Looking Backwards
LB #1
“Well, I didn’t think you had it in you. I’m your huckleberry.”
One of the most iconic lines in recent cinema was uttered by Val Kilmer in his iconic role as western legend Doc Holiday. Kilmer passed away this week after a long battle with throat cancer. Donald J. Trump stepped into his shoes Wednesday and lived those iconic lines. He wandered over to the poker table afterward and remarked, “What ya’ll doing, playing cards?”
Yes, he had it in him. All the flip-flopping and backtracking seem to be over. On Wednesday after the market close, Trump laid out his reciprocal tariff plan. It was not well received. The tax will be the largest on American consumers since 1968, it puts our tariff rates at the highest in over 100 years. What followed was one of the worst two day stretches in the stock market’s history as the Dow Jones was down almost 4,000 points in two days, with the Russell 2000 index now in a bear market down almost 25% from its peak as small caps got hit hard and the Nasdaq is also in a bear market after falling more than 20% from its highs set recently after Trump’s election. I’m not sure which collapsed more the stock market this week or the Dukies in the NCAA tournament. Dem boys spit the bit up 6 with less than a minute to go. But I digress. Just about everything got hit, oil, precious metals, industrial metals, retail, clothing, foreign markets you name it. The markets were down sharply on Thursday and then China retaliated with their own 34% tariffs on Friday morning and the trade war really got rolling. The weekend has been full of protests and uncertainty as trillions in stock market equity was zapped from 401Ks.
We will get to all of this today, but let’s start with the tariffs themselves. These aren’t reciprocal tariffs. These are just tariffs, on them. The math behind this is so embarrassing and misleading. They are just made up numbers. James Surowieki on twitter was the first I saw to crack the code on Trump’s tariff formula. “Just figured out where these fake tariff rates come from. They didn’t actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country’s exports to us.
So we have a $17.9 billion trade deficit with Indonesia. Its exports to us are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges us. What extraordinary nonsense this is.”
That’s right, then divide by two because we are being nice and kind and you get Trump’s number of 32% for Indonesia. That is the tariff rate Trump gave them. This isn’t reciprocal tariffs this is an attempt to balance the trade deficit.
Jerome Powell spoke on Friday morning and offered no clues that the Fed was going to step in and arrest the slide of the stock market. He said as always that the Fed is squarely focused on achieving their dual mandate of maximum employment and stable prices, but some were unhappy with him and no one was louder about that than Donny T himself who didn’t care about what Powell did last month to suddenly caring as he watched the markets crater after his tariff bomb. This from Trump’s social media account, “This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates.
He is always “late,” but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months – A BIG WIN for America.
CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”
Zero Hedge put out a funny post Friday showing the 2012 tweet from Trump saying that if the Dow dropped 1,000 in two days the president should be impeached. That tweet aged about as well as Biden did during the last presidency. That would be impeachment number three for you Don. Is it three strikes and you’re out? The Dow dropped 2,231 points on Friday and Trump played golf.
LB #2
This is what Matt Levine wrote in his email newsletter over at Bloomberg, “So for instance you could crudely characterize a portion of the trade between Vietnam and the US as (1) Vietnamese wages are lower than US wages, so Vietnamese people make sneakers and t-shirts that they sell to the US cheaply for dollars and (2) the US financial system is big, so Vietnamese people invest those dollars in US financial assets. We are good at making financial assets, they are good at making low-cost clothing, so we trade. To Trump this is necessarily unfair and we must stop it. My Bloomberg colleague Joe Weisenthal writes:
Now we’re slapping massive tariffs on them, but the question is … to what end? Do we think there are hundreds of thousands of people in the US eager to work in sneaker and t-shirt factories at the wages that sneaker and t-shirt factories pay? Are there people eager to work in sneaker factories even at ‘good’ wages? Do we think that the US has the level of robotic capability to replace these factories without having to hire a lot of workers? And if not, what is the administration trying to accomplish?”
It all comes back to the debt. We talked about the complicated math situation of the tariffs above and how they are just focused on reducing the trade deficit, not actually the tariff rates of those countries. Why? I want to point out as we have been talking about for months. Trump wants a recession and now he will get it. He needs the 10-year Treasury yield to drop, and it did 40 basis points. This from ZeroHedge, “The Trump Administration needs a recession to create the desired economic rebalancing and to bring rates lower for the debt. And according to Mizuho’s Dominic Konstam, it’ll likely get it and be able to blame previous (Democratic) Administrations.
This sets them up nicely for the 2026 mid-terms and potential Constitutional reform. Assuming 2s10s gets to +100 bps, Bessent will likely take the opportunity to term out the debt as higher (foreign) demand will be forthcoming. For every 100bps interest savings, over the term of the Administration the Treasury can save $200 billion, going a decent way towards deficit reduction.” Bingo. That’s it, folks. Everything else is just noise. They are focused on fixing the deficit.
