What caught my eye this week.
I read a short story when I was a teenager that unsettles me to this day.
It featured an everyday American town, only everyone there was beholden to this one particular kid. Even the adults would watch what they said and did around him.
To spoil the twist, it turned out the kid was born with godlike powers.
The town, and the chunk of the planet it sat on, was adrift in space somewhere after he’d dislocated it from the planet. The lives of the survivors living in this bubble now revolved around the child, although they tried desperately to pretend that life was normal.
Obviously the worst of it was their deity was a three-year old child, not a wise all-seeing superpower.
The kid-god was insecure, arbitrary, unpredictable, spiteful, prone to deadly tantrums, and generally mentally ill-equipped for the job.
I’m sure you can see where I’m going with this.
Trump TV
Look at a chart of the S&P 500 this week and you’ll find that US shares closed much higher.
Perhaps some Panglossian observers see a good week for the markets, like the town folk in that story pretended they were living a good life.
Passive purists will see more evidence to ignore the noise and keep buying.
But experienced, the week was a rollercoaster ride driven by the kind of crazy plot lines and reversals you’d expect to find – not coincidentally – in a season of WWE Wrestling.
We’re all degenerate meme traders now
I won’t run through the ups and downs. If you care about market drama, you saw them unfold.
Ditto Trump’s tariffs. If you haven’t read enough of the millions of words written by now to convince you of their sheer stupidity, this post won’t tip the balance.
But for two weeks the market has given us real-time pricing on just how damaging this plank of Trump’s agenda would be. The Nasdaq and very nearly the S&P 500 plunged into a bear market, before rallying on Trump declaring a 90-day pause for most of them.
Below is a daily price chart of that reaction. Remember these are multi-trillion cap indices – not illiquid meme coins – rising as much as 12% in a day:
What a killer run for Trump TV, watched around the world!
Personally I found it even more exciting than the one where his supporters invaded the US capital a few seasons ago.
It’s much more thrilling when you’ve skin in the game.
And the subplots!
The pseudonymous ‘Walter Bloomberg’ X account that promoted the ‘fake’ story the tariffs would be paused for 90-days, whipsawing markets by $2.5 trillion in half an hour as it was believed and then denied!
The arch-villain China slapping back with even more tariffs of its own!
Then Trump apparently being inspired by Walter’s fake ‘pause’ and actually implementing a 90-day delay. Possibly only after he watched a bank boss fretting on Fox TV!
This isn’t even to get into how these enormously consequential announcements are being made via Trump’s Truth Social account. Rather than, you know, the White House.
Or even accusations for potential nation-scale insider trading based on Trump telling his supporters it was a good time to buy stocks, shortly before the market ripped 10% on his latest not-Tweet.
Personally, I don’t think it can be insider trading when it’s done in public.
But also, what a quaint thing to worry about these days…
Do you even lift, bro?
Perhaps my favourite bit involved all the NPCs / billionaire tech and finance bros battling on social media. Especially Trump supporter and hedge fund manager Bill Ackman, who went from warning the tariffs would cause an ‘economic nuclear winter’ one day, to praising Trump for a textbook ‘art of the deal’ later.
I’m with AQR founder Cliff Asness who replied that:
“For me, one of the main benefits of making some money is not having to wear a gimp suit for anybody.”
But I suppose Ackman is in too deep to recant.
Black Mirror Monday
At the risk of sounding exactly like someone who complains that WWE Wrestling is not a real sport – and thus who piously reveals that they don’t get the joke – it’s a bit sickening to me that this entire charade has become normalised in just a few short months.
Well I’m having none of it. This is not normal, and it’s not a brilliant way to shape US economic policy, let alone re-route the world.
It’s mindlessly stupid. The tariffs would plunge us into a depression if implemented, whereas they only have us flirting with recession when teased and (partly) retracted.
Listen, if the US wants to turn itself into an autarky run by an autocrat, go for it. I don’t believe the US public voted for that – and it would impoverish most people there, especially the poor – but that’s its (bad) business.
But let’s not pretend the case for free trade wasn’t made 200 years ago. And not just in theory – the world, and especially the US, has mostly grown crazy rich on the benefits.
You might as well declare you’ve doubts about the theory of steam engines.
Then again, 10% of the US electorate believes the Earth is flat, so perhaps they would.
In most cases for most countries at most times tariffs are bad.
Trump’s sky-high tariffs for the US are idiotic, and even as a threat they will have consequences.
No serious CEO will have begun to move factories to the US last weekend based on Trump’s earnest declarations that tariffs were ‘beautiful’ and here to stay and set to reinvigorate US manufacturing and all the rest.
Yet the unfolding farce will still be affecting millions of decisions up and down the supply chain.
