DOGE - Govt Efficiencies Are Everywhere

There’s been alot of talk about Elon Musk and the government efficiencies that COULD be captured over time. We all know the government is about the most inefficient of any organization in this country. Our politicians and staffers spend like drunkin sailors and they lean on the USD being the reserve currency and our ability to print money at will. No more DC. Interest rates will not go down unless we either go into a deep economic downturn (not a compelling outcome), or get very serious about balancing the budget and cutting all the wasteful spend. Now that we have outsiders involved, those that have only 1 endgame, savings, we have a nbetter opportunity to make real headway than ever before. To be sure, it will not be easy. Bad muscle memory in the form of waste runs deep in DC but when you make these decisions and the waste very public, the abusers tend to scurry away and hide. That’s what we want. Bottom line: the market is NOT priced for proper efficiencies being accomplished. Any success on this topic will be well rewarded in the equity markets, bond markets, and rates should fall which would stimulate the housing sector which is a big employer in America. IMO, one has to have some “shelter” exposure that’s correlated to falling rates, for the good reasons. This would be home improvement brands like HD, LOW, SHW, BLDR and home builders like DHI, LEN, home furnishing brands RH, WSM, ARHS, and private equity brands BX, KKR, APO and even BLK and GS now getting more focused on their alts divisions. Blackstone has almost $300B in real estate assets so any fall of rates for the good reasons would make that stock really get some giddy-up!

The above is a great chart from Brad Gerstner’s Altimeter Capital highlighting the benefits of reducing spending while keeping the normal revenue growth trajectory we are used to. It’s absolutely doable and for the first time in my life, it’s an actual policy goal with high motivation. Bond Vigilantes beware!

Futures Tank on Trump Tariffs

Well, futures have opened and the sellers are back on the continued news of sweeping tariffs across Mexico, Canada, China, and the EU is surely coming. Trump just loves to be a bull in a china shop. Let’s hope the smart folks around him remind him sentiment is a fickle thing and so are his approval ratings. His ego needs to be stroked and he uses the stock market as his score card for success. So far, he’s starting off with a D-.

The three largest trading partners of the U.S. are: Canada, Mexico, and China. The proposed tariffs will affect trade worth about $1.3 trillion, or 43% of US imports. Again, the result of all this lunacy is likely A)high market volatility, B) slowing economic growth, C) higher persistent inflation, D) wild volatility in currency markets, E) added retaliation against the US from these countries, which simply creates a wicked negative feedback loop. Get your trading cap on and keep it close for the next 4 years, thats where the most money will be made. This is what markets will look like 4 years looking backward.

Tariff-Man Strikes Again: Canada, Mexico, China, EU; "We Comin"

Who wins most when Tariff-Man pushes every leader the US is connected to? Algo’s & Volatility. You can be VOL’s girlfriend or you can use VOL to line your pockets with cash. I know which one I prefer. Everyone knows by now what Trump’s playbook looks like. For this reason, I expect more friction between Trump and other world leaders and countries. If I was the leader of a country being tormented with Trump, I would probably torment him back and call his bluff ALOT. Trump, the man who is happy to push too hard, is playing a dangerous game. Friction, volatility and noise causes uncertainty and that causes businesses and consumers to flinch at times, which can cause economic slowdowns. Those are tied directly to stock prices so Trump, who uses the stock market as his barometer for success, is risking the positive wealth effect and markets to line the governments pockets with tariff cash so he can push tax cuts to consumers and companies. It’s like creating a ton of volatility so he can steal money from our left pocket and put it back in our right pocket. The whole thing is idiotic but consider the source!

There is sure to be plenty of tariff news this weekend and the degenerates trading futures for 5 ticks will be licking their chops come Sunday. We should all expect inflation to continue to stay elevated and volatile month to month. For now, the consumer is spending well and the industrial economy is slowing beginning to wake up. There’s alot more to be excited and positive about than you are seeing in the news. Remember, fear mongering is always an effective tactic to get you glued to the media. Once they have you captive, they can monetize your fear into more ad dollars. Don’t get sucked into the FUD (fear, uncertainty, doubt). We’ve seen this Trump movie before, we know his playbook, we know what he cares about (our admiration and stocks), and we know he wants his legacy to be viewed as positive. It will all work in the end, until then, buckle up for a wild ride.