Paper profits in the stock market came easily and they went away just as easily. There will be pain but 80% of the country doesn’t even have a 401k. Trump doesn’t care about your stock price. Yet.
John Authers at Bloomberg had this to say, “The greatest issue concerns the dollar. Relative to the rest of the world, US assets have boomed ever since the Global Financial Crisis and went into overdrive after the pandemic stimulus programs in 2020. At that point, America let the liquidity flow, and attracted massive flows from other countries into its stock market. Following Julian Brigden of MI2 Partners, you could call this “vendor financing.”
The growth in European holdings of US stocks has been breathtaking… This has been helped by a virtuous circle. The flows push up the dollar, which increases the returns for foreign investors and fosters confidence that the US is unstoppable, thus drawing in more funds. It’s a classic example of what the hedge fund manager George Soros, mentor of US Treasury Secretary Scott Bessent, calls reflexivity, or the ability of the market to create its own reality.
The problem arises when something obtrudes…US stocks, particularly Big Tech, have been a kind of piggy bank for the world. The risk now is that foreign investors will smash the piggy bank. For an idea of what’s at stake, look at Apple Inc., which stands to be grievously hurt by the new tariff regime. Its market cap almost touched $4 trillion three months ago. Now it’s nearly back to $3 trillion. The value it has lost is greater than the highest market cap ever accorded to Walmart Inc.”
Easy come and easy go. Apple was overvalued which is why Warren Buffet sold so much of his stock in it. Now it is more reasonably priced. Catherine Lucey writes for Bloomberg, “President Donald Trump has vowed his historic tariff blitz would revive domestic manufacturing, but industry worries about his approach are raising fresh doubts about whether he can deliver on his promise of an economic boom.
In the Rose Garden on Wednesday, Trump declared “jobs and factories will come roaring back into our country” and predicted new “golden age” in America. Since then, he has stood by his decision to hike US tariffs to their highest levels in more than a century, even as the move sparked a global market meltdown. Some manufacturing advocates and economists questioned Trump’s underlying logic, saying supply chain issues, high costs, workforce needs and the laborious process of moving production to the US stand in the way.”
It’s easy to make promises. I don’t hate the strategy, but I question the tactics. Let’s stick with Apple for a moment. This from Sonya Gugliara for Daily Mail, “The price of an iPhone is set to skyrocket under President Donald Trump’s ‘Liberation Day’ tariffs crackdown, experts have warned…
This is because Apple manufacturers its iPhone in China, which has been hit with a staggering 54 percent tax on its imported goods. The tech giant would likely pass these inflated costs onto the consumer, taking the price of a 256GB iPhone 16 Pro from $1,100 to an eye-watering $3,500, according to Wedbush Securities analyst Dan Ives. The president claims his tariffs will encourage domestic manufacturing by increasing the price of foreign products. But since Apple would still need to import the raw materials used to make its devices, experts say there is not an economical way to make iPhones on US soil.
Moving iPhone production to America would be a,’massive, mammoth undertaking,’ senior research analyst at brokerage firm Rosenblatt Securities Barton Crockett told the WSJ. ‘It’s not clear you can make a competitively priced smartphone here,’ he told the outlet. Currently the cost of assembly is around $30 in China, but this would soar by ten times if production moved to the US, Lam explained.”
I don’t know about you, but I’m not buying a $3,500 iPhone anytime soon. All the people about to be laid off in this country will not be able to afford one either. So, Trump’s gamble of taking tariffs back to the early 20th century also risks taking back communications back there as well. Watson, Is there a payphone bank? Can I ask you a question? Do you know if the hotel’s pager friendly? I’m not getting a sig on my beeper.
LB #3
From ZeroHedge, “In DB’s reaction note to the first major salvo of the Trump 2.0 trade war in early February, the bank highlighted that the revenue generation aspect had become a much more overt policy goal than during the 2018-19 trade war. This theme has been consistently visible in commentary by Trump and administration officials.
Estimates of the additional revenue from announced tariffs – DB sees a range from $300bn to around $500bn per year as reasonable – make the 2025 tariffs the largest US tax hike (in % of GDP terms) since at least the 1968 Revenue and Expenditure Control Act that came during the Vietnam War (Figure 3). Such an increase may also put customs revenue on the verge of overtaking corporate taxes as the third largest revenue source in the federal budget, but the increase would have closed only about a fifth of the $2trn federal budget deficit for 2024 (close to 7% of GDP, fig 4).”
