Episode summary
Tesla’s Monster Musk Incentive. Plus, Deutsche Bank’s Jim Reid on Stocks | Barron's Streetwise
Barron's Streetwise
· · Hosts: Jack Bary, Andrew Bary · Guests: Jim Reid
Summary
Jack How argues that Tesla shareholders are likely to approve Elon Musk’s new pay package because the company’s valuation now depends heavily on future bets like robotaxis and humanoid robots, not just cars. He says Musk’s voting control matters if Tesla is to build what Musk calls his “robot army,” and that the package could double Musk’s ownership from about 13% to around 25% if milestones are met.
The broader investment discussion turns to whether elevated valuations can continue in the U.S. Jim Reid of Deutsche Bank says historical data would point to below-trend returns for highly valued markets like the U.S., even though AI could still boost productivity. He argues that valuations matter a great deal over long horizons and that investors should favor cheaper markets rather than chasing expensive ones.
Reid says emerging markets look like the best long-term risk-reward opportunity because of better demographics, lower debt, and lower valuations. He is also cautious on developed-market bonds, saying starting yield matters and that the recent normalization still implies only a very small positive real return. On gold, he says he likes it as an inflation hedge, but at current levels he thinks a globally diversified equity portfolio may offer better long-term returns.
Key takeaways
- Jack How says Tesla’s market value now depends mostly on robotaxi and humanoid-robot hopes, which is why Musk’s role remains central to the stock story.
- The host says Musk’s new package could double his Tesla stake from about 13% to around 25% if operational and valuation milestones are achieved.
- Jim Reid says historical returns suggest expensive markets like the U.S. should lag their long-term trend, even if AI improves productivity.
- Reid says the main long-term lesson is simple: buy cheap markets and avoid expensive ones when possible.
- Reid says emerging markets look like the best risk-reward bet because valuations are lower and demographics and debt dynamics are better.
- Reid says gold fits his inflationist view, but current prices may leave globally diversified equities with the better expected return.
Notable quotes
“It is tempting to kind of you know hide away in cash but I think you have to respect the kind of history of financial markets”
“close your eyes and invest in assets that probably protect you from inflation really”
“valuations matter enormously and without giving away the secret source for free”
“the emerging market world is probably the best risk reward”
“I think when you have a fiat money system and a democracy at the same time, then the stars align”
How the episode opens
It is tempting to kind of you know hide away in cash but I think you have to respect the kind of history of financial markets and respect the kind of history of intervention to believe that you probably do have to kind of close your eyes and invest in assets that probably protect you from inflation really. Hello and welcome to the Baron Street Wise podcast. I'm Jack How and the voice you just heard that's Jim Reed.
He's the global head of macro and thematic investing at the Deutsch Bank Research Institute and he's talking about long-term investing. In fact, he just published a study titled The Ultimate Guide. Probably put some echo on a title like this.
The ultimate guide to long-term investing. That sounds like something that could help. In a moment, we'll hear from Jim about what hundreds of years of returns for stocks and bonds tell him about what's next for investors.
Now, before that, I'll say a few words about Tesla and Elon Musk and his trillion dollar incentive package that comes up for a vote in the week ahead. Spoiler alert, it's going to pass. Listening in is our audio producer, Alexis Moore.
Hi, Alexis. Hey, Jack. Where is your personal muskometer?
I feel like we haven't heard as much from Elon Musk. I don't I don't want to say he's been quiet, but he's been quieter. I guess the big reason Musk seems quieter is that he left government back in May.
He stepped down from that Department of Government Efficiency or Doge. There was kind of a backlash back then from investors, including longtime bolts. I'm looking at a report from back in April from Dan Ies at Wedbush Securities.
It's titled Musk facing a code red situation if he stays at Doge.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tesla robo future
- musk incentive
- inflation investing
- two centuries of returns
- stocks outlook
Companies and tickers mentioned
- TSLA
- DB
- Tesla
- Deutsche Bank
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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