Trump Tariffs

 Every person who participates in this forum has bias regarding a multitude of politically involved issues.

 EVERYONE!

  Nobody is 100% impartial.  We are humans...it's not even possible!

 WSC has as much right to post his views/opinions here as everyone else! 

I not only welcome his participation, I applaud it - as I consider them as consistently among the most intelligent, fact-based and logical on the board.

 The only people who should be "censored" from participation here are those who violate Covers.com rules, which are laid out clearly in the TOS. Direct, personal attacks [behavior!] are the most frequent violation on *ALL* Covers. com forums, including here, but other forms of negative behavior [see TOS] should not and are not tolerated on this PRIVATE website.

WSC has the most taxing moderating job at Covers.com, bar none!
I've been boxed before, several times, and he was absolutely correct each and every time. I umpired fastball and refereed basketball for 15 years in the 70s/80s and I know firsthand how difficult it can be to referee - particularly when there are seemingly an unending number of "close calls" and when it becomes highly charged emotionally, like here.

Just like getting handed a speeding ticket, there are far too many dopes whining at the cop because THEY got caught speeding. Some idiots even whine that the cops shouldn't be allowed to drive on the same roads they do! Many consider such fools as "trolls"

Keep posting and KEEP UP THE GOOD WORK, WSC!

 I look forward to reading all your posted views/insights/opinions, as they are hands down among the very best posts on this forum!

@Rush51

 I mean to add more about what I was saying earlier about a hidden recession.  The guy I referenced the other day also pointed out that he felt the last 'rolling' sector was the government sector and that it had hit the bottom also.  This is not surpassing, as this is generally sort of what we see.

Even at Powell's talk today he also pointed out some of this but did express his issues with some of the things going forward.

At any rate, I think a lot of this highlights what I have been saying all along.  Even though I am not quite yet as positive as he is.

A leading Wall Street analyst says the wave of government layoffs driven by Elon Musk’s DOGE initiative—the so-called Department of Government Efficiency—marked the end of a three-year rolling recession in the U.S. 

The “rolling” nature of this recession meant different sectors hit their troughs at different times, but Wilson argues that the government sector was the last domino to fall—with DOGE’s mass layoffs acting as a clear inflection point.

The good news is that for every recession there’s a recovery, and Wilson continues to call for a bullish “rolling recovery,” stating: “We’re buyers of dips into year-end.” He wrote that the bank is standing by its S&P 500 bull case of 7200 through the middle of next year.

the bank highlighted that DOGE might lead to a “government labor cycle” and against that backdrop, “we believe the DOGE layoffs marked the end of the rolling recession that likely began 3 years prior.” He cited the bank’s projects that job cuts over the period lasting from 2022-2025 were roughly 30% higher on average than during the last economic expansion that lasted from 2010 to 2019.

The market reaction to these layoffs was swift: stocks, especially small caps, fell sharply into April as massive government-sector job cuts—some 280,000 positions announced in February and March alone—drove recessionary levels of household and corporate confidence.

Wilson acknowledges ongoing risks from lagging labor indicators, but contends that the worst of the economic pain is now behind.

As more evidence of the rolling recession, Wilson cited negative median stock earnings growth and small-cap growth in earnings per share (EPS) from 2022 through 2024. Both spent years in negative territory, only to rebound sharply in early 2025. Exhibit data from the note show Russell 3000 median EPS growth transitioning into positive territory for the first time in years by mid-2025, a dynamic only seen during early-cycle recoveries.

@Raiders22

 I think I came across that same article from Mike Wilson of Morgan Stanley a few days ago.  Perhaps it was him that talked about a "rolling recession."  It would be most unusual, but could be supported by the fact that we haven't had a negative print in job gains in a very long time.  So, while it is possible, it is not the standard.  And What I find incredible is how powerful the MAG 7 companies have supported stock prices all this time, if indeed a "rolling recession" occurred.  It really has been a bifurcated market for awhile, and AI has been the name of the game going on 2 years now.. 

