What we’re reading (5/9)
“Baffled By The Trump Tariffs, C.E.O.s Lean On The Word ‘Uncertainty’” (New York Times). “Corporate America is stumbling in the dark, and so are investors. Ford and General Motors executives say they can’t estimate what lies ahead. There’s too much fog even to hazard a guess, so both companies have suspended earnings guidance — signals about future sales and profits — leaving investors to navigate on their own. And the automakers are not the only ones. A broad range of companies, including Delta Air Lines, Southwest Airlines, the footwear company Skechers, UPS and the engine manufacturer Cummins, say they can’t talk confidently about the future.”
“Wall Street Bonuses Could Drop As Much As 20% Because Of Trump Tariff Turmoil” (New York Post). “Bonuses on Wall Street could plunge by as much as 20% as dealmaking dries up and the stock market whipsaws because of economic turmoil caused by President Donald Trump’s trade war, according to a top consultancy. Johnson Associates, a compensation specialist, said deals have all but ground to a halt over Trump’s threats to slap stiff tariffs on imported goods. In its latest outlook report released Thursday, the firm predicted a 10% cut to bonuses for investment bankers as ‘expected M&A ‘mania’ disappoints with economic uncertainty’ over the looming heavy levies.”
“Paper Strips, Floppy Disks, And 1940’s Tech: Let’s Modernize Our Air Traffic System” (The Hill). “The root of the problem? The U.S. still relies on outdated, decades-old technology to maneuver jumbo jets. While other countries have embraced digital displays and infrared-based systems, American air traffic controllers are trained to use paper strips, floppy disks and World War II-era radar technology.”
“There’s A National Egg Crisis, And One Company Is Making A Lot Of Money” (Wall Street Journal). “Eggs are the most visible symbol of the toll that inflation is taking on U.S. consumers, and no one sells more of them than Cal-Maine. Its 50 million hens produce roughly one out of every five eggs sold in the U.S. As egg prices have tripled in three years during a nationwide bird-flu epidemic, its stock has doubled…Prices for a lot of major commodities like hogs, corn, wheat, soybeans and cattle trade on markets run by exchange operator CME Group. Futures trading in these commodities can help farmers and businesses hedge against price fluctuations. Eggs are different. The egg industry relies on contracts between a customer, like Walmart or Kroger, that wants to buy a certain amount of eggs from a supplier like Cal-Maine.”
“Convergence? Thoughts About The Evolution Of Mainstream Macroeconomics Over The Last 40 Years” (Olivier Blanchard). “This year marks the 40th anniversary of the NBER Macro Annual Conference, founded in 1986. This paper reviews the evolution of mainstream macroeconomics since then. It presents my views, informed by a survey of a number of researchers who have made important contributions to the field. I develop two main arguments. The first is that, starting from strikingly different positions, there has been substantial convergence, in terms of methodology, architecture, and main mechanisms. The second is that this convergence has been, for the most part, good convergence, i.e., the creation of a generally accepted conceptual and analytical structure, a core to which additional distortions can be added, allowing for discussions and integration of new ideas and evidence, rather than fights about basic methodology.”
What we’re reading (5/8)
“U.S. And U.K. Unveil Framework For Trade Deal” (Wall Street Journal). “The pact, which appeared to have been put together hastily by U.S. and British officials, is fairly limited in scope. The Trump administration agreed to roll back tariffs imposed on British steel and automobiles in exchange for purchasing Boeing jets and giving American farmers greater access to U.K. markets.”
“Musk-Tied Investor Clashes With One Of World’s Biggest Asset Managers” (New York Times). “A prominent Silicon Valley investor is in a bitter dispute with his former employer, one of the world’s largest asset managers, accusing it of fraud and attempted bribery. In a lawsuit filed on Thursday in California, Josh Raffaelli, who until late last year was a fund manager at Brookfield Asset Management, said the company had mistreated investors in his funds as it sought to make up for losses in other parts of its business. The 100-page complaint is notable in part because Mr. Raffaelli has close ties to Elon Musk, the world’s richest man. That relationship enabled Mr. Raffaelli’s funds to put money into Mr. Musk’s private companies, a coveted opportunity in Silicon Valley. But among Mr. Raffaelli’s allegations is that Brookfield improperly limited the amount that he could invest in a Musk company on behalf of Brookfield’s clients.”
“Valuations Have Dropped, But Not Enough To Be ‘Cheap’” (Institutional Investor). “The key question now is whether earnings will hold up. Consensus expectations for Q1 and Q2 have been revised downward, while the second half of the year remain largely unchanged. Analysts are closely watching the Q1 earnings season to see if companies begin guiding lower for the back half of the year – tariffs could serve as a convenient rationale. Meanwhile, the percentage of companies with rising earnings estimates has dropped from 47% to 35%, edging closer to the 27% level that historically signals a broader weakness.”
“America’s Largest Real Estate Brokerages Are Fighting Over Private Listings” (CNN Business). “Compass has denied the accusation that it pushes sellers into private transactions. Instead, the company said many sellers choose to list their homes privately before sharing their homes more widely on the multiple listing service (MLS), which is a database that agents from all companies use to share home listings with each other. Most MLS listings are automatically picked up by homebuying websites like Zillow and Redfin.”
