The redoubtable Mr. Rekenthaler peered in from his retirement villa today, and shared his take on market volatility. He notes that some assets have appreciated in value (BRK.B, Treasury notes) and some have declined (tech stocks, bitcoin). Many attribute this is tariff jitters.
He scoffs.
At base, he claims, if it were tariffs, then BRK.B and tech would have declined, Treasury notes and bitcoin would have risen because the value of the former is impaired by tariffs, the value of the latter is not.
Alternately, he argues, we're seeing a short term panic reaction from speculators who know that it's always safest to be the first out the door when the price of an overvalued asset breaks:
Speculative assets have been sliding not because investors have determined the true cost of tariffs, but instead because the marketplace has suffered one of its periodic bouts of risk on, risk off.
The real reckoning, for good or ill, will come when the impact of tariffs becomes clearer and the decisions are more driven by investors than speculators.
JR does not overtly factor-in the unpredictability of Mr. Trump's tariff policy, where the rules change frequently, unpredictably and by whim. That, as much as the tariffs themselves, might be a factor at play. We'd need to think about whether it impacts his underlying thesis. I haven't, yet.
Comments
My first swipe at a response:
All that said in Mr K's article, tariffs are clearly driving the bus right now. Take away 100% of the tariffs and retaliatory tariffs, and the BS that surrounds the buffoon's daily comments/actions on them, and I suggest we would NOT be seeing anywhere near this level of volatility or declines.
Which takes me back to the phrases I coined earlier this year on this forum:
Buffoon-induced correction*
Buffoon-induced bear market*
Buffoon-induced black swan event**
Buffoon-induced recession**
* = The buffoon's cronies have duly instructed us "not to worry about a little market volatility"!
** = Of course, the buffoon has attempted to preempt owning (the likely coming recession) by saying any near-term recession would be "Biden's and Kamala's"!
John's right. As the Naranja Suprema de Mar-a-Lago said today when asked about tariffs .... key points of idiocy bolded.
"We’ve been subjected to costs that we shouldn’t be subjected to. In the case of Canada, we’re spending 200 billion a year to subsidize Canada. I love Canada, I love the people of Canada. I love I have many friends in Canada. The great one, Wayne Gretzky, the great. Hey, how good is Wayne Gretzky? He’s a great one.
But we have– I know many people from Canada that are good friends of mine. But, you know, the United States can’t subsidize a country for $200 billion a year. We don’t need their cars. We don’t need their energy. We don’t need their lumber. We don’t need anything that they that they give. We do it because we want to be helpful.
But it comes a point when you just can’t do that. You have to run your own country. And to be honest with you, Canada only works as a state. It doesn’t. We don’t need anything. They have as a state. It would be one of the great states anywhere. This would be the most incredible country visually. If you look at a map, they drew an artificial line right through it between Canada and the U.S. just a straight artificial line. Somebody did it a long time ago, many, many decades ago. And it makes no sense.
It’s so perfect as a great and cherished state. Keeping, ‘Oh, Canada,’ the national anthem, I love it. I think it’s great. Keep it. But it’ll be for the state. One of our greatest states, maybe our greatest state. But why should we subsidize another country for 200 billion, costs us $200 billion a year? And again, we don’t need their lumber. We don’t need their energy.
We have more than they do. We don’t need anything. We don’t need their cars. I’d much rather make the cars here. And there’s not a thing that we need. Now there’ll be a little disruption, but it won’t be very long. But they need us. We really don’t need them. And we have to do this. I’m sorry. We have to do this."
Canada should just call his bluff and cut off the oil and electricity supplies and see how Donnie feels about 'not needing anything from them' .....
Today's latest example of self-induced chaos:
Trump White House has asked U.S. military to develop options for the Panama Canal, officials say
https://www.nbcnews.com/politics/national-security/trump-white-house-asked-us-military-develop-options-panama-canal-offic-rcna195994
It's a full frontal assault on the world, and it is unnerving. Is Greenland next? Canada?
It's also an embarrassment, to be frank.
WABAC, agreed, the daily\weekly\monthly market is not a reliable indicator of weighing the longterm cost to society.
however, does anyone doubt that on a whim, trump can press for any\all below and surely the markets will recover in the short-run :
- cancel tariffs, declare victory
- w/gop majorities, get more biz tax cuts
- cajole for rate cuts and other easing
if\when we are in a real economic crisis, many dems will publicly support the above just to get somewhat back to status quo.
hell, the market may even overshoot in the mistaken notion that trump has achieved sanity during irreversible cognitive decline. trump lived long enough for ozempic, but not for that.
(if there is any one sign that the bubble is no where close to bursting, its that djt is not a penny stock)
I don't see any reason to think Trump will give up on his trade war short of the manifest threat of losing the Senate and House in the mid-terms. I'm keeping my eye on ag-state politicians.
But I can't entirely discount your first point either. It could all spin on a dime.
Let Doug Ford shut off the electricity from Ontario. Let Canada use its own oil. I wish there were a magic pill we could feed to MAGA to get them to see ACTUAL reality. But new MAGA is the uber-wealthy who care not a wit for anyone else. Their 401k plans are just an afterthought in their portfolios. On their way to privatizing EVERYTHING, they are counting their expected windfall already.
Our country has indeed become an embarrassment. And the Orange Doink wants NATO to assist us in annexing Greenland? I have no more words. Orange walking disaster.
Citizens United really marked the end of a semi-democratic America.
“In the space of four years, Nazi Germany changed from a defeated nation, a bankrupt economy, strangled by war debt, inflation and lack of foreign capital; into full employment with the strongest economy and biggest military power in Europe.”
Faber and some professionals interviewed make a case for a small (10-20%) allocation to a a momentum approach (buy what’s been going up / sell what’s falling), claiming it also prevents steep losses in prolonged bear markets. Several Cabrera funds incorporate or rely fully on “momentum / trend following” approaches. I’m not sold. Sounds a lot like the elephant chasing his tail to me. Recently sold my 17.5% portfolio stake in one of Cambrea’s etfs. Aside from the issue above, I was surprised how difficult it can be to unload 100% of a thinly traded etf. Enough to make me steer clear in the future.
Thanks David for the thread.
thus, a mkt recovery by some combination of the 3 may overshoot on the mistaken notion trump suddenly gained wisdom.
/// BARTIROMO: Investors are on edge over the possibility of a recession after the Atlanta Fed predicted a 2.4% contraction this quarter
LUTNICK: What? Say that again? 2.4% contraction?! Right here right now -- that is ridiculous
BARTIROMO: Have you spoken to the Atlanta Fed president?
LUTNICK: Absolutely not