Crony Capitalism = Socialism: Why Government in Business Fails

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For crying out loud, crony capitalism is socialism. This is another one of these topics that I’ve talked about ad nauseam for decades and people, don’t get it. They don’t get it. I try, I try to explain it. I try to break it down. And the funny thing is it all depends upon, you know, whose horse is in the White House. If it’s their horse.

their horse and they’re conducting crony capitalism slash socialism. That’s okay. Okay, if it’s not, they’re against it and vice versa. Vice versa. I see it now with the, you know, the Republicans or MAGA types out there. don’t understand why it’s not a good idea. Your presidents take positions in American companies and I’m like, no, again, it’s not good.

It’s not good when the donkeys get involved in the private sector. It’s not good when the elephants get involved in the private sector. And then, you know, this time around, it’s like, well, you know, Obama did it and Biden did it and, you know, taxpayers didn’t get anything. We just gave them money. You’re not wrong.

You’re not wrong. But just because they didn’t take, you know, demand equity positions in these companies is going to make it any better or right for the American people or citizens are great for the economy. It actually causes a different type of disconnect. I was happy to see this today. A guy I got a great deal of respect for Robert Posen. He used to be the former president.

of fidelity and MFS funds. I think a professor now at MIT Sloan School for Business wrote a piece about this, talking about the fact that what Trump is doing and taking equity stakes in companies causes a myriad of issues from opaque decision making, conflicts of interest,

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a climate of instability for investors and companies. Now again, the administration’s point is this is great. This industrial revival. These are America champion companies. This is fantastic. You we’re going to make America great again.

what it does ultimately, okay? And pay attention, okay? You follow along. It distorts capital flows. Taking direct ownership stakes in, what are we at now? Nine companies? Nine companies in sectors like semiconductors, rare earth, defense. This is,

a complete and utter departure from what we do here in this country. Anytime the government has taken a position in anything, it was under an emergency circumstance and it was temporary. And I didn’t agree with it then. I didn’t agree with any crap. I agree with the bailouts for Wall Street.

Auto industry, I’ve been against it all. I’m consistent on that. Right now the government holds a 9.9 % stake in Intel. Not $8.9 billion stock purchase, 15 % in MP materials, 5 % in lithium Americas, minority stakes in startups, like Vulcan elements and Trilogy metals, 10 % in USA rare earth.

US Steel, we received a golden share to secure veto power over major business decisions made by the company. And that veto has already been used. Already been used. US Steel wanted to a plant in Illinois and the United States government rejected that. Now, their argument, international security concerns, we’re gonna do this in China. China.

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Let’s try it again. Yeah. Listen, I get it. You want to ensure domestic supply of critical materials, advanced technology. okay.

Why these companies?

out curiosity. Why? Why these companies? What what did they do? What was the do you have a like, I don’t know, some sort of investment policy statement for the country? Are you just winging it? Because again, that’s what the democrats did. They did same thing with their green technologies, all the crap that you but they just throw money at things.

They didn’t take equity stakes in these things. They just threw money at them. Again, does that mean it’s tough politics problem? mean, I would assume it play a part in this, wouldn’t you? Again, I’m an equal opportunity basher here on the program, go out to both sides. I said one of the greatest investments one could have made during the…

went over the financial crisis and a lead up to Barack Obama becoming president of the United States was to donate him money and start some sort of green company because you were getting government cash and a lot of it. American Recovery and Reinvestment Act back in the day. yeah.

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Vulcan elements. Now, again, I said, I was disgusted. Just as much as anybody should have been disgusted about the know, the the business deals with the Biden family and deals and Ukraine and all these various different things that were going on that we knew were crooked as hell. Okay, let’s

Listen to this one Vulcan Elements, which is a North Carolina based rare earth magnet startup.

August, 2025, Donald Trump Jr’s venture firm, 1789 Capital, invested in Vulcan. Three months later, the company received a $620 million Pentagon loan commitment and $50 million in Commerce Department Equity Financing. This is one of the largest industrial deals issued that year. Now,

first and foremost, okay? Let’s just say that the administration is 110 % right in regards to Vulcan. It’s next great thing out there. Again, I don’t believe they should be investing in it. Don’t you think before they did this, they should have maybe said to Donald Trump Jr., you might wanna, you should divest of this. This doesn’t look good.

This doesn’t look good. This is not right. out, buy his out. It was, hadn’t have it that long. Buy out his position at par.

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I’m just throwing it out there, okay? Because all I’m saying is, why don’t you just replace Donald Trump Jr. with Hunter Biden and see how that sits with you? Because if it was, I’m telling you right now, the folks on Fox News underwear would be in a bunch. You know it and I know it. Again, Donald Trump Jr. said he had no role in securing the funds. Okay, all right, sure.

Yeah, we got his personal investment, which raised red flags. 1789 Capital also held stakes in at least four companies that secured federal contracts or investments.

Again, replace Donald Trump Jr. with Hunter Biden and see how that sits with you.

People have asked Pete Hegseth about the family connections. Got nothing so far. It’s not even the ethics. Posen says it’s about market uncertainty. When success appears to depend on political access rather than actual performance, investor confidence weakens. This warps market incentives, discourages fair competition, and introduces long-term risk to private capital. That’s basically right out of Atlas Shrugged.

what Posen just said. That’s Rand, pretty much. That’s right out of Atlas Shrugged, and he’s not wrong. The companies benefiting from these equity deals experienced crazy stock gains. Intel’s share price rose more than 80 % in 2025. Mpib materials more than 200%. USA Rare Earth up 15 % after the government investment. Okay? What does this mean to Wall Street? It’s a new reality. If a company is seen as favored by Trump,

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Investors pile in not because of fundamentals, but because of perceived political insulation again the same thing holds true for the left same thing

Same exact thing and we’ve talked about not only that in regards to how they handle regulations as well. Regulatory capture plays a part in this. The risk is that valuations end up becoming inflated, competition narrows, and this is what’s most important, something I’ve tried to get across for some time. Capital is allocated inefficiently.

Okay, money is diverted to the wrong places. Rival firms, those that are not in cahoots, not in cahoots with Washington DC, well, it hurts them. Think about this. Try to go raise money, winning contracts, you’re, again, you’re competing against Uncle Sam.

MP materials CEO James Latinsky said in an earnings call that in the very short term, the administration has made sure that we have a successful national champion in MP.

Are you freaking kidding me? That’s the CEO of the company. That sounds like it’s right out of China! China! Because we hate China! But we’re doing the same shit as China.

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The instability is reverberating across other industries. Will Mr. Trump next target be aerospace, biotech, who qualifies for government capital, who doesn’t? Without transparency, every company becomes a potential beneficiary or casualty of political favoritism. Again, causes uncertainty, all sorts of issues. This is why.

This is why it doesn’t work.

Government? Government. Rules. Umpire. Referee. Everyone equal under the law. Make sure everything’s supposed to work. Supposed to have nothing to do with the private sector. Completely separate. You want our economy to boom? This is how you do it. Watchdogonwallstreet.com.