“Leo XIV, Elevated By Francis, Becomes First American Pope” (Washington Post). “As the sun set Thursday over St. Peter’s Basilica, a 69-year-old prelate who began his calling as a Chicago altar boy stepped onto the central balcony as the first American pope, stunning Vatican City and the world by breaking the long-standing taboo of electing the son of a global superpower to lead the Catholic Church.”
What we’re reading (5/7)
“Fed Warns Of Rising Economic Risks As It Leaves Rates Steady” (Wall Street Journal). “The Federal Reserve warned that tariffs were raising risks of higher unemployment and higher inflation when officials unanimously agreed to hold interest rates steady on Wednesday. ‘If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,’ Fed Chair Jerome Powell said at a news conference.”
“Countdown To China Trade Talks” (DealBook). “Treasury Secretary Scott Bessent said that the focus of the talks, which will involve Jamieson Greer, the United States trade representative, and He Lifeng, China’s vice premier for economic policy, would be more about de-escalation than achieving immediate tariff relief.”
“Buffett’s Bet Of The Century” (Financial Times). “Due to legal restrictions on gambling in some US states, the bet was arranged through something called Long Bets, a forum for big wagers on the future backed by Amazon’s Jeff Bezos. Although seemingly frivolous, friendly gambles can have a lot of power. In 1600, Johannes Kepler entered into a bet with a Danish astronomer that he could calculate a formula for the solar orbit of Mars in eight days. In the end it took him five years, but the work help revolutionise astronomy.”
“Amazon Unveils Hi-Tech Robots That Could Replace Huge Numbers Of Warehouse Workers” (Mirror). “The machines, called Vulcan, have cutting-edge technology that learn to ‘feel’ and have a human-like sense of touch. By doing so, they can carry out detailed picking and packing in warehouses that until now could only be done by people. It paves the way for the robots to take over jobs currently done by workers in Amazon’s vast warehouses - known as fulfilment centres - in the UK and around the world. Amazon, founded by billionaire Jeff Bezos, employs around 75,000 people in the UK alone, most of them in warehouses. Globally, it has about 1.5 million employees.”
“Young Banker’s Death That Sparked Backlash Against Jefferies Involved Fentanyl And Cocaine, Autopsy Reveals” (Business Insider). “Carter McIntosh, an associate with the bank's technology, media, and telecommunications coverage team in Dallas, was found dead in his apartment in January, leading Jefferies CEO Richard Handler to issue a memo defending the bank from ‘unfounded’ speculation about the banker's cause of death. The police initially ruled it an ‘unexplained death.’ An autopsy report by the medical examiner's office now says McIntosh's death was an accident caused by the ‘combined toxic effects’ of fentanyl and cocaine, according to a copy of the report obtained by Business Insider.”
What we’re reading (5/6)
“U.S. And Chinese Officials To Meet Amid Trade War” (Wall Street Journal). “Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer are traveling to Switzerland on Thursday to meet Beijing’s lead economic representative, potentially paving the way for broader trade talks. Bessent and Greer are expected to meet with Chinese Vice Premier He Lifeng, leader Xi Jinping’s economic czar, according to people familiar with the matter.”
“Stock Market Bulls Have Gone Into Hiding. Why Our Money Pros Are The Most Bearish In Nearly 30 Years.” (Barron’s). “America’s money managers are more bearish today than they have been in nearly 30 years. Barron’s latest Big Money poll of professional investors finds 32% of respondents bearish on the outlook for stocks over the next 12 months—the highest percentage since at least 1997. Just think about all the crises investors have weathered since then: the bursting of the dot-com bubble, the 9/11 terrorist attacks, the collapse of Lehman Brothers and the 2008-09 financial crisis, the Covid-19 pandemic. And yet the Big Money pros are more anxious now than during any of those painful points for the financial markets, the economy, and the country. The bulls’ ranks also stand at historic levels in our spring survey—historically low, that is. Just 26% of respondents call themselves bullish on the market’s prospects, the smallest percentage since 1997.”
“Traders Bet It Will Take Longer For Fed To Start Cutting Rates” (Bloomberg). “Traders are betting on a slower pace of interest-rate cuts from the Federal Reserve this year, with economic resilience forcing policymakers to remain on hold for longer before easing more sharply in 2026. Just a day ahead of the US central bank’s latest policy decision, money markets are pricing three quarter-point reductions this year, one less than at the start of April. About a half point of additional cuts are expected next year, the most priced in for 2026 at any point in the current easing cycle.”
“A New Study Raises Alarms About Plastics And Heart Disease. Here’s What To Know.” (New York Times). “The news made for an alarming headline this week: Research showed that common chemicals in plastics were associated with 350,000 heart disease deaths across the world in 2018…[w]hile experts agree that phthalates are harmful, they cautioned that the study relied on complex statistical modeling and a series of assumptions and estimates that make it difficult to determine how many deaths might be linked to the chemicals…In the latest study, researchers attempted to quantify global cardiovascular deaths attributable specifically to one type of phthalate, known as DEHP. One of the most widely used and studied phthalates, DEHP is found in vinyl products including tablecloths, shower curtains and flooring.”
