Investing in America’s Newest Oligarch
Introduction
This topic may be a little sensitive due to its political nature, so I am going to attempt to be as honest, forthright, and objective as possible in this analysis as possible, and go out of my way to make sure I am not spun into any partisan webs or narratives from either side of the aisle.
Regular readers of mine know that I share in America's morbid fascination of our richest citizen, Elon Musk. Most recently, when covering a TSLA covered call fund, TSLY, I wrote about Musk becoming the "Efficiency Czar" — now one of two sharing the crown with Vivek Ramaswamy.
Our Newest Oligarch
To be clear, when I use the term "oligarch," I am using this working definition:
A citizen of a country who can use their wealth or power over industry to influence governmental authority or policy.
Oligarchy is a form of rule by a small group; modern-day Russia and many post-Soviet countries are accused of having entire government systems run by oligarchs.
In the US, we still have a significant barrier between our oligarchs and politics. That barrier is becoming slimmer now that world's-richest-man Elon Musk has done two things in quick succession:
Provided nearly 20% of campaign funds raised for Trump's 2024 campaign on his own
Was quickly offered a position of authority over governmental agencies and policy without being made to give up his position as CEO of his various enterprises
Appointment as a czar is far different from a cabinet position, which would require far more time and attention from Musk
This quid-pro-quo is nothing new to American politics. Other oligarchs have been said to exert power over politics such as the Koch brothers, the Kushners, and before his political career, Donald Trump himself.
This is nothing new to America. It's been this way since the beginning; consider that America was founded primarily by wealthy planters and businessmen, as the majority of the population was not literate in 1776.
America's wealthiest man from history, John D. Rockefeller, was accused of this practice too when he supported the Republican Party during the Civil War, as he was very open that, "God gave me money, I won't apologize for it."
What's different now is that up until recently, Musk has stayed out of politics. This time around, things are different. He has joined the ranks now of those mentioned above.
So What?
What about this gives Musk's businesses an advantage? A few things.
The most important narrative I see is that Musk's businesses are on the forefront of regulation and are reliant on governmental approval for their operations.
TSLA, EVs & autonomous vehicles
SpaceX, space flight contracts with NASA
SpaceX's subsidiary Starlink, telecoms and defense contracts
Boring Company, urban infrastructure
Neuralink, "brain-computer interfaces"
xAI, artificial intelligence creation
All of these would benefit from Musk's primary job as co-Czar of "The DOGE," which is to deregulate areas of industry that have "too much red tape."
So, it's clear that he has a vested interest in doing a good job in this role, and is already making moves as of time of writing, November 18th, with the announcement of slashes to autonomous vehicle regulation. Previously, he was put on a three-way call with Trump and Ukrainian President Zelenskyy, where they discussed Starlink. We know that Starlink has been used by US and Ukrainian intelligence services in the war, as well as for communications and internet access in war zones where fixed infrastructure on the ground is disabled.
This cooperation is likely to increase as Musk is given further access to the situation than other defense contractors.
Tesla Motors Inc. (TSLA)
Immediately following the election, and doubling up on the confirmation from the Trump team about the Department of Governmental Efficiency ("DOGE"), Tesla Motors Inc. (TSLA) went nuts.
Investors are clearly signaling that they believe that TSLA will benefit from this news. This is partially because of Musk's access to power, but also now on news that the Trump team intends to deregulate autonomous vehicles. This would greatly benefit TSLA's robo-taxi initiative, the Cybercab.
TSLA has been bringing home the big-bucks, increasing its profitability over the last few years. This momentum doesn't seem to be stopping anytime soon, especially if they are allowed more regulatory room by the DOGE.
One of the biggest risks to TSLA is its already high valuation, which is only getting higher as the stock takes off post-election. However, TSLA has never seemingly traded in-line with other car companies, so this kind of premium is to be expected.
TSLA isn't Musk's only investible venture, and is likely going to be the most over-traded idea among investors wanting to cash in on Musk's potential success in his new governmental role.
SpaceX & Starlink (SPACE)
Between deregulating space flights, further integration with NASA as a contractor, and the entire Starlink enterprise which now literally encompasses the entire planet, SpaceX is how I would want to play the Musk trade that I've outlined.
There are a myriad of ways to gain exposure to SpaceX, but almost all of them fall short of actually owning the stock outright. It is available through many private investment platforms like EquiyZen or Rainmaker Securities (no endorsement for either of those, just names I know), but only for accredited investors. Some of these platforms have very steep minimums, so even if you are accredited, you may not want to take such a large position depending on your risk tolerance.
Enter funds that invest in SpaceX as part of their holdings. There are a couple options to choose from, but no matter what you pick, you will end up with other stocks as well in these funds. That being said, that may not be a bad thing, as funds like Cathy Wood's famous ARK Innovation ETF (ARKK) were propped up by their TSLA exposure during its massive run-up in 2020 and 2021.
The ARK Venture Fund (ARKVX)
Speaking of Wood, her company runs a mutual fund that invests in privately listed companies. It's up 25% on its one-year, and 16.58% since its inception in September 2022. SpaceX is its largest holding.
You also get some other gems that folks may be interested in, such as Epic Games (Fortnite) and OpenAI (ChatGPT).
Fidelity Contrafund (FCNTX)
Contrafund is a mutual fund that Fidelity has run since the late 1960s, and has a stellar (get it?) track record. They hold mostly public firms, but also own shares of private ventures as well. SpaceX is one of these holdings, though it is close to 2% of FCNTX's holdings, and so isn't the best way to gain exposure.
Space ETFs
There are several space-focused ETFs that adjacent stocks. If you are bullish on not just SpaceX, but space firms in general, these are for you.
ARK Space Exploration & Innovation ETF (ARKX)
Procure Space ETF (UFO)
SPDR S&P Kensho Final Frontiers ETF (ROKT)
All three funds hold roughly 30-50 stocks, all space themed, but in different weights to each other. Both ARKX and UFO have ERs of 0.75%, while ROKT carries a 0.45% gross ER.
Risks
There are a few risks. The first is key-person risk, and that is if something happens to Musk, this all falls apart. I would expect TSLA and SpaceX both to crash to some degree if Musk were involved in an accident or something of that nature. He is the key to TSLA's access to the government and without him, they're likely just another EV company in the government's eyes.
Secondly, much of the investment thesis is speculation. Even the news about deregulating autos is speculation because Trump doesn't become president until January. Even then, it may take time for the DOGE to be set up, for Musk and Ramaswamy to make any decisions, and for those to be implemented. That process could take a long time, and there are no guarantees that they will be successful with their endeavors at deregulation and efficiency-making (whatever that means, it's nebulous right now).
Third, there is a considerable market risk tied to both TSLA and SpaceX, since their valuations are higher than that of their peers. This means that in the event of a market crash, they may be harmed more than the broader market. TSLA very famously carries a beta of 2 or more at times, meaning it moves twice as fast as the market does both up and down.
Conclusion
With Musk's new role in the government, it is likely that his enterprises will receive boons in the form of deregulation of their various industries, increased government contracts, and deep access to key decision makers of policy like the President. This has already sent TSLA soaring, and it is likely to go higher. I also anticipate that SpaceX will do very well, which cannot be bought directly by most investors, but can be held indirectly through various funds.
Those with access to direct stock are recommended to do so; aggressive equity investors could consider up to 3% of an equity portfolio allocation to TSLA, and 2% allocation to SpaceX shares.
Those with access to the private funds, and my recommendation for SpaceX exposure, ARKVX, could consider up to a 10% allocation in an aggressive equities portfolio, or up to a 5% allocation in a moderate portfolio. I would recommend conservative investors stay away from these trades in the present due to risks, such as heightened valuations and the speculative nature of the investment thesis.
Thanks for reading.