To the Editor: This was an interesting report regarding productivity improvements (" How a Chicken Sandwich Shows a Hidden Power in the U.S. Economy," April 26). My view is that it isn't productivity that should get the credit for the absence of a recession. It's liquidity.
For the first time ever, the Federal Reserve pushed up short interest rates without inducing a liquidity crisis.
Good businesses weren't forced to close randomly for lack of financing, which instead just cost more. So, only those truly insolvent were affected. The massive suffering engendered by the previous methods, cheered on by the gold bugs, may have been mostly unnecessary.
R. Paul Drake On Barrons.com
Full-Self-Driving Boost
To the Editor: Regarding " AI's Next Big Winners Aren't Just Tech Companies. Watch These Stocks" (April 26), here's another great example of how artificial intelligence can boost earnings, namely electric-vehicle maker Tesla.
In its recent full self-driving, or FSD, software update, Tesla notes that its AI-driven end-to-end neural network has replaced "over 300K lines of explicit C++ code."
This has made the FSD work much better and more intuitively. Simultaneously, Tesla gave a free month of FSD to all of its customers, and then cut the price in half to $99 a month.
Given that Tesla buyers are self-selected to like cutting-edge features, FSD could give a big boost to earnings very soon. Let's say 25% of the five million Tesla owners opt in. At $99 a month, that's about $495 million per quarter. Assuming a 90% gross margin, that's $333 million after tax, or an additional 20% of its first-quarter adjusted earnings.
With Telsa stock being out of favor lately, this seems like a little-noticed change that could have a huge positive effect on Tesla's earnings.
Frank Kenna Branford, Conn.
Inflation's Legacy
To the Editor: Harley Bassman, creator of the MOVE index, the standard measure of interest-rate volatility, predicts that the next Fed rate cut will be politically motivated (" Bonds Have Had a Wild Ride. The Roller Coaster Is Coming to a Stop," Other Voices, April 26).
His view is buttressed by Cantor Fitzgerald CEO Howard Lutnick, who sees a September Fed rate cut just before the election to help "the guy who is employing you."
Bassman compares the legacy of the Ronald Reagan/Paul Volcker administration with the Joe Biden/Jerome Powell regime. They differ starkly, since Reagan and Volcker were cleaning up the inflation mess caused by Jimmy Carter and Arthur Burns, whereas Biden and Powell own the legacy of 18% inflation since 2021.
William J. Doyle Atlanta
Send letters to: mail@barrons.com. To be considered for publication, correspondence must bear the writer's name, address, and phone number. Letters are subject to editing.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 03, 2024 18:24 ET (22:24 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments