The Trump 'Maga Crash' | Musk Loses It.

well Wall Street is beginning to panic

because Donald Trump is actually doing

exactly what he said he was going to do

most of Wall Street believed that there

was basically no chance Donald Trump

would Implement stronger tariffs than

what he conducted in

2018 because inflation is just too high

today and

by initiating large tariffs we might

actually worsen the inflation situation

well we kind of got exactly the opposite

of what Wall Street expected we got

exactly what Donald Trump said now take

a look at this and you can get a sense

for how Wall Street is reacting this is

a sheet from Deutsche Bank it says huge

shock first thoughts on the Tariff

announcements the macroeconomic

implications of such tariffs are likely

wide ranging and materially disruptive

especially outside of the US by our

estimates the market was roughly pricing

in the equivalent of a 5% Universal

tariff being enacted in the coming

months equivalent to about a 30 basis

point hump in inflation however the

announcement this weekend was about

three times larger than expected with

reasonable pass through assumptions we

expect a 1% headline inflation impact if

tariffs are indeed sustained the tariffs

are roughly five times as large as the

toal total cumulative sum of all of the

tariffs that Donald Trump implemented

under the first Administration as a

result expect a large and volatile

Market reaction well this is exactly

what we're seeing in the market right

now especially since there's been this

quote underlying Trump put embedded into

the S&P 500 but wait a minute what

happens when Donald Trump is asked about

the market and he says eh people will

understand we're doing what we need to

do to correct the wrongs of fentanyl or

the