Looks like I was right yet again about the tariffs. On April 9th I wrote:
It looks like I was right to buy the dip, having done so Monday morning on FNGA. Here is what I said: “I have begun buying leveraged tech stocks on the dip this morning to take advantage of this great overreaction. My favorite: FNGA.”
I am up considerably on this position, plus up a lot on Bitcoin short positions. So overall, my P&L is close to record highs, on top of 100% gains of ‘net worth’ in 2024 (when all my accounts are added together, such as the crypto shorting accounts , the stock accounts, cash, etc.).
I sold the FNGA a few days ago having bought the dip 4 weeks ago at a large profit. As shown below, the QQQ recovered all its post-liberation day losses:
As I also correctly predicted (so far) there would be no big inflation spike.
Most of the headiness again are expecting inflation, yet it hasn’t happened:
It’s just like Covid again. Let me know when the inflation actually happens. Like Covid, the media is trying to scare people so it becomes a self-fulfilling prophecy.
A typical counterargument is that it will take a while for stores to restock, so the new inventory will be more expensive after the existing inventory is sold out. But inventory restocking and depletion is a continuous process over many stores. It’s not some abrupt process. So if we imagine that soon after liberation day, some stores were running low on inventory, so they would have restocked at the higher post-tariffs prices, whereas other stores had enough inventory to last a month. So we would expect a gradual rise of inflation until every store has depleted and replenished its inventory. But there is nothing to indicate prices have gone up. So like covid, all the panic and fear was yet another media-generated scam.
Second, as explained before, the US economy is dominated by services. And third, imported raw goods only account for a tiny percentage of the final price of a good. Much of the sticker price is to cover advertising/marketing and labor. Imported bulk goods are cheap relative to the resell price. The markup is to cover all the expenses and to ensure a small profit.
About Trump backtracking, he always does this. Typically one of four things happens: Trump realizes the policy cannot work and backtracks, or he is stopped stopped such as by courts, someone talks him out of it and he backtracks, or he was not not actually serious on following through completely. A failure mode of all of these is really improbable. This is why I was optimistic about the stock market.
Anyone who remembers his first term can see the pattern. Trump starts with a big, outlandish proposal. Then he backtracks. It’s like, “We’re going to build a huge border wall,” and the actual amount of wall built was tiny. Or “Hillary will go to jail,” and nothing happens to her. Or “Facebook is censoring users. Repeal Section 230,” and nothing is done about either.
My hypothesis is he didn’t expect the stock market to fall as much as it had. Trump had made it abundantly clear during the campaign and after winning that there would be tariffs, yet stocks kept going up. Even when he implemented tariffs on Feb 1st against Mexico, China, and Canada, the stock market brushed it off after a brief sell-off, only to crater a month ago. From the above link:
Until the crisis is alleviated, President Donald J. Trump is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada will have a lower 10% tariff.
The following day, Monday, the stock market fell 2%, but recovered by week’s end.
On March 6th, he recanted on those tariffs. He’s always doing this. It’s hard to keep track of all the times he has flip-flopped on this.
Internal polling probably showed some decline of support, and he was being attacked by his billionaire donor base and the center-right. So he had to backtrack to prevent a bad situation from getting worse. Had he backtracked all at once, then he would look like a bigger pushover than he already is, so he’s doing it slowly and framing it as negotiations (instead of capitulation) and hoping his most ardent supporters do not notice.