Financial news media continued running its favorite genre: sell-off porn. We even got pieces on circuit breakers - always a vibe when CNBC & Bloomberg starts quoting the SEC & FINRA like it’s gospel. You already know the reason: the “t” word.
Markets opened in freefall, reversed losses after a headline about a 90-day tariff pause, then got whipsawed again when that headline got promptly body-slammed by reality. When the dust settled: Dow down, S&P lower (5,062), Nasdaq somehow green. Volatile and confusing sum it up.
I Thought The Goal Was Tik-Tok, Not Tit-for-Tat?
China pledges to stimulate their economy while slapping 34% tariffs on the U.S. The Trump administration fired back with threats of another 50% tariff on Chinese exports. At some point, China might just need to ship over consumer goods and include a check for the U.S. shopper.
Not the Flight To Quality You Ordered
Speaking of China - are they dumping Treasuries? Someone’s selling. The 10-year yield spike by 20bps to 4.22% , which isn’t exactly the behavior you’d expect in a flight to quality. If it’s not China hitting the bid, maybe it’s leveraged players forced to sell what they can, not what they want, to meet margin calls.
We talked about the Treasury conundrum back on Friday - still relevant. File it under second order thinking and don’t get too comfortable.
Leverage In Focus: Echoes of Explosions Of The Past
Whenever volatility picks up and the word "deleveraging" gets tossed around, someone usually ends up face down in the punch bowl. Remember Archegos? That 2021 moment when one firm, running a giant levered book, detonated after banks—plural—forgot to ask how many IOUs they'd handed out. Just ask Credit Suisse. Or whatever’s left of them. (Hi UBS).
Let’s not forget what Howard Marks wrote back on May 9, 2024 when Marks reminded us about ‘The Impact of Debt’:
“But levered portfolios face a downside risk to which there isn’t a corresponding upside: the risk of ruin….“never forget the six-foot-tall person who drowned crossing the stream that was five feet deep on average.” To survive, you have to get through the low points, and the more leverage you carry (everything else being equal), the less likely you are to do so.”
So what’s the impact of leverage today? No one knows. But if this ride keeps going, it seems likely we’ll find out who was swimming naked in that stream.
Tariffs: Symptom, Not Cause?
We talked yesterday about the potential for changing the global monetary order - a Bretton Woods III. Apparently, Ray Dalio was thinking the same thing. (We assume he’s a loyal reader.)
He argues that tariffs are just a surface-level reaction to deeper structural problems: too much debt, not enough trust, and a financial system propped up on increasingly shaky scaffolding. He might be right. Or he might just be angling for another LinkedIn carousel post.
When Everyone's Guessing, Maybe Sit Still
Here’s the thing: chaos is always loud. Long-term investing is mostly quiet. And patience never trends on X.
We’ve said it before, but it’s worth repeating when the VIX spikes and headlines scream—discipline wins over drama. While the crowd fixates on the next 90-day tariff pause or Treasury yield spike, smart money is thinking in decades, not trading sessions.
XTODs:
XTOD: Chinese memes on American re-industrialization rolling in. lol the music. https://x.com/i/status/1909348105675211192
XTOD: Steve Miran’s Hudson Institute speech represents one of the most concise and clearest articulations of the Trump admin’s worldview, which is often either lost or confusing in Trump’s own rendering. As far as I can tell, they think of the Pax Americana global order as a club membership, for which the US has under-charged for the past few decades. Reasonable people can debate whether the US undercharged but important thing is that the current admin thinks so. So much so that the current admin believes the current system has been made unsustainable and made the US economy at a severe competitive disadvantage and sections of its population in dire economic straits. Again, debatable but that’s the claim.
So to make the system work, as far as I can tell, basically they want to charge a membership fee to pay for the global order system. And the fee is per usage, the more a member country practically uses club’s facilities and the valuable amenities provided by the US, the more they ought to pay the US through tariffs if not directly in wire payments. Again debatable whether tariffs are really the best means of collecting such a membership fee, since tariffs are at least in part borne by American consumers and create frictions in global trade hence making the whole system less efficient.
That is the philosophical rationale behind the tariff table we saw, which honestly may not have been Miran/CEA’s best possible work as much as something that was just a quick hack. Based on this, I suspect a lot of the severe tariff rates on some of the poorest countries in the world were likely indeed mistakes and will likely need to be revised downwards.
This is a massive change to the global order, but if there’s some silver lining it’s that like it sounds like it’s more a radical reform than a total abandonment of Pax Americana and at least as per this speech not a total decoupling either, which I think is more consistent with Trump’s ideology or lack thereof. https://whitehouse.gov/briefings-statements/2025/04/cea-chairman-steve-miran-hudson-institute-event-remarks/
XTOD: The Foreign Minister of Iran, Abbas Araghchi has confirmed via a post on X that representatives from the United States and Iran will meet in Oman on Saturday for “indirect high-level talks” claiming that the “ball is in America’s court.”
XTOD: Educate yourself. No one is ever going to teach you enough or hand it to you on a platter. Books and articles, and ask questions—an endless amount of them.
https://x.com/gaborgurbacs/status/1909348105675211192
https://x.com/stevehou0/status/1909344035418079455
https://x.com/sentdefender/status/1909393821865029944
https://x.com/RyanHoliday/status/1909228715130884258
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