To expand the economic discussion in another area (interest rates), I'm in the Ken Griffin camp when he says that the threat of Fed Independence is a threat to the Bond Market & long-term interest rates.  A Fed Chairman (Powell successor) that wants to see interest rates pushed down when the inflation rate tells you this may not be the wisest move, is a risk to the overall health of the economy.  For all the blame that Powell took on the way up (and deservedly so) when inflation shot up , I think he is undeservedly taking a lot of flak for being pressurred to push rates down, now.  He even admittedly said the Fed is in Risk Management mode right now.  Does he Pay attention to inflation rate that is still too hot ?, or pay attention to an employment picture that is looking less strong.  Lots of people seem to forget that the target inflation rate is 2%, and we are nowhere near it, nor is the trend taking taking us there.  

For all the years we U.S. consumers enjoyed w ZIRP and low inflation for almost 2 decades, it seems we will now be mired in a higher inflationary environment for years to come.  That will lead to all U.S. households feeling this pain.  This will get worse if Trump's hand-picked FED successor is true loyalist. 

@Rush51

 Yes, he is the one.  A few pages back I posted the key parts of his initial assessment.  Most of which I agree with.

Very true concerns about the FED. They are in a tricky spot.  You normally do not want to cut your rates when inflation is going up.  All of the assets are at all-time highs.  Stock markets, crypto, gold, silver, housing -- everything is at all-time highs.  And they cut the rates.  

If you take out China with the renminbi, because it is a closed system but look at the other countries it is interesting (USA, Germany, Japan, UK, Italy, France).  Essentially, you see that in 5 of the 6, the rates are turning over.  

Normally you can make it one point for inflation and a half-point for term, depending on how long it is.  So, you want your yield to be 1.5% plus inflation rate.

So, obviously, not one country now is doing that.  You also have to keep in mind that the governments can drive down short-term rates, they do not have control over the long-term rates.

Generally, there is considered to be four major buckets of money that major asset managers feel that they can go to and not affectuate prices:  US, Euro, Japan, and China.  You have to sort of bypass China because of their internal issues.

France has twice in the last two weeks fiddled with their rates and has riots in the streets.  They are the #1 country in the world with 57% of GDP expenditures.  

So, they have to look at where will they go.  US treasury buybacks are rising.  They are taking the interest on the federal balance sheet ($6.5T) and going to the open market and buying the US 10-year bond.  This is at an all-time record right now.  $138B bought so far this year, compared to $79B all of last year.  

So, the question on why the 10-year has turned over is:  is it because Bessent has bought $138B on the open market or is it because of the unemployment.  This is not so easy to parse out.

@Rush51

Japan is in a quandary with what to do.  The sequencing is up in the air.  If their 30-year continues to go up and cause problems, what do they do.  When they run out of assets they have been borrowing collateral to get more dollars.  Then they are forced to sell.  They own over $2T US bonds and other securities.  So, do they sell any of these?  If they do sell what are they going to do.  They are selling the dollar and turning around and buying the yen so they can bring it back and give it the institutions to meet their margin call.  

Or, is the sequencing going to be with France because they cannot reach a deal and the UK is hurting, even though they are not in the Euro.  Half of the riots are that they want to pull out of the EU and the Euro.  So, if they pull out, people then sell the Euro and what do they buy.  Do they buy US, or do they buy Japan.  What happens if Germany and Japan go at the same time.  It is not likely, but it could happen.  

So, the big assets managers have to figure out which way to go.  They have to be very concerned about going to the US, where they are doing QE but not admitting doing QE (stealth QE), trying to fire FED members.  Do they trust the US, do they trust Trump, do they trust Bessent -- who knows.  Do they sell Euro, do they buy Euro.  

Think about in Europe -- they are already bifurcated.  It is on a political military level.  But they have the coalition of the willing.  Which means not everyone is willing.  So the Euro and the EU is kind of already breaking up.  

So, if you assume there has to be some kind of sequencing, does it mean the US screws it up so badly that it drives the Euro and Yen up before they break and then everything reverses.  These are very unique times that we have not seen before.  It is really what is known as a sovereign crisis.

So, look at the currencies.

GBP is basically flat.  Yen, the same thing.  Euro, the same. No one can figure out the sequencing so that is why the bonds are moving but the currencies are not.  Nobody knows the sequencing.

Essentially when you control interest rates, you give up control of your exchange rates.

I am not a FED fan nor a Powell fan.  But now that they have decided this course and indicated to stay on the course, it will be very interesting what happens going forward.  Are they able to control things and stave off a potential stagflation event.

