This week is the calm before the storm. Trump’s team is desperately saying and doing anything they can to keep the markets calm and orderly. They are rolling back tariffs like Walmart does everyday low prices except tariffs will make those prices go higher. The Treasury department and Scott Bessent have gotten what they needed with Bonds rallying and the 10 year Treasury going down below 4.2% this week. It took some serious walking back of policies and appeasing the auto industry to do it, but they are getting there. That’s why this is the calm before the next storm. There are a few storms on the horizon, and I want to alert everyone. These are not all being talking about nearly enough.
Speaking of Walmarts, they are about to be a lot emptier. Jesse Pound writes for CNBC, “Gene Seroka, executive director of the Port of Los Angeles, said Tuesday on CNBC’s “Squawk Box” that he expects incoming cargo volume to slide by more than a third next week compared with the same period in 2024.
“According to our own port optimizer, which measures the loadings in Asia, we’ll be down just a little bit over 35% next week compared to last year. And it’s a precipitous drop in volume with a number of major American retailers stopping all shipments from China based on the tariffs,” Seroka said.”
The online sleuths are out watching ships enter and exit the port just like Covid. If we get a supply chain interruption it will be much different this time. Last time, everyone had tons of free government money and could buy buy buy which made shortages even more prone to price increases. People think that it could happen again, and I think it will not last long because people are unable to spend. They are tapped out, inflation-ed out, no money left. No one believes me but none other than Beyonce Knowles just had a concert tour and here is my first reference of a TMZ post in the cooperative’s history, drumroll please “Beyoncé’s not used to missing a step — but with “Cowboy Carter” tour tickets struggling to sell, fans are saddling up with jokes … and she’s stuck taking the heat.
With her tour kicking off tonight at L.A.’s SoFi Stadium, there are still more than 3,800 tickets up for grabs — and resale prices have dropped to $20. Pretty wild, considering it’s Queen Bey we’re talking about … and she literally just snagged an Album of the Year Grammy for “Cowboy Carter”!” This is quite a juxtaposition from what Darreona Davis wrote for Forbes. “Singer Beyoncé’s world tour raked in $179 million in a single month, according to Billboard, far surpassing a previous monthly record set by her and setting the stage for her to join the likes of Coldplay and Rolling Stone on the list of artists with the highest-grossing tours. In August, Beyoncé’s Renaissance World Tour grossed $179.3 million, making it the highest one-month gross for tours since Billboard began tracking tour earnings through Boxscore—its touring data tracker and live acts ranking charts—in 1985.” This was 18 months ago people. Unless she had a fall from grace like Kanye West that I am unfamiliar with I am going to guess it might be the fact that people be broke.
It gets worse. DNYUZ recants a recent report put out by Torsten Slok, the chief economist at Apollo Global Management, “Empty shelves could be coming by next month and a recession will arrive this summer, according to an economist.
Torsten Slok, chief economist at Apollo Global Management (APO-0.03%), earlier this month calculated the probability of what he calls a “voluntary trade reset recession” at 90% in the face of President Donald Trump’s tariffs. And in a new report published this weekend, he points to the decreasing flow of container ships from China to the U.S. as a major domino that will lead to that recession in a matter of months.
By mid-May, Slok writes, the movement of container ships will “come to a stop.” Later that month, demand for trucking will also grind to a halt.
That will lead to empty shelves in stores. Companies will be forced to respond to declining sales, which will mean layoffs at retailers and trucking companies sometime in late May or early June. Then, by the summer, that will equal a full-blown recession.
Slok points to a number of factors working against the U.S. economy: the tariffs themselves, as well as lower consumer and corporate confidence, retaliation and declining tourism from other countries, and DOGE’s mass firings, among others.”
I agree and I have been writing about this for some time now. This is all known and is just sitting like a weight on the equities market. The bond market is ready to rally and lower yields will make the Trump administration’s day. It won’t make yours or mine though as we are heading further into a recession. People not in recessions can afford concert tickets, now we can’t cause we are.
