WTF Is Going On: CEOs On Tariffs, Hegseth, And Martha Stewart

We look at some big news and some old news

The Corporate Response To Liberation Day

“Earnings season”, in which companies that operate on a standard calendar begin to report quarterly results, has begun. For major companies, the release of quarterly numbers is accompanied by a conference call in which Wall Street analysts ask questions about the business.

Unsurprisingly, a common subject of questions has been the U.S. tariff regime launched on April 2 and then paused a week later. Here are some of the more interesting responses from corporate executives:

Tyson Abston, chief executive officer of Texas-based Guaranty Bancshares, asked about the attitude from lending customers:

They're like the rest of us. I mean, there's just uncertainty…they're not seeing anything in our local markets that are really concerning at this point. And -- but like everyone else, they look and see what's happening on the national scene and that changes their view. So I think everyone is just kind of on standby trying to see where this -- how this plays out.

But assuming this gets -- this whole issue with tariffs gets resolved, then the Texas economy is strong and robust and growing, and that should resume and I anticipate that will resume once that happens.

This is one of the most interesting, and still unsettled, debates about what is going on, both within the equity market and in the economy more broadly (as we’ve written before, those are not the same thing).

If Trump reverses on tariffs (or at least mostly reverses), does the damage remain relatively minimal? Do companies in Texas and elsewhere undo their own “pause” and start to borrow and invest again once certainty arrives, or is there a broad macroeconomic cost to having so many companies and businesses and consumers at a standstill on big-ticket purchases?

Abston takes the positive outlook here, and most banking executives seem to agree. (Definitely, they agree on the uncertainty and the resulting impact — that customers are “taking a wait and see approach”, as another independent banking CEO put it on his own call.) But obviously the details matter.

There is a point where companies shift from pausing investments to canceling them, because there is a point where the cost of waiting becomes material. Cancelations become layoffs and they cascade into the broader economy. What worries investors and observers is that it’s not at all clear where that point is, or what will happen on the way there.

Steve Durels, Executive Vice President / Director of Real Property at SL Green, which claims to be the largest office landlord in New York City

But I think what's most telling and give me a second sort of tell the story, if you go back in our pipeline 3 weeks ago, so pre-announcement of tariffs, we had 62 tenants in the pipeline versus today, we have 64 tenants in the pipeline. Of those 64 tenants, 44% of them have an expansion requirement as part of the deal that they're negotiating.

Of the tenants that we replaced over the past 3 weeks, 18 tenants were replaced by 20 new tenants.

Obviously, New York City office tenants are at this point more exposed to services than manufacturing, but an interesting data point against the idea that all corporate spending and expansion is coming to an end.

Maury Marks, president and CEO, Quorum Information Technologies, a Canadian developer of software for car dealerships

On the current path that the government is following, the tariffs will likely result in reductions in vehicle sales on both sides of the border and dealerships and OEMs [original equipment manufacturers; ie, carmakers] will be challenged with raising prices or possibly losing market share and/or having their gross margins contract.

Quorum is a small company, with a market capitalization of 67 million CAD (US$48 million). But it’s very much a niche business, and these kinds of businesses usually have a better understanding of their customers than do larger, more diversified suppliers. Clearly, Marks (who also founded the company) sees real pressure for the auto industry in the wake of the tariffs (which include a response from Canada).

For what it’s worth, the market seems to agree: shares of both Ford and General Motors are down 6% so far this month. One political aspect to keep in mind here: car dealers are generally staunchly Republican, and so this industry could be a key test case for the willingness of Trump’s base to endure a trade war.

Ken Bockhorst, CEO of Badger Meter, manufacturer of utility meters and flow measurement products:

Finally, let me share an example of the knock-on effect of the tariffs that may not be as obvious from the headlines. China has implemented export controls on certain chemical and rare earth elements as part of its response to U.S. tariff actions. Bismuth is an element that's included in the supply restrictions. While bismuth happens to be a small component of our brass [indiscernible] recipe, the prices increased nearly tenfold since early this year.