$300 to $500 billion in tariff income. It isn’t replacing the income tax anytime soon, but it is a start, and if the tax impact causes interest rates to fall and they save $200-$300 billion, well now we have closed 40% of the budget deficit. All it took was vaporizing 25% of the nation’s 401k money to do it. I never said this would be without pain and I think Trump promised it. We are also only two days in so don’t think that this sell off can’t continue. Earnings will be affected, sales will crater, and that will bleed into stock prices a lot of which was figured in the last two days, but more could easily come in the months ahead as the earnings come in lower, job losses increase etc. This is a recession with a stock market crash now.
Looking Forwards…
LF#1
In this time of turmoil, it is imperative to keep our wits and look at the big picture. Trump is trying something here that needs doing and although risky, needs to be done. Lost in the midst of stock market turmoil was another key sell-off, the sell-off in oil. Oil prices dropped from $73.63 a barrel on Brent to $65.58, a drop of over 10%. Yes, there was definitely some spillover effects from the stock market and risks of global demand slowing etc, but OPEC+ also revealed that they would be producing more barrels as Trump had asked them to do. This will drive the cost of energy down, the prices and earnings of oil companies, but make it cheaper at the pump for all citizens, not just good for the owners of equites but everyone. Trump will definitely take this as a win and rally his troops if it remains.
LF#2
The Macro Butler writes this on ZeroHedge, “Taking another perspective: In just the first five months of the fiscal year, the U.S. has spent $480 billion on interest alone, a record high and more than three times what the Department of Government Efficiency claims to have saved since January 20, 2025. This is a problem because not only is the cumulative budget deficit for the first five months of fiscal 2025 the highest on record, surpassing even the fiscal shock of the post-COVID response, but the U.S. government also has an additional $8.70 trillion in debt to refinance beyond this $1+ trillion deficit. In a nutshell, almost $10 trillion of US government debt will need to be issued in the last 9 months of the Jubilee Year, that’s more than a trillion a month…In the past, major problems in industrial economies stemmed from the private sector, with factors like wars, revolutions, tax hikes, or price controls causing a plunge in ROIC. However, since the start of this decade, the issues lie with public institutions, as confidence from citizens and investors wanes. Since the start of the decade, governments have engaged in reckless spending on wars, DEI initiatives, and fiscal stimulus that don’t improve citizens’ lives but serve to maintain a plutocracy in power. This is unsustainable and suggests that, in the coming months and years, major credit markets, especially in so-called ‘developed’ markets, could see prices fall to zero, either due to currencies becoming worthless or a sovereign debt crisis forcing governments to default. In a nutshell, gold is now hedging not only a possible collapse in profitability but also a threat to the very existence of most fiat currencies.”
The government has to sell debt, they simply have to. If they don’t, that is end of empires stuff and that is why this is all about corralling the deficit first and then the debt. They have to do this first. They have to refinance and get those savings and then they will unleash some inflation with stimulus or what have you, but not yet. The skyrocketing price of gold is telling them that gold is the risk-free instrument worth holding and not treasuries. That can only be fixed with a responsible government. Gold is the adult in the room.
LF#3
Which brings us to our last item of the week. This is chilling and has been overshadowed by all the stock market turmoil, but I will not omit it because it is the most important item of the week. We live in the United States where according to the 10th amendment of the Constitution, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” In theory, and yes I am being naïve to think we still follow the Constitution, but what the hell I’m a romantic. Furthermore, in article 1 section 10, the Constitution states, “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.” So, states have the right to make gold and silver and only gold and silver a tender in payment of debts. Good to know. This from ITM trading via ZeroHedge, “A bill that would have made Utah the first state to pay vendors in gold passed nearly unanimously—but was suddenly vetoed by Governor Spencer Cox. No warning. No explanation. And no clear logic.
“Every Republican and Democrat voted for it, yet the governor killed it anyway.” The bill would have allowed vendors to choose gold payments through vetted, secure, and private infrastructure. It posed no threat to state systems. So why the quiet veto?
Insiders suspect pressure from above, because if Utah pulls this off, other states will follow. And the central planners can’t risk people having a real choice in sound money.
“This is about preserving freedom, savings, and property rights before the dollar collapses.”
Utah is about as conservative as it gets, and they want to make gold and silver tradable money, and the governor vetoes it out of nowhere. I wonder who tapped him on the shoulder, the treasury secretary or the barrel of a gun held by someone that simply follows orders.
The legislature is working to override the veto. In spite of what’s going on, there are still people that care and understand what this country was built on. Trump is trying to make sure we can still sell debt by shoring up the federal finances and states are already seeing that there is a risk of a dollar collapse. Don’t get distracted, dismayed, or disappointed. This whole dog and pony show is about real money.
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 38,314.
The 10-year Treasury bond is at …4.00%
The price of Brent Crude is … at $65.58 per barrel .
The price of gold is … at $3,035/oz.
The price of silver is … at $29.23/oz.
I leave you with this from the information superhighway, why are pediatricians so grumpy? They have little patients.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.