“How Could Tesla Replace Elon Musk?” (The Week). “Will he stay or will he go? Tesla last week shot down a report that its board is searching for a new CEO to replace Elon Musk atop the company. But questions about the company's future are not going away. Finding somebody to take Musk's place is a ‘huge challenge’ for Tesla, said Axios. There are three ‘practically unanswerable’ questions about the process: Who could take his place? How would Musk react? What would investors think? The questions may soon need answering. Tesla has ‘suffered declining sales’ since Musk made himself the face of the Trump administration's government-slashing efforts. Despite the company's stumbles, any new CEO ‘will be operating in Musk's shadow.’”
April performance Review
April:
Prime: -3.09%
Select: -0.50%
SPY ETF: -0.52%
Bogleheads (80% VTI + 20% BND): -0.24%
Year-to-date 2025:
Prime: -1.99%
Select: +6.15%
SPY ETF: -5.10%
Bogleheads (80% VTI + 20% BND): -2.91%
May picks available now
The new Prime and Select picks for May are available starting now, based on a model run put through Today (April 30). As a note, I will be measuring the performance on these picks from the first trading day of the month, Thursday, May 1, 2025 (at the mid-spread open price) through the last trading day of the month, Friday, May 30, 2025 (at the mid-spread closing price).
May picks available soon
I’ll be publishing the Prime and Select picks for the month of May before Thursday, May 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of April, as well as SPC’s cumulative performance, will assume the sale of the April picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Wednesday, April 30). Performance tracking for the month of May will assume the May picks are bought at the open price (at the mid-point of the opening bid and ask prices) on the first trading day of the month (Thursday, May 1).
What we’re reading (4/26)
“A Reckoning For The Magnificent Seven Tests The Market” (Wall Street Journal). “[E]ven after a rally this past week, the Magnificent Seven are off to their worst start to a year since the 2022 slide, according to Dow Jones Market Data. Each stock has fallen more than 6.5%, and they have collectively lost $2.5 trillion in market value. The Roundhill Magnificent Seven exchange-traded fund just posted its best four-day run ever, notching a 13% climb—that still left it down about 15% this year.”
“The Mystery Behind Gold’s Bull Market” (MarketWatch). “Gold’s recent meteoric rise above $3,400 might continue even further. But I know of no way to have much confidence that it will. That’s because none of the many theories advanced to explain gold’s rise are objectively provable.”
“The S&P 500’s Half-Decade Golden Age Of High Valuations Is Over, Bank Of America Says” (Business Insider). “Since 2020, investors have been willing to pay a premium relative to S&P 500 company earnings. So-called price-to-earnings ratios have been elevated thanks to mammoth stimulus efforts amid the pandemic and excitement around artificial intelligence developments. The optimistic outlook has propelled stocks to 146% gains from COVID-19 lows. Over that time, S&P 500 PE ratios on a trailing 12-month basis have barely dipped below 20 times and have risen as high as 41x. The average PE ratio during the last five years was just shy of 26x.”
“Large Language Models, Small Labor Market Effects” (Anders Humlum and Emilie Vestergaard). “We examine the labor market effects of AI chatbots using two large-scale adoption surveys (late 2023 and 2024) covering 11 exposed occupations (25,000 workers, 7,000 workplaces), linked to matched employer-employee data in Denmark. AI chatbots are now widespread—most employers encourage their use, many deploy in-house models, and training initiatives are common. These firm-led investments boost adoption, narrow demographic gaps in take-up, enhance workplace utility, and create new job tasks. Yet, despite substantial investments, economic impacts remain minimal. Using difference-in-differences and employer policies as quasi-experimental variation, we estimate precise zeros: AI chatbots have had no significant impact on earnings or recorded hours in any occupation, with confidence intervals ruling out effects larger than 1%. Modest productivity gains (average time savings of 2.8%), combined with weak wage pass-through, help explain these limited labor market effects. Our findings challenge narratives of imminent labor market transformation due to Generative AI.”
“Consumer Sentiment Plunges 8%” (CNN Business). “Consumer sentiment plunged 8% in April from the prior month, to a final reading of 52.2, the University of Michigan said in its latest survey released Friday. That was a slightly smaller decline than a preliminary reading from earlier this month, which didn’t capture people’s reaction to Trump’s 90-day tariff delay announced on April 9.”
What we’re reading (4/23)
“Stocks Rally, Swayed By White House Comments On Fed, Tariffs And Trade” (New York Times). “A stock market surge on Wednesday was again fueled not by concrete evidence of policy changes, but by off-the-cuff comments from President Trump and other officials, as investors latched onto scraps of information about tariffs, trade and other crucial issues that can shift from day to day. Wall Street’s drastic swings this week — a sharp sell-off on Monday, followed by two big daily rallies — highlight how investors are swayed by the latest headlines amid the confusion and uncertainty about the White House’s intentions.”
“Huge Stock Swings Are The New Normal For Frazzled Investors” (Wall Street Journal). “The trade war’s swings—both higher and lower—have left many investors on edge. The S&P 500 has gained or lost at least 1% in seven of the past 10 sessions, and April is poised to be the most-volatile calendar month since the Covid crash in 2020, according to Dow Jones Market Data.”
