So we’re not firing Powell, we just want lower rates. Score one for Fed Independence, for now at least.
And China, You’re Kind of A “Big Deal”
Treasury Secretary Bessent channeled Ray Dalio when he said there’s an opportunity for a “beautiful rebalancing”, a play on Dalio’s beautiful deleveraging. He also highlighted the opportunity for a “big deal” if China wants it, which of course is the million dollar question, where does China stand with respect to de-escalating the trade situation?
For the day at least, Trump and Bessent both seemed to hint that tariffs will be lowered and soon.
Equities 'Likey'
News on Powell and trade were good enough for 3% gains at one point, but we’ll settle for the 1.7% gain that ended the day, with the index closing at 5,375.
Even bonds got into the action with a solid 5Y auction, though the 10Y yield was little changed at 4.39%. The 2Y yield moved higher on the rotation into risk and perhaps a sense of less political pressure on the Fed to cut rates, closing at 3.89%.
We’ll see how the dreaded 7Y auction goes today.
Detachment, Day Two: From the Oracle Himself
Yesterday I called “detachment” a super-power of some of the world’s greatest investors and as a reprisal today, I bring you that sentiment directly from the mouth of Warren Buffett, “You can't look around for people to agree with you. You can't look around for people to even know what you're talking about. You have to think for yourself. An ability to detach yourself from the crowd is a quality you need.”
Strategic Detachment in Global Trade
I said yesterday that we should let go of our attachment to things that no longer serve us and for the Trump administration that means trade.
I argued against mercantilist policies last week, but what if we’re just entering an “age of scarcity”. Even before tariffs, economist William White had been arguing we were moving from an age of abundance to one of scarcity. The reasons: demographics shrinking the workforce, debt levels limiting future maneuvering, COVID shining the light on the fragilities of globalization and other factors.
Scarcity is the New Abundance
In White’s work, detachment from global entanglements is just a rational response to inherent systematic fragilities. The Triffin dilemma is unsustainable for the U.S., market forces alone can’t be trusted to manage strategic supply needs, and we can’t rely on a system of coordination for everything. In other words, tariffs and industrial policy are a somewhat natural reaction to a world where things are becoming more scarce and dependency could be dangerous. An era of precaution that prioritizes “Can you still get this when the world breaks?” over “Ship it from wherever it’s cheapest.”
Said differently perhaps the real risk we’ve been forgetting about in all of the noise could be summarized as the return of limits.
Is this theory correct?
Malthusianism for the Win? Nah
The original Malthusian economics that population growth would outpace the resources needed to support them has been proven wrong, but perhaps some of the principles are correct?
More likely is technological progress, policy adaptability and further global cooperation win the day.
Sure it will take tackling some structural issues, but it can be done.
Feel free to share your thoughts in the comments.
XTOD’s:
XTOD: MUNGER: There's a lot to be said for developing a temperament that can own securities without fretting. The fretful disposition is the enemy of long-term performance.
BUFFETT: It's almost impossible to do well in equities if you go to bed every night thinking about the price.
XTOD: In the 1970s Henry Singleton made a move that baffled Wall Street but cemented his legacy, although it would be years before other realized its brilliance. After aggressively acquiring 130+ companies throughout the 1960s, he suddenly stopped cold. While competitors desperately continued buying at inflated prices, Singleton pivoted completely, redirecting Teledyne's resources to buying back its own undervalued shares and never making an acquisition again.
This dramatic reversal was purely rational, a hallmark of Singleton's business philosophy: https://pbs.twimg.com/media/GpOcxbBWYAAZ0K_?format=png&name=900x900
XTOD: Looking at incoming vessels to the Port of Los Angeles (America's largest port):
1.) This week we're still in frontrunning mode (57%+ YoY). 2.) Next week we're basically at normal (-8% YoY).3.) Two weeks from now we're in The Bad Place (-44% YoY)
XTOD: X is a swarm of grifters. All those grifting fringe research outlets that surf the podcast circuit and have logos with a veneer of respectability and ETFs to prey on retail, had 7K SPX targets last year when the recession was in motion. They are now touting a regime change.
XTOD: When Charlie Munger was asked, “You seem extremely happy and content. What’s your secret to living a happy life?” he replied, “The first rule of a happy life is low expectations. If you have unrealistic expectations you’re going to be miserable your whole life. You want to have reasonable expectations and take life’s results good and bad as they happen with a certain amount of stoicism.”
https://x.com/kejca/status/1914754403338178604
https://x.com/farnamstreet/status/1915048526175777039
https://x.com/Brendan_Duke/status/1914748283622129951
https://x.com/INArteCarloDoss/status/1914619654133240253
https://x.com/SteadyCompound/status/1914998689602609649
No comments:
Post a Comment