To give one tiny example, the UK’s Character Group – the maker of Peppa Pig plushies – withdrew market guidance this week.
As This Is Money reports:
Character, which manufactures Teletubbies toys and the largest range of Peppa Pig products, told investors on Friday its ‘ability to assess the financial implications’ of tariffs has been ‘considerably obscured’ by escalating retaliatory measures.
The New Malden-based group predominantly counts the UK and Scandinavia as its key markets, but US sales made up about 20% of turnover last year.
The UK will face so-called ‘baseline’ tariffs of 10%, but much of Character’s manufacturing comes from China where exporters to the US now face levies of 145%.
Character Group is set-up just like millions of other companies around the world that took advantage of global trade to improve production and lower prices.
So we can only imagine all the similar decisions being made globally to pause output, and to suspend investment and expansion.
It sums up why markets hate uncertainty. It’s not because traders are lily-livered. It’s because the economic damage is real, and just as bad un-priceable.
Ah, Mr Bond Vigilantes, we’ve been expecting you
There’s not point re-litigating the brutal inanity of US policy every Saturday morning. This is going to go on for years, and attention is all Trump wants anyway.
But on that note perhaps the one good development this week was the potential re-emergence of the so-called bond vigilantes:
We all know former real estate bankruptcy Donald Trump loves cheap debt. So maybe rising bond yields did force his hand towards a pause, rather than, say, Ackman’s whining.
Of course, as Cullen Roche notes there’s a lot going on with US bonds:
The 10-year interest rate ripped from 3.9% up to 4.5% in four trading sessions. As I write it’s now back to where it was nine trading sessions ago at 4.3%.
So, we whipped way lower and then went way higher.
Again, it’s all uncertainty. No one knows where inflation and the economy is going. If inflation rips higher then bond yields will follow. If the economy rips lower then bond yields will follow.
But we’re in totally uncharted territory because we’ve never had the entire global economy at the mercy of a single unpredictable person writing Tweets sporadically.
I talked to some of the largest bond traders in the world in recent days and they’re all so perplexed about it. They described it as “chaos”, “uncertainty”, “madness”. There are theories floating around about carry trade unwinds, funds imploding, China selling and just bidless markets.
I suspect it’s a lot of all of these things. But the uncertainty of it all is the main issue. No one knows where any of this is headed and if you’re someone trying to lend money or set prices in the coming months then good luck guessing where you should be.
Trump’s supporters don’t care less that China ultimately buying a lot less US stuff would mean it would have far less need to hold shedloads of US treasuries.
Nor that unwinding China’s US debt stockpile would see US rates soar, crippling US households.
Remember, this is television! Don’t get hung up on reality.
The Mad King
Indeed as it’s presently unfolding, US exceptionalism is getting downgraded at a speed that would embarrass a B-Movie scriptwriter.
The only thing that’s different about the tariffs mayhem compared to the rest of the MAGA/Trump agenda, is it comes with real-time pricing. The damage is marked-to-market.
As blogger ermine puts it, the US is rapidly transitioning from having a POTUS to having a KOTUS, at least in practice.
A man whose daily utterances moves trillions in the markets. And who is checked mostly not by conventional counterbalances, but by the japes of sanctioned court jesters.
Fun and games
So in the spirt of the times – and since it’s all a game nowadays anyway – I asked ChatGPT for an appropriate toy:
I can’t wait to play with him next time.
Historians may someday look back and find something good to say about this entire episode.
They turned the murderous Genghis Khan into a nation-builder, after all.
Perhaps in some needlessly damaging way, this week really will eventually be seen as an idiotically-implemented check in the very-definitely authoritarian China’s rise to power, for instance.
Even forest fires do some good in the long-run.
It’s just your bad luck to find yourself in the middle of one.
Have a great weekend.