A side note that is interesting is that Miran was the dissenting vote for a half-point cut.  While the two members that are deemed Trump's choices to succeed Powell did not.  Bowman has said she does not want the job.  Waller has been more receptive to 'openly campaigning' for it, yet he did not call for a half-point cut.  So, what does Trump do about that position next year.

But either way it should be interesting times ahead.

You put WAY too much emphasis on France protesting and their demands - do you know why all European countries make fun of France? Because they whine all the time and protest about pretty much everything - not even joking - France has protested almost daily since 1799 after the French Revolution ended - and why should they leave EU - they are basically the leaders of EU

And Brexit has basically ruined UK - if you have been there both prior and after you know what I am talking about - if you are up for a bet - where your side is France leaving EU and mine is UK rejoining - just hit me up I would be up for that bet

@Calde13

 Immigration killed the UK and the whole Eurozone. Now the powers that be have America in their sights.

@Calde13

 I would say Germany are/were the leaders of the EU.

Well that just shows you don't know what you talking about ! In a EU zone which biggest threat is a new war - who do you think call the shots - one of its few nuclear nations or a country that hasn't been allowed to militarise for 80 years ? I will let you figure that out Einstein 

The main reason immigration has been a problem for us is because we already fight overpopulation on a continent that isn't big and don't have a lot of natural ressources - that has been a problem for ages !! - And if anything UK has faced that problem less since leaving EU - so seems funny to me they have severly gone downhill after leaving (if you disagree I would question if you have visited UK before and after - it isnt a small difference - they have basically fallen right off a cliff) 

- The EU represents the world's largest interconnected market in terms of both size and monetary value. To suggest that its member states leaving would not have a significant impact is laughable.

@Calde13

 It's the EU's own fault. Fascist war mongers like the Rhino's in the American congress. They are messing with a Bear who will annihilate them. Just hope Trump is smart enough to know that!! We agree to disagree again. It's obvious we get our information from different sources. I already know where you get yours just by your opinions. 

If you mean “my source” is having lived here my entire life (desent from a family of 1000% Europeans and living in one of the countries with the most well educated populations on earth) - been to pretty much all countries in EU and having studied economics then you are correct  - but I will give you it is atleast nice for a change being lectured by an American of all nationalities  

[Quote: Originally Posted by Calde13]And Brexit has basically ruined UK - if you have been there both prior and after you know what I am talking about - if you are up for a bet - where your side is France leaving EU and mine is UK rejoining - just hit me up I would be up for that bet[/Quote]

As someone who traveled to London on business years ago (2010-2015), how has it changed ?  Genuinely curious..  

@Raiders22

 Raiders, you said this in a post yesterday ;  You also have to keep in mind that the governments can drive down short-term rates, they do not have control over the long-term rates.

That is exactly right (!) , and this is something that gets missed by a lot of folks... The Government (i.e. the FED) isn't in control of long-term rates (unless it buys Treasuries on the open market to push rates down).   It's the bond market/traders that control the 10-year Treasury (and the shorter duration auctions).  And the 10-year Treasury Yield  is what many interest rates are based off of (mortgage, etc).  So, people looking to buy a house now will be surprised to see these rates backing up again the last few days.. 

Why do you think this is occurring ? 

And I've got another question for you.  With our national debt exceeding $37T, we've got a real debt "time-bomb" on our hands.  I scoff at the notion that Government Bonds are backed by the full faith & credit of the U.S. government. (And I lean toward Corporate Bonds for this reason) But , the Government is not in control, unless it resorts to extraordinary measures.  Again, it's the bondholders who  will dictate the terms at what's an appropriate interest rate for the risk being taken with an entity that is so far in debt.  Sure, the Fed can print dollars, but that's inflationary and further erodes the U.S. dollar.    This will kill the existing value of bonds.  

How do you see this playing out ; this is a big cloud hanging out there that doesn't get talked about enough.  I have gold exposure, and bought 3-4 years ago because of this concern.  Crypto is not backed by anything, so I may increase my gold exposure to > 5%

Not to answer the question but to me the reason for the backup is two fold, one is that the inflation beast is not cooling and in many respects getting worse with past inventories pre tariff eroding and the impacts of enormous tariffs we should be seeing in the next 4-6 months, inflation that persists means point two that the FED did a charity cut and with this done they will not go further with inflation headwinds and no economic event which would force immediate action. Trump belly at the bar whining wont move the needle given he is the cause for this inflation so the market sees that this rate cut might be one and done for many months and who knows how long.