“Markets Think They Hold All The Cards Over Trump” (Wall Street Journal). “The power of the markets isn’t magical. Asset prices are just many people assessing the prospects for the economy and future returns, and concluding that neither 145% tariffs on China nor Trump interfering in setting interest rates would be good for them. Markets are a live opinion poll of money. In that sense, they matter to Trump. But there is no assurance that he will be ruled by them. Sometimes doing what’s best for the country might be bad for stocks (tax rises) or bad for bonds (tax cuts) or bad for the dollar (rate cuts or a war, for example).”
“China’s ‘Bleeding’ Exporters Have 3 Options. All Of Them Are Bad.” (Barron’s). “Beneath the fluorescent lights of a warehouse in Foshan, a city in southern China, Liu Wenyi watches as workers tape shut boxes of ceramic teapots destined for no one. The buyer in California canceled the order last week, just after new U.S. tariffs pushed the total duty on her products above 150%.”
“Driverless Trucks Are Rolling In Texas, Ushering In New Era” (Axios). “Drivers along a 200-mile stretch of I-45 between Dallas and Houston should get ready for something new: the semi-truck in the next lane might not have anyone in the driver's seat.”
What we’re reading (4/22)
“Dow Jumps 1,000 Points Tuesday To Snap Four-Day String Of Losses” (CNBC). “Stocks rallied Tuesday on hopes that U.S.-China trade tensions could ease soon, as investors recovered from the steep declines suffered in the previous session…The major averages spiked on news that Treasury Secretary Scott Bessent told a group of investors Tuesday that there ‘will be a de-escalation’ in the trade war with China. ‘No one thinks the current status quo is sustainable,’ he said during a meeting with investors hosted by JPMorgan Chase, according to a person in the room.”
“Trump Says He Has ‘No Intention’ Of Firing Fed Chair Powell” (Wall Street Journal). “President Trump said he is not planning to fire Federal Reserve Chairman Jerome Powell and he signaled that tariffs on China could be lowered, prompting relief from investors who had been spooked by the White House’s aggressive moves in recent weeks. ‘I would like to see him be a little more active in terms of his idea to lower interest rates…but, no, I have no intention to fire him,’ he told reporters in the Oval Office.”
“Futures Rise After Trump Comments On China, Powell” (Yahoo! Finance). “Futures for the major stock indexes opened higher after President Trump said he is not planning on firing Federal Reserve Chairman Jerome Powell and that tariffs on goods from China will ultimately be less than 145%.”
“S&P 500 Bounce Has Traders Fearing Another Head-Fake Market” (Bloomberg). “Wall Street pros have a warning for investors eager to jump back into the stock market as it rebounds Tuesday: Watch out for headfakes in the middle of a longer-term decline…’I think what we’re seeing now is about as myopic a market as we’ve ever seen,’ said Michael Kantrowitz, chief investment strategist at Piper Sandler & Co.”
“Elon Musk Says He Will Spend Less Time in Washington as Tesla’s Profit Drops 71%” (New York Times). “Elon Musk, Tesla’s chief executive, said on Tuesday that he would spend less time in Washington working for President Trump after the automaker reported a profit drop of 71 percent in the first three months of the year. Mr. Musk told Wall Street analysts in a conference call that he would continue to spend ‘a day or two per week’ on Washington matters, probably for the duration of Mr. Trump’s presidency. The billionaire executive is one of Mr. Trump’s closest confidants and has played a leading role in the president’s efforts to slash government spending and cut tens of thousands of federal government jobs.”
What we’re reading (4/21)
“It’s Gotten Riskier To Be A Long-Term Investor” (New York Times). “Many people can ignore these shifts and hang on to their government bonds and bond funds. And those looking to lock in high yields may find occasional bargains, when Treasury yields jump close to 5 percent, as they did earlier this month. But everyone — even if not an investor — is being exposed to innumerable risks that may not be entirely appreciated.”
“Why It’s So Difficult For Robots To Make Your Nike Sneakers” (Wall Street Journal). “Nike’s effort was the boldest. The company aimed for large-scale automated production in under a decade, which it said would save on labor costs and allow it to deliver new models of shoes to Americans faster…The effort quickly ran into trouble. The robots struggled to handle the soft, squishy and stretchy parts that are integral to shoemaking. Shoe fabrics also expand and contract depending on the temperature, while in shoemaking no two soles are exactly alike. Human workers can adapt to such challenges, but it proved difficult for machines.”
“The Pepperoni Price Index” (Business Insider). “‘This happens every sort of downturn in the economy — there’s increased demand for premium frozen pizzas, high-priced frozen pizzas,’ said Craig Zawada, the chief visionary officer at Pros Holdings, a price optimization company. It’s a bit counterintuitive, he added, since you'd think consumers are more cost-conscious, but it's actually a trade that makes sense because ‘they’re replacing eating out to having a good frozen pizza at home.’”
“Long-Run Effects Of Trade Wars” (David Baqee and Hannes Malmberg). “[This paper] shows that accounting for capital adjustment is critical when analyzing the long-run effects of trade wars on real wages and consumption. The reason is that trade wars increase the relative price between investment goods and labor by taxing imported investment goods and their inputs. This price shift depresses capital demand, shrinks the long-run capital stock, and pushes down consumption and real wages compared to scenarios when capital is fixed. We illustrate this mechanism by studying recent US tariffs using a dynamic quantitative trade model. When the capital stock is allowed to adjust, long-run consumption and wage responses are both larger and more negative. With capital adjustment, U.S. consumption can fall by 2.6%, compared to 0.6% when capital is held fixed, as in a static model. That is, capital stock adjustment emerges as a dominant driver of long-run outcomes, more important than the standard mechanisms from static trade models — terms-of-trade effects and misallocation of production across countries.”
“Pope Francis, First Latin American Pontiff Who Ministered With A Charming, Humble Style, Dies At 88” (Associated Press). “Pope Francis, history’s first Latin American pontiff who charmed the world with his humble style and concern for the poor but alienated conservatives with critiques of capitalism and climate change, died Monday. He was 88.”
What we’re reading (4/19)
“Trump To Replace Acting IRS Commissioner” (Wall Street Journal). “President Trump is replacing the acting IRS commissioner that he appointed just three days earlier, according to people familiar with the matter, making a sudden shift that continues an unusual upheaval at the tax agency. Deputy Treasury Secretary Michael Faulkender will now run the Internal Revenue Service on an acting basis, becoming the fifth person to hold that job so far this year.”
“Trump Studying If Removing Powell Is Option, Hassett Says” (Bloomberg). “Donald Trump is studying whether he’s able to fire Federal Reserve Chairman Jerome Powell, his top economist said Friday, a day after the president publicly criticized the head of the central bank for not moving fast enough to slash interest rates.”
“Strange Sell-Off In The Dollar Raises The Specter Of Investors Losing Trust In The US Under Trump” (Associated Press). “Among the threats tariffs pose to the U.S. economy, none may be as strange as the sell-off in the dollar. Currencies rise and fall all the time because of inflation fears, central bank moves and other factors. But economists worry that the recent drop in the dollar is so dramatic that it reflects something more ominous as President Donald Trump tries to reshape global trade: a loss of confidence in the U.S.”
“Capital One And Discover Merger Approved By Federal Reserve” (CNBC). “Capital One first announced it had entered into a definitive agreement to acquire Discover in February 2024. It will also indirectly acquire Discover Bank through the transaction, which was approved by the Office of the Comptroller of the Currency on Friday.”
“OpenAI’s Latest Move Makes It Harder For Rivals Like DeepSeek To Copy Its Homework” (Business Insider). “In a bid to protect its crown jewels, OpenAI is now requiring government ID verification for developers who want access to its most advanced AI models.”
What we’re reading (4/17)
“Trump Again Calls For Fed To Cut Rates, Says Powell’s ‘Termination Cannot Come Fast Enough’” (CNBC). “A senior White House official told CNBC that the post should not be seen as a threat to fire Powell, but rather as a reinstatement of Trump’s frustrations with the Fed chief. However, Trump doubled down on his post later in the day, telling reporters: ‘I don’t think he’s doing the job. He’s too late, always too late … Slow, and I’m not happy with him. I let him know it, and if I want him out, he’ll be out of there real fast, believe me.’ Trump also ignored multiple follow-up questions on whether he was trying to remove Powell.”
“Private Equity World Engulfed By Perfect Storm” (Wall Street Journal). “One of Wall Street’s most consistent profit engines is close to breaking down. Even before President Trump’s tariff chaos, buyout firms had been struggling to sell their portfolio companies and return money to anxious investors. Now recession fears and market turmoil have brought dealmaking to a near standstill…The longer the deal logjam lasts, the harder it will be for firms to hand money back to clients such as pensions and endowments. The amount of unrealized value the funds owe their investors has hit record levels, according to an analysis by credit-ratings firm Moody’s Ratings. That makes it tougher for the firms to raise new funds.”
“Moody’s Boosts Default Forecasts As Global Trade War Heats Up” (Bloomberg). “The credit-grading firm said it now sees the default rate for speculative-grade companies reaching 3.1% by the end of the year, compared with its prior expectation of 2.5%. If that forecast materializes, it would still amount to a decline in the default rate from the year prior, but Moody’s says it wouldn’t take a major negative shock for the rate to rise instead, possibly to as high as 6%.”
“Why Trump Will Lose His Trade War” (Paul Krugman). “The overall point is that even relatively sophisticated Trumpers like Bessent are still thinking in terms of Chinese access to the markets of the United States and our imagined trade war allies, when the real issue now is whether China can strangle the U.S. economy by disrupting our supply chains.”
“Why Value Investors Are Looking At Japan, Korea, And Brazil” (Institutional Investor). “In speaking this week to Dave Iben, portfolio manager at Kopernik Global Investors, who was also present at the event, the implication was that this is in fact feeding time at the value investor zoo. While the U.S. has seen sharp decreases, it remains expensive, he believes and because the shocks are being felt around the world there are in fact increased opportunities to buy companies that have been identified as undervalued elsewhere.”
What we’re reading (4/15)
“Treasury Secretary Scott Bessent To Yahoo Finance: Not All Tariff Deals Will Be Done In 90 Days” (Yahoo! Finance). “‘Let's set aside China. There are 15 large trading partners. We set aside China. There are 14, and we're in rapid motion and setting up a process for the 14 largest trading partners, most of whom have very large deficits. So, in 90 days, are we going to have a complete doc, a formal legal document done and dusted? Not likely,’ US Treasury Secretary Scott Bessent told Yahoo Finance Tuesday in an exclusive interview. ‘But I think if we follow the process, we could have substantial clarity on those 14 away from China in terms of agreements in principle. And then once we reach a level that we've agreed on and they've agreed to lower their tariffs, lower their non tariff barriers, currency manipulation, and subsidies of industry and labor, then I think we can move forward,’ he continued.”
“Is Dollar Weakness A Panic Signal Or Healthy Rebalancing?” (Joachim Klement). “In short, we may be seeing the end of U.S. exceptionalism in real time. But it is not the end of the U.S. dollar as the world’s reserve currency. What we are witnessing is likely a rebalancing of international investment portfolios, which, over the last decade, have become increasingly concentrated in U.S. assets. For example, the U.S. share of the MSCI World stock market index has risen from 48% in 2010 to 73% today. In a way, this is reminiscent of what occurred after the tech bubble burst in 2000. Back then, investors gradually reduced their U.S. portfolio allocations in favour of European and Asian investments after the U.S. market share in the MSCI World had risen from 40% to 60% in just five years.”
“Fed Resists Pressure To Rescue Treasury Market” (Semafor). “[T]he Fed isn’t accelerating regulatory changes that would encourage banks to load up on government debt, people familiar with the matter said, even though Treasury Secretary Scott Bessent and JPMorgan CEO Jamie Dimon both support the idea. Tweaks to rules that currently penalize banks for holding big slugs of Treasury bonds are instead winding their way through a painstaking internal process that could take months, the people said.”
“Inside Mark Zuckerberg’s Failed Negotiations To End Antitrust Case” (Wall Street Journal). “Mark Zuckerberg called the head of the Federal Trade Commission in late March with an offer: Meta would pay $450 million to settle a long-running antitrust case that was about to go to trial. The offer was far from the $30 billion that the FTC had demanded…[o]n the call, Zuckerberg sounded confident that President Trump would back him up with the FTC, said people familiar with the matter…FTC Chairman Andrew Ferguson found the offer not credible, and wasn’t ready to settle for anything less than $18 billion and a consent decree. As the trial approached, Meta upped its offer to close to $1 billion, the people said, and Zuckerberg led a frenzied lobbying effort to avoid the FTC trial. It wasn’t enough. On Monday, the trial kicked off.”
“Red-Hot Netflix Is Proving Itself As A Recession-Resistant Stock” (Insider). “As major stock indexes have gotten off to a rocky start this year, Netflix has been a beacon of strength, handily outpacing the broader market and its mega-cap tech peers. The company has climbed more than 10% since the start of January, compared to an 8% loss for the S&P 500 and an even-sharper 17% decline for the elite Magnificent 7 cohort.”
What we’re reading (4/14)
“Put The P/E Ratio In Timeout For Now” (TKer). “The forward price-earnings (P/E) multiple has limited value during normal times. And the metric arguably has even less value during periods of elevated uncertainty. That’s because the E is based on analysts’ estimates for the near future. And when the outlook for business is increasingly uncertain and rapidly changing, it can take time for many analysts to adjust that E. This is especially the case right now as many companies have not yet factored the impact of tariffs into their guidance, which analysts lean on when they establish their earnings forecasts.”
“Tim Cook’s ‘Long Arc Of Time’ Prepared Apple For The Trade War” (Wall Street Journal). “Tim Cook and his adherence to the “long arc of time” won—again. The iPhone is exempt from the White House’s latest escalation of the trade war with China, the Trump administration quietly announced late Friday. The disclosure came after more than a week of existential dread. At one point, Apple had lost almost $800 billion of market value after Trump officials claimed imposing sky-high tariffs on Chinese-made goods would shift iPhone assembly to American factories.”
“China Suspends Rare Earth Exports, Kneecapping US Industry Reliant On Beijing’s ‘Monopoly’” (New York Post). “China has stopped shipping some heavy rare earth metals and magnets critical to US production of everything from cell phones to fighter jets as Beijing’s trade war with Washington simmers, leaving American industry in a bind. Effective April 3, China is no longer exporting seven heavy rare earth metals processed exclusively in the Asian power, as well as heavy rare earth magnets — of which about 90% of the world’s supply are also synthesized on Beijing’s territory.”
“China Can’t Spend Its Way Out Of Trouble” (Project Syndicate). “China’s prolonged reliance on fiscal stimulus has distorted economic incentives, fueling a housing glut, a collapse in prices, and spiraling public debt. With further stimulus off the table, the only sustainable path is for the central government to relinquish more economic power to local governments and the private sector.”