These are headwinds that come about during a business cycle and can be particularly painful, but there is so much more. The collegeinvestor.com is writing about the crashing credit scores among student loan borrowers. Robert Farrington writes, “For thousands of federal student loan borrowers, the past few weeks have been a wake-up call. As credit monitoring services send out alerts, many are realizing that their credit scores have dropped by over 100 points—some by as much as 200—due to missed student loan payments.” This will lead to higher interest rates, higher car insurance rates, and even a limit on credit completely. This is a real inconvenience but not as much as actually having to pay your student loan payment after a four-year hiatus. Preston Cooper writes about actually collecting again for The Washington Post, “Last week, the Trump administration drew criticism for announcing that the Education Department would resume involuntary collections next month.
In February 2020, the last month before the government paused payments, 60 percent of Nelnet’s borrowers were repaying their debts. Five years later, payments are due again — but the repayment rate has fallen to 38 percent… But even with this factored in, Nelnet’s data shows a spike in delinquencies compared with before the pandemic. A staggering 15 percent of borrowers are more than 90 days delinquent, which is reported to credit bureaus.
If this wave of delinquencies continues, the Education Department has warned that 10 million borrowers — nearly a quarter of the total — could be in default within a few months.”
How many of these borrowers were going to Beyonce Knowles concerts two years ago instead of paying their student loans? My guess is greater than zero. I have been critical of Trump for his ridiculous handling of the tariff situation, but kudos must be given for a couple large items. The border has been secured and that makes everyone seemingly happy. Why, because no one is talking about it. That will mean that there will be less workers, but no one so far has seemed to mind and that is probably because Trump isn’t deporting anyone. His record is behind Biden’s at this point, but the border situation is better. Second, he is starting to have the government treat people like Covid is over, which it has been, forever seemingly.
Dana Gentry writes for the Nevada Current how this might affect the housing market. “Five years of COVID-era relief for federally-insured mortgages has helped millions of American homeowners retain their properties, while artificially inflating home prices and leading to the potential for Bubble 2.0, insist some experts who are hailing a decision from President Donald Trump’s administration, announced Tuesday, to end one program in September… COVID-era mortgage relief, initiated by Trump in 2020 and extended by Biden in 2021, “has created another subprime housing bubble and put taxpayers at risk. Trump should end it,” says a February editorial in the Wall Street Journal. “Under the guise of Covid relief, the Biden administration masked the growing troubles in the housing market by paying off borrowers and mortgage servicers to prevent foreclosures. Of the 52,531 FHA loans last year that went seriously delinquent within their first year, only nine resulted in foreclosure. The national delinquency rate for all mortgages, which topped 10% during the Great Recession, has been rising for more than a year and edged up to 3.53% in February, according to Intercontinental Exchange (ICE), a housing finance company.”
We talked about that very same editorial and now the foreclosures are starting to rise, however we are a long way from another crisis. One could develop as the bubble is bigger than last time. Treasuries have been in a 40 year bull market until the last couple years, the stock market just hits new highs a couple months ago, and the real estate market is less affordable than any time in our country’s history.
The people aren’t the only ones running out of money that came courtesy of the Trump and Biden’s stimulus packages though. This week Los Angeles County workers are going on strike and the broke county can’t afford to pay what they are asking. Jaimie Ding and Jonathan Lloyd write for NBC Los Angeles, “More than 50,000 Los Angeles County workers were on strike again Tuesday, closing libraries and disrupting administrative operations in the nation’s most populous county and organizing a large march in downtown LA.
The two-day walkout that began Monday followed failed negotiations with the county for a new contract after the last one expired in March, according to the Service Employees International Union Local 721… LA County says it’s facing “unprecedented stresses” on its budget, including a tentative $4 billion settlement of thousands of childhood sexual assault claims, a projected $2 billion in impacts related to the LA wildfires in January, and the potential loss of hundreds of millions in federal funding.
“We do not want to negotiate ourselves into a structural deficit — which could lead to layoffs and service reductions,” spokesperson Elizabeth Marcellino said in a statement from the chief executive office. “We are trying to strike a balance: fair compensation for our workforce while sustaining services and avoiding layoffs in the midst of some of the worst financial challenges we have ever experienced.”
