There’s been alot of talk about Elon Musk and the government efficiencies that COULD be captured over time. We all know the government is about the most inefficient of any organization in this country. Our politicians and staffers spend like drunkin sailors and they lean on the USD being the reserve currency and our ability to print money at will. No more DC. Interest rates will not go down unless we either go into a deep economic downturn (not a compelling outcome), or get very serious about balancing the budget and cutting all the wasteful spend. Now that we have outsiders involved, those that have only 1 endgame, savings, we have a nbetter opportunity to make real headway than ever before. To be sure, it will not be easy. Bad muscle memory in the form of waste runs deep in DC but when you make these decisions and the waste very public, the abusers tend to scurry away and hide. That’s what we want. Bottom line: the market is NOT priced for proper efficiencies being accomplished. Any success on this topic will be well rewarded in the equity markets, bond markets, and rates should fall which would stimulate the housing sector which is a big employer in America. IMO, one has to have some “shelter” exposure that’s correlated to falling rates, for the good reasons. This would be home improvement brands like HD, LOW, SHW, BLDR and home builders like DHI, LEN, home furnishing brands RH, WSM, ARHS, and private equity brands BX, KKR, APO and even BLK and GS now getting more focused on their alts divisions. Blackstone has almost $300B in real estate assets so any fall of rates for the good reasons would make that stock really get some giddy-up!

The above is a great chart from Brad Gerstner’s Altimeter Capital highlighting the benefits of reducing spending while keeping the normal revenue growth trajectory we are used to. It’s absolutely doable and for the first time in my life, it’s an actual policy goal with high motivation. Bond Vigilantes beware!