China produces 90-plus percent of the bismuth in the world, a pivot away from bismuth and the recipe is not possible in the short term and strategic sourcing initiatives won't help reduce the cost of a supplier restricted rare element.

We will therefore need to adjust pricing accordingly.

A quote that can be interpreted by both sides of the tariff debate. Either this is a clear example of the unintended consequences of a trade war, or yet another sign that for national and economic security reasons, the U.S. needs a supply chain beyond foreign control.

Nicholas Pinchuk, CEO of high-end tool manufacturer Snap-On:

Now -- now let's briefly address the issue of the day, tariffs. A word that was mentioned last Friday in the Wall Street Journal, 254 times. Yesterday, it was down to a mere 163 mentions.

As good a note to close on as any, though we may return to this topic as the month goes on.

Hegseth Does It Again

Three weeks ago, we pointed out the similarities between the beginning of Trump Media & Technology Group and the Department of Defense in his second term. During its long (albeit eventually successful) effort to go public, TMTG suffered from not having any “grown-ups in the room”. The DoD, at least based on SignalGate, seemed to have the same problem: a ridiculous operational error, in which the editor of The Atlantic was invited to a chat discussing war plans/attack plans, driven in part by a lack of any high-level operational expertise among high-level DoD officials.

The pressure rose on Hegseth this weekend. The New York Times reported a second Signal chat which too disclosed attack plans to a group including his wife and brother. On Friday, several of his deputies were fired, reportedly after they were found to have leaked information. (On Monday, NPR reported that the administration is looking for a new Secretary of Defense, though Trump’s press secretary has refuted that report.)

And, again, as with TMTG, the question is: why? Why is a former commentator on Fox News with no high-level experience running the Department of Defense? One answer from Trump supporters no doubt would be that the experienced members of that department simply can’t be trusted. Given how many former Trump administration officials from the first term have come out against him, and how much reporting there has been of career officials literally stopping his efforts during that term, that argument has some merit, particularly to those firmly behind the second term agenda.

But there is another issue, one highlighted by another recent development: the apparent impact of an interview with JPMorgan Chase chief executive officer Jamie Dimon on Fox Business. That interview reportedly caught Trump’s attention; soon after, the president implemented a 90-day pause on reciprocal tariffs (except those placed on China).

According to reporting from the New York Post, Dimon — almost certainly the most respected executive in finance — and Trump communicated extensively ahead of the inauguration, with one source saying Trump had a “man crush” on the banker. And so Dimon’s interview may well have had some influence on the 90-day pause. (Trump’s press conference that day certainly suggested as much.) Another, potentially bigger, factor may have been the rush by Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to get to Trump without the presence of trade adviser Peter Navarro, as reported by the Wall Street Journal.

In other words, when Trump has respected, experienced professionals — like Dimon and Bessent (Lutnick is still up for debate) — in his ear, there can be a reasonable outcome. When he doesn’t, the Department of Defense has “a complete meltdown in the building”.

And yet there are so many people that are not experienced, whether in the second term administration or in the motley crew of The Apprentice contestants, career politicians, Russian-American financiers, and former derivative traders that surrounded the creation of TMTG. In both cases, the lack of experience keeps causing problems — and keeps underscoring the question of how and why Trump hires his people.

Like so many things Trump, that question doesn’t have an easy answer. In fact, as we wrote in one of our first posts, it is incredible that nearly a decade after his first GOP presidential run, we still have so little understanding of who exactly Trump is and how he thinks¹.

But one thing both his skeptics and admirers often miss is just how long Trump has been out of the business world. The Apprentice premiered in 2004 — the same year Facebook was founded. The dealings of the Trump Organization are opaque, but there’s little evidence of any major Trump-led and Trump-owned deal in the last two decades; the business model by all accounts has shifted to licensing instead of management. The one exception there has been the cash put into buying and upgrading golf courses in Ireland and Scotland.