Fed funds impacts banks so I noticed immediate cut in a high yield savings account I have at my local bank and most banks react quickly to the change in fed funds when it goes down, the mortgage market is not tied to fed funds and especially since we are a capitalist economy and plenty of mortgage originations are not from Fannie and Freddie but from conventional market sources. 

On the inflation front, did another trip to RD today because I needed some imported Cacao Berry cocoa powder that I last bought about a year ago on Amazon, its a 2 lb package and I go through it every 1.5 years or so, it is superior to any brand Ive found locally. The price since my last purchase in 2024 went from 29 bucks to 52 for the same package and brand, so I refuse to pay 20 bucks plus per lb for cocoa and went to RD looking for a good brand like Callebut or Ghirardelli which isnt as good as this but is 40% cheaper and of course they were OUT of all but the crappy Hersheys. Also noticed beef prices are not getting better yet either.

@Rush51

 So, people looking to buy a house now will be surprised to see these rates backing up again the last few days.. 

Why do you think this is occurring ? 

This is usually due to an anticipatory move in the 10-year Treasury.

This happens from time to time when the FED drops rates.  It also did it the last time there was a rate cut by the FED.

The FED does not really control mortgage rates.  They are tied to the 10-year T-note and pricing in a spread.

So, the investment move is done in anticipation of what will happen.  Essentially a very, very short leading indicator.

That is why the mortgage rates had been coming down before the FED cut.

But then the 10-year started trending up afterwards.

This is because the investors are more interested in where the rates will go long-term.

So, investors are now reacting to their expectations being more than what the Fed delivered.  Remember that some were hoping for a 50 basis cut.  But because the FED did indicate another cut or two this year and early next year, the mortgage rates should stabilize around where they are right now.

I scoff at the notion that Government Bonds are backed by the full faith & credit of the U.S. government. 

I am not sure exactly what you mean by this or why you imply that you doubt it is true.  Are you thinking it is approaching a time that they might default or something.

@Rush51

With our national debt exceeding $37T, we've got a real debt "time-bomb" on our hands.

Yes, debt is a huge, huge problem that absolutely will need to be dealt with.  The best way to gauge it to me is not the total number of $37T, but the debt to GDP.  This is now over 120%.  It is sort of in line with other countries like France, Spain, UK, and Canada.  Better than Japan that is well over 200% now.  A lot of countries are well under 100% like Germany, Australia, and even China.  Different countries are at different stages and some are developing and others have internal issues.  But it is very, very disconcerting when the world’s top economy has that issue.

But there are some extenuating circumstances to consider.  Sure, the interest needs to be paid.  But does the debt itself need to be paid off altogether.  As Krugman, famously, likes to point out Great Britain is still hanging onto debt from the Napoleonic wars.

There is a contingency of economists that do not necessarily consider the debt bad for the economy.  The debt is used to finance a lot of what the country provides for its citizens.  The contention is that the investment with the debt is a good return.  In other words, the bang for their buck is great.  

The opposite side will say the risk could outweigh the rewards.

@Rush51 

For example, there was recently an article about a couple of famous celebrities that took out a mortgage on their mansions.  Like for $50-70M, or so.  The economist, or some money guy, they interviewed said it was not a bad thing to do this.  In other words, if you can take out a debt at a lower interest rate than you can get a return on your investment it can be good.

The issue is that it does not consider risk enough to me.  An awful lot can go wrong.  That is why I always tell folks to be debt-free, including their mortgage, as soon as possible.  Then the risk is not so high.  

The same goes for the country.  I think it is far too dynamic and complex to keep taking the risk.

But the issue is how to fix it and do the folks have the will power to do it.

The folks will always want the next generation to deal with it.  Neither party in Congress wants to cut their specific pet projects.

You can argue that now that the reconciliation bill is done and Trump will now have his own budget going forward and maybe he will take some consideration into it with some of the cuts the DOGE committee suggested.  You can argue that a lot of the revenue from the tariffs can go to it.  You can argue that it can slowly be refinanced down with lower rates going forward.