“Tariffs, Saving, And Investment” (John Cochrane). “I haven’t written much about tariffs, because so many other economists are doing such a great job. Tariffs are easy: The right answer is unilateral free trade. Tariffs are hard: The rest is explaining why 100 objections are wrong. I’ll get there. One aspect is less clear than the others: the whole business about saving, investment, “reserve currency” and so forth. Most economists reacted in horror at CEA chair Stephen Miran’s essay claiming that US reserve currency status — that we can print money, send it abroad and other countries work hard and send us stuff in return — is a burden for the US. Actually there is a kernel of logic here, and a great danger, though tariffs will do absolutely nothing to rectify the situation at least without huge economic cost.”
What we’re reading (4/12)
“Wall Street’s ‘Smart Money’ Braced for Tariff Chaos. It Was Still Caught Off Guard.” (Wall Street Journal). “Hedge-fund manager Edouard de Langlade had the best trading day of his career after President Trump unveiled his sweeping ‘Liberation Day’ tariffs. Markets plunged the following day, resulting in a huge payoff for Langlade’s multibillion-dollar bet against U.S. stocks and the dollar. ‘When Trump was elected, I thought, ‘The crash is about to come,’’ said de Langlade, founder of Swiss hedge-fund firm EDL Capital, which gained 6% that day. What he didn’t fully see coming: Stocks ripping higher Wednesday after Trump delayed most of his so-called reciprocal tariffs.”
“Investors Are Growing Concerned About A U.S. Asset Exodus As Treasuries And The Dollar Decline” (CNBC). “The April sell-off for financial markets has been wider and more volatile than typical pullbacks, fueling concern that the aggressive and constantly changing trade policy from Washington, D.C. could be doing long-term damage to the financial standing of the U.S.”
“America Risks ‘Moron Premium’ After Trump’s Tariffs Chaos” (The Telegraph). “After Liz Truss’s ill-fated mini-Budget blew up the bond market three years ago, the former prime minister was forced into an embarrassing climbdown. As well as sacking her chancellor Kwasi Kwarteng, she also quickly unwound her package of unfunded tax cuts to keep the markets at bay. However, despite the radical reversal, borrowing costs did not return to their old levels and Britain was left paying what was unkindly dubbed a ‘moron premium’. The US is now at risk of suffering a similar fate.”
“What We’ve Learned From 150 Years Of Stock Market Crashes” (Morningstar). “So, what does this history tell us about navigating volatile markets? Mainly, that they’re worth navigating. The markets recovered after their stressful period in 2022—just as they did after a 79% decline in the early 1930s. And that’s the point: Market crashes always feel scary when they happen, but there’s no way to know right now whether we’re encountering a minor correction or looking down the barrel of the next Great Depression.”
“The Russian Paradox” (Marginal Revolution). “So much education, so little human capital”.
What we’re reading (4/10)
“Stocks Dive Again As Angst Rises Over Trump’s Trade War” (New York Times). “The S&P 500 tumbled 3.5 percent on Thursday, signaling renewed investor concern about the worsening trade war with China and the destabilizing effects of President Trump’s tariff policies. One day after the stock market had its best day since 2008 as it reacted to Mr. Trump’s decision to postpone many of his tariff plans for three months, Thursday saw a significant portion of those gains wiped away. Early Thursday, the president clarified that he had raised tariffs on Chinese goods by a total of 145 percent since taking office.”
“How The Bond Market Helped Make Trump Blink On Tariffs: ‘I Was Watching It.’” (Yahoo! Finance). “President Trump hit the pause button on reciprocal tariffs — and the bond market convinced him. In the lead-up to the president's pivot, markets were unraveling: Stocks slid sharply, with the S&P 500 on the brink of a bear market. But the real alarm bell? A sharp, unexpected surge in long-term Treasury yields — a move that seemed to force the president’s hand. ‘The bond market is very tricky. I was watching it,’ Trump admitted to reporters shortly after the announcement. ‘People were getting a little queasy.’”
“The U.S. And China Are Going To Economic War—And Everyone Will Suffer” (Wall Street Journal). “Many businesses had begun to adjust to a reality of higher tariffs that started during the first Trump administration. But if the new tariffs remain, they face a loss of access to Chinese production altogether—with profound changes for American consumers. Americans, already stressed from a 24% rise in prices over the past five years, could end up paying even more for a smaller selection of everyday goods. Many businesses had begun to adjust to a reality of higher tariffs that started during the first Trump administration. But if the new tariffs remain, they face a loss of access to Chinese production altogether—with profound changes for American consumers. Americans, already stressed from a 24% rise in prices over the past five years, could end up paying even more for a smaller selection of everyday goods.”
“Retail Investors Are Running Head First Into This Topsy-Turvy Market” (CNBC). “Institutional investors ran for the hills during that week, causing the S&P 500 to briefly dip into bear market territory, which refers to a 20% drop from recent highs. But data from market insights firm Vanda Research, a trusted authority on retail investor trends, showed mom-and-pop traders…doing the exact opposite. ‘What marks an equity drawdown? It’s usually retail capitulation as the final shoe to drop,’ said Marco Iachini, vice president of research at Vanda. ‘We’re clearly not seeing that.’”
“Robot Rogue Traders Could Rule World And Make Bankers Even Richer, Experts Warn” (The Daily Star). “Bots are increasingly being used by financial companies hoping to develop new investment strategies, cut down on dull administrative tasks and automate decision-making around loans. A recent International Monetary Fund report showed more than half of all patents - new financial plans - produced by trading firms are related to AI.”