Federal funding has dried up. It was drying up and then Doge came and mopped up some of the remainder. Schools, governments, and contractors of city, state, and county are going to be undergoing some serious belt tightening. Layoffs have already started and will accelerate. Last time this happened was during covid and the government had to print almost $10 trillion to get us out of it. What are they going to print this time? It is going to be bigger.
I’ve long speculated that Trump and Bessent were trying to push us into recession. I believe we already are in recession and have been for some time now. We just need to data to be corrected and revised as it always is and it will soon show that we have. However, this is an acceleration into a recession that I can’t recall since 2008. It’s a financial panic type situation. It’s sitting out there like a hurricane beyond the horizon. The day is fairly sunny, the winds are calm, but the fury is coming in like the empty ships from China.
What’s not coming on those ships are products sold by thousands if not millions of small businesses here in America that import goods from China. There are thousands of businesses that sprung up during Covid that utilized the current environment that we were living in. Sell to America, produce in China, import to Americans, rinse repeat. Skin care companies, t-shirts, purses and wallets, you name it the American small business owner in the age of the internet is about to experience their first big recession.
The problem as I see it is that there are too many headwinds. It reminds me of the scene in the Perfect Storm where Clooney and Wahlberg just make it out of the storm only to find out they had been sandwiched between storms instead. That’s where we are. We got a little dose of uncertainty at the beginning of the month, but what happens ahead will be much worse. It will be persistent as one thing hits and another thing hits and then another and another. It is in bad and precarious times that people need to rely on their communities, their friends, and their business partners. This is why it is so disconcerting to see Trump lay a flame thrower to the rest of the world. There will be no one coming to help us. No one. The ever-nice Canadians just elected another liberal as Prime Minister Carney’s greatest accomplishment was to stand up against Trump. The FT is reporting that even the Danes are boycotting Coca-Cola. Is nothing sacred?
This leads us to the big one, the real problem and yes, it is who is going to buy the bonds. However, Simon White, Bloomberg macro strategist writing via ZeroHedge, gives us some more color, “A capital war is the next logical step after the trade war, with downside for Treasuries, risk assets, and the dollar.
Trade wars are damaging for markets and the economy. But their logical consequence – a capital war – could do even more harm. The imbalances that have built up will cause potentially trillions of dollars of capital to shift around the globe, generating instability and likely prompting governments to take action to limit or direct its flow. The dollar faces a secular weakening, other currencies are at risk of overvaluation, while US assets are exposed to capital outflows… Simply speaking, the US owns too few foreign assets relative to what foreigners own of the US, and vice versa for trade-surplus countries, who often own US assets. The logical consequence of tariff policy is that imbalances will shrink. Trade nationalism will lead to capital nationalism.
And the imbalances are big. The gap between total assets and liabilities (the net international investment position, or the sum of previous financial account balances including valuation effects) is trillions of dollars for several countries. The US is a true outlier, having an NIIP of -$26 trillion. The vast proceeds from the US’s large trade deficits over many years have ended up back in US capital markets and US non-financial assets.”
It would be naïve to think that if America goes into recession that the rest of the world gets away scot-free. They won’t, but what they can do is protect themselves by selling US assets. Bonds, equities, and real estate are what they can sell and when that wave hits the shores of America the bond market hiccup three weeks ago was just a burp. Wave after wave and trillions upon trillions of selling as everyone races to nationalize their own situations. The sell offs will be extreme and this is what worries me most in all this…Does the government let it happen or do they print money like poop through a goose. If they choose the latter, the American way of life is over forever eventually. If they choose the former, the pain will be other-worldly. Enjoy the calm, because the storm could be arrive as early as Friday’s jobs report. I think the phony numbers are over, the forclosure delays are over, the student loan forbearance is over. Good times are over. I hope you got to see the Knowles lady two years ago…
Sincerely Yours,
C Thomas Printer
Also born on this date… the highwayman, Willie Nelson.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.