But the bottom line is always that the government will not cut.  A lot could be saved right away by doing away with a lot of departments that I do not feel do anything worthwhile.  Like the DoEducation, HUD, DoEnergy, etc.

But to get Congress to agree on a timeframe and a manner in which to do this is too difficult.

So, yes, it may come to a head one day if spending is not drastically curtailed.

You are very correct though that you cannot just keep printing money.  But as I mentioned before where else will folks go with their money.  It is very complicated.  But for now the USA just has the advantage and seems to keep it for a while.  So, they can keep kicking the debt can down the road, so to speak.

@Rush51 

I have gold exposure, and bought 3-4 years ago because of this concern.  Crypto is not backed by anything, so I may increase my gold exposure to > 5%

I have no issue with this and think that is about the right amount to be exposed to gold.  You always want to be diversified.  You never want all of your money coming from only one place.

I am not a Crypto guy as an investment.  To me it is purely speculative.  Those things can have a place if all else is completely taken care of.

@wallstreetcappers

Not to answer the question but to me the reason for the backup is two fold

No problem.  You are the BOND GUY. 

I agree that inflation is the big issue.  I think the FED did not want to cut at all.  But the pressure, political and otherwise, was too much this time.  I think they missed their time to cut effectively.  Now they are caught in no-man’s land.  This could tip into a stagflation situation.

Of course, everyone has been saying that the tariffs are going to be a big issue.  Then when they were not, they said well they soon will be.  Eventually they could be right.  Just like the ‘guy’ that keeps calling for a recession.  He will one day be right.  

But so far the tariff thing has not added near what some of the pessimistic economists were saying.

So, hopefully, it will not.  If it does the FED for sure will have a dilemma on its hands.

On the inflation front, did another trip to RD today because I needed some imported Cacao Berry cocoa powder that I last bought about a year ago on Amazon, its a 2 lb package and I go through it every 1.5 years or so, it is superior to any brand Ive found locally. The price since my last purchase in 2024 went from 29 bucks to 52 for the same package and brand, so I refuse to pay 20 bucks plus per lb for cocoa

I wish I had known you needed some.  I was just in the US and took 4 packets to my sister.  I think that was around the price I paid.  I think it was organic and think it comes in 200g packets.

But cocoa pricing is not a USA thing.  It had been driven up because of weather and disease in various parts of the world where it is grown.  

But the price is headed down in a hurry.  The last two years it shot up because of those issues.  Now it is at like a year low with the futures.

So, hopefully the local prices there will follow it down. 

@Raiders22

 Well I bought at 29 last year and I have purchased this brand for multiple years so the price increase was from 2024 to now specifically. Buying an imported item off Amazon means you can use tools to trace price history (camel camel) and you can track price movements even though it is not perfect its reasonable.

Same goes for other imported items as I mentioned a while back, I buy the callets for baking at RD since you cannot find a decent priced high quality baking chip anywhere else and the price for that has also risen 50% year over year, I purchase certain items only at that place since you cannot find them elsewhere. Same goes for stuff like crab legs, Chilean seabass etc etc all have gone out of control pricing in the last six months. 

Even at Costco I purchase their store cut Chilean seabass portions because they are larger if you can find than RD and the price is lower. In the last year the price went from 17 a pound to now it is 27 a pound for their butcher cut portions.

Also to add that the prices changes are for imported items AND for certain beef/pork products, there are plenty of non tariff domestic items that have not changed much like today i purchased a 5lb sealed pack of whole milk mozz that I will grate from the block and the price was 2.26 a pound and that has not changed, same goes for the bouncer flour and items like beans and domestic canned products, the price ramping is for imported tariff impacted items I am noticing and especially gourmet higher ticket items.

@wallstreetcappers

What is a 'callets'?  I looked it up and it says it is a person calling out numbers like for bingo?

I do not cook.  So, never heard that term.

'RD' is a store like Costco there?

Yeah, I do not doubt prices are up.  Inflation has been up for an extended period now.  

I was just pointing out cocoa and, even, coffee have been unique.

Gotcha.  Yes, I watched the session the other day and the guy tried to pin him down on percentage that is strictly due to tariffs.  I am not doubting some of it is on the imported foods.  But I think overwhelmingly it is just inflation.

Another one.  What is 'mozz'?