From Monevator
The Slow & Steady Passive Portfolio update: Q1 2025 – Monevator
Inheritance tax hacks – Monevator
From the archive-ator: Volatility, inflation, and asset class returns – Monevator
News
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UK equity funds suffer worst quarter for outflows ever as clients pull billions – CityAM
The homebuyers who lost thousands when their off-plan dream turned sour – BBC
‘Dire’ UK productivity falls far behind the US… – Yahoo Finance
…but at least GDP surprised with a 0.5% expansion in February – CNBC
Pandemic-fuelled shift to coast and country has gone into reverse – Guardian
Where living standards are rising fastest in Europe [Infographic] – Visual Capitalist
Increased state pension will arrive in accounts from next week – This Is Money
US Justice Department scaling back crypto investigations – Washington Post via MSN
The US is down but not out – Known Unknowns
Products and services
Cash ISA picks for 2024/2025 – Be Clever With You Cash
Six things we’ve learned from a decade of pension freedoms – Which
You can get up to £250 cashback when you open a SIPP with Interactive Investor. Terms and fees apply. – Interactive Investor
Mortgage rates set to drop after tariff turmoil… – BBC
…and more cuts could be on the way… – Which
…with the gap between two- and five-year fixes now tiny – This Is Money
Get up to £4,000 when you transfer your ISA to InvestEngine our link. (Minimum deposit of £100, other T&Cs apply. Capital at risk) – InvestEngine
The best ways to earn and use Tesco Clubcard points – Be Clever With Your Cash
Five things your estate agent is too afraid to tell you – Standard
Get up to £1,500 cashback when you transfer your cash and/or investments through this link. Terms apply – Charles Stanley
Should you ditch the TV licence? – Be Clever With Your Cash
Skinny but spacious homes for sale, in pictures – Guardian
Market movements mini-special
Off the charts volatility is a sign we’re living in financial history – Sherwood
Welcome to the grasslands – Fortunes & Frictions
What do the market declines imply about corporate earnings? – KOI
How long does it take for the market to recover? – Of Dollars and Data
This is what real uncertainty looks like – Morningstar
How to survive chaotic markets – A Wealth of Common Sense
Comment and opinion
Are equities ‘always’ better in the long run? [Search result] – FT
Let them trade stocks – Best Interest
Does financial literacy decrease with age? – Wharton
Bear markets and bad decisions – Behavioural Investment
Trump’s tariffs are a reminder to investors to diversify – UK Dividend Stocks
FIRE vs meaningful retirement: choose wisely – CFA Institute
What to think about when leaving a legacy to kids – Humble Dollar
The four phases of retirement [Podcast] – Humans vs Retirement
Rebalancing frequency mini-special
Portfolio rebalancing: empty calories or free lunch? – Elm Funds
How well do you understand rebalancing? – Robert’s Substack
Naughty corner: Active antics
The Mag 7 account for 40-50% of S&P 500 volatility – Verdad
Best international stocks to own – Morningstar
Venture needs to get past its ‘IPO or bust’ mentality – Institutional Investor
Kindle book bargains
A Man for All Markets by Edward O. Thorp – £0.99 on Kindle
Million Dollar Weekend by Noah Kagan – £0.99 on Kindle
Great Britain? by Torsten Bell – £1.99 on Kindle
The Moneyless Man by Mark Boyle – £0.99 on Kindle
Or pick up one of the all-time great investing classics – Monevator store
Environmental factors
Government may extent domestic energy grants to heat batteries – Guardian
‘Greenhushing’: companies hiding their environmental concerns – Grist
China can win an energy war with the US – Semafor
UK planning bill throws protections to wind, say nature chiefs – Guardian
Experts dispute claim that dire wolf has been brought back from extinction – BBC
Many US EV and battery factories are being cancelled under Trump – MSN
Is legal action the only way to save the planet? – Guardian
‘Dark diversity’: the invisible threat to nature – Science Alert
Robot overlord roundup
Shopify looking to AI to keep its workforce lean – Sherwood
Algorithms locking up US prisoners for life – Pro Publica
The colours of her coat – Astral Codex Ten
AI model passes Turing Test ‘better than a human’ – Independent
Tariffs are kryptonite to the AI business – Axios
AI-human teams and the future of work [Research] – Fork Lightning
Not at the dinner table
What it feels like right now – Terrible Minds
All the arguments for Trump’s tariffs are wrong and bad – Noahpinion
The market check – Roger Lowenstein
The Trussing of Donald Trump – Drezner’s World
Decision making under uncertainty – The Pursuit of Happiness
I should have seen this coming – Atlantic [h/t Abnormal Returns]
Trump may have just ended globalisation as we know it – Washington Post via MSN
The new right’s cult of domesticity – Emily Amick
Off our beat
Good example of how PR campaigns delude the online masses – Guardian
The long history of Korea explained – Unchartered Territories
Happy, joyous, and free – We’re Gonna Get Those Bastards
The West is bored to death – The New Statesman
Translated fiction is so on-trend – GQ
The English neighbourhood that claims to hold the key to fixing the NHS – BBC
Doing more is often easier – Raptitude
Seth Godin on thinking long-term – Big Think
20 dogs sitting in a row with their leashes on the ground next to them – Zoe Mendelson
US tourist takes wrong boat, ends up a Southend fan – BBC
And finally…
“As long as the odds are in our favor and we’re not risking the whole company on one throw of the dice or anything close to it, we don’t mind volatility in results. What we want are the favorable odds. We figure the volatility over time will take care of itself.”
– Charlie Munger, Damn Right!
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