the Great Depression.

• Total debt is up by over $2.5 trillion since 2020.

Between the lines: Several media outlets continue to praise the creation of part-time, low-paying jobs as a stimulus to the economy.

• The official narrative is the economy looks good, stocks are up, and inflation is low.

• However, the reality is much different.

Follow the money: The Street believes the U.S. will see $5 per gallon of gasoline by summer.

• Raw food ingredients such as cocoa and sugar are rapidly rising.

• If fuel costs continue to increase with the rise of commodities, food prices will rise significantly before the fall.