So by the time of his first term (and certainly by the interregnum), the top contacts Trump developed in his career were mostly retired or in some cases passed on. And neither the White House, or Mar-a-Lago, is an ideal place for making new contacts. Even Bessent, who has a real history in finance and a good deal of respect from the industry, seems to have come to Trump through a close relationship with the president’s former sister-in-law. Too many other people are simply in the orbit of someone whose best days in business or long behind him. The term “Trumpworld” exists for a reason, after all.

Obviously, any president (or even a former president) has the opportunity to reach out to people experienced and expert in their field. Trump’s conversations with Dimon, if true, show he has taken advantage of that opportunity at times. So much else of what has happened, however, shows he hasn’t taken advantage of that opportunity enough.

Martha Stewart Loses $1 Billion

We’re late to Martha, a documentary about icon Martha Stewart that was released on Netflix in November. We do recommend the film; it’s a well-done and candid look at a complex person with a fascinating story.

One of the more interesting clips in the documentary comes from what appears to be a 2009 interview with ABC News². Stewart is asked how much money she lost off her conviction for insider trading lying to federal investigators. (As the documentary notes, she was not convicted of insider trading. Rather, she was convicted of lying to the Federal Bureau of Investigation about the reason for her sale of stock, in late 2001, in biopharmaceutical stock ImClone. ImClone shares tanked the day after her trade, after the Food & Drug Administration refused to review its flagship drug. ImClone’s CEO would serve more than seven years in prison for several criminal charges.)

The interviewer asks Stewart if she lost $500 million from the conviction. She responds that it was actually more than a billion. Given that Stewart is not a wholly reliable narrator in the film itself, it’s fair to wonder whether she was exaggerating during that interview 15 years earlier.

Unsurprisingly for anyone who has watched the documentary, it seems pretty likely that she was. Martha’s business in late 2001 was entirely tied up in her publicly traded vehicle, Martha Stewart Living Omnimedia. MSLO developed and owned the rights to the magazines, books, television shows and even a syndicated newspaper column. Stewart in turn owned about 63% of the company, nearly all through supervoting shows that gave her effectively total control.

At the stock’s high market price in the fourth quarter of 2001, the company had a market capitalization just shy of $1 billion, with Stewart’s stake worth about $600 million. It’s possible, perhaps, to argue that $600M figure is somewhat undercounted, since it values her supervoting shares at the same price as minority ownership — but it’s still a long way to $1 billion.

Shares started falling in 2002, when controversy around the trade began to build. By the time MSLO was sold, in 2015, for just $6.15 per share (less than one-third its peak from Q4 2001), Stewart owned 46% of the company. Her share of the ~$350 million purchase price came to about $163 million. But what made it worse is that the deal was done half in cash and half in stock of the acquirer. That acquirer, Sequential Brands, would sell the Martha and Emeril Lagasse brands in 2019 — and eventually go bankrupt in 2021, with Stewart still owning more than 12% of the company.

In other words, Stewart’s stake in her own business went from ~$600 million to a cash payment of a little over $80 million. The notoriety created by her conviction no doubt was a key factor — but it also wasn’t the only issue. The magazine business as a whole obviously saw pressure across the 2000s and 2010s. 13% of MSLO revenue in 2001 came from Kmart, a business that already was in decline and would subsequently file for bankruptcy twice. Even in a world where Stewart wasn’t prosecuted, the business was facing the prospect of secular decline; as it was, even Stewart’s transformation in the 2010s, catalyzed by a bawdy and well-received performance at a Comedy Central roast, did little to help the stock.

To be sure, it’s still one of the most expensive convictions in history relative to the alleged crime committed. But it seems likely that Martha Stewart’s path from billionaire to millionaire was driven more by economic realities than legal aggressiveness.

As of this writing, Vince Martin has no positions in any companies or securities mentioned. If you enjoyed this piece, please give a like, both to spread the word and help us fine-tune our coverage.

1. I’d wager his most ardent supporters and his most ardent critics both believe they know to absolute certainty, but neither extreme case — that he’s a hard-working, intensely pure patriot, or a cynical, corrupt, moron — actually fits the evidence at hand.

2. That’s our best guess based on the short clip and a Google search.