What we’re reading (4/8)
“Stocks Slide Again As US Forges Ahead With 104% Tariffs On China” (Reuters). “The United States said on Tuesday that 104% duties on imports from China will take effect shortly after midnight, even as the administration of President Donald Trump moved to quickly start talks with other trading partners targeted by sweeping tariffs.”
“Trump’s Tariffs Put Fed Chair Powell In A ‘No-Win Situation’” (Wall Street Journal). “Federal Reserve Chair Jerome Powell is facing an increasingly dreadful task. Economists, business owners and investors are betting that the uncertainty created by the sudden rollout of President Trump’s large tariff hikes, many of which are set to take effect Wednesday, will push the economy closer to a recession by weakening hiring and spending. That would call for cutting rates to cushion any downturn. At the same time, the magnitude of tariff increases is likely to lead prices to rise substantially for many imported goods, including materials used by domestic manufacturers.”
“A Contagion Of Uncertainty” (Tyler Cowen, The Free Press). “It is not merely that the policies keep on changing. We are seeing that the policies didn’t have much of a rational basis to begin with. Exactly how were all those threatened tariff rates calculated to begin with? A debate is raging across the internet and social media, but it seems they did not have much of a logical basis. We even were ready to put a tariff rate of 10 percent on the Heard Island and McDonald Islands (where?), which are inhabited mostly by penguins. Not a single step of this process has inspired confidence.”
“Signs Of Wall Street Stress Pile Up Amid Trump Tariff Turmoil” (Yahoo! Finance). “One concerning development is that there were no new offerings in the investment-grade and high-yield bond markets for three days, according to Reuters, as credit spreads widened due to concerns about the rising odds of a recession.”
“De-Extinction Company Announces That The Dire Wolf Is Back” (ars technica). “On Monday, biotech company Colossal announced what it views as its first successful de-extinction: the dire wolf. These large predators were lost during the Late Pleistocene extinctions that eliminated many large land mammals from the Americas near the end of the most recent glaciation. Now, in a coordinated PR blitz, the company is claiming that clones of gray wolves with lightly edited genomes have essentially brought the dire wolf back. (Both Time and The New Yorker were given exclusive access to the animals ahead of the announcement.)”
What we’re reading (4/7)
“U.S. Stock Meltdown Gives Way To Global Rout” (Wall Street Journal). “U.S. stocks took a heavy beating for two days in a row last week. On Monday, it was the rest of the world’s turn. Historic turmoil in financial markets left investors with few places to hide as President Trump’s challenge to world trade intensified stock losses from Hong Kong to France. Hopes that the White House would ride to the rescue over the weekend, pausing the tariffs, were dashed.”
“The Tariffs That Led To The Biggest Stock-Market Drop Since COVID May Have Been The Result Of An Error” (MarketWatch). “‘The idea is that as tariffs rise, the change in the trade deficit will depend on the responsiveness of import demand to tariffs, which depends on how import demand responds to import prices and how import prices respond to tariffs,’ AEI senior fellows Kevin Corinth and Stan Veuger pointed out. The problem is the White House used 0.25 as the elasticity of import prices. Per the research paper the USTR cited in the tariff determination, the elasticity is actually closer to 1, or 0.945 to be precise. The AEI authors say the White House may have used the elasticity of retail prices instead of import prices. The AEI team went and recalculated tariffs based on using correct numbers — and found no tariff rate would exceed 14%, and most would be at the 10% floor the Trump administration set. It stands to reason that if the revised calculations were used, the stock-market reaction would have been much different.”
“Donald Trump Tells Americans Bracing For Economic Collapse: ‘You Have to Take Medicine’” (Vanity Fair). “The self-proclaimed ‘Tariff Man’ spent the weekend golfing and says he plans to stay the course despite Wall Street turning on him and stocks making wild swings in response to his new policy.”
“China Says It Will Never Accept US ‘blackmail’ In Escalated Tariff Threats” (DailyMail). “China said it will never accept the "blackmail nature" of the United States after the latter escalated tariff threats against it, the Chinese commerce ministry said on Tuesday. The U.S. threats were ‘a mistake on top of a mistake,’ a ministry spokesperson said in a statement, urging the U.S. to properly resolve differences with China through dialog with mutual respect and on an equal footing.”
“Trump’s Tariffs Will Wound Free Trade, But The Blow May Not Be Fatal” (New York Times). “The shock of Mr. Trump’s move is reverberating even more widely, given the larger size of the American economy and its place at the fulcrum of global commerce. Yet as with Brexit, its ultimate impact is unsettled: Mr. Trump could yet reverse himself, chastened by plummeting markets or mollified by one-off deals. More important, economists say, the rise of free trade may be irreversible, its benefits so powerful that the rest of the world finds a way to keep the system going, even without its central player. For all of the setbacks to trade liberalization, and the grievances expressed in Mr. Trump’s actions, the barriers have kept falling.”
March performance review
Prime: -3.58 percent
Select: -0.70 percent
SPY ETF: -5.89 percent
Bogleheads Portfolio (80 percent VTI + 20 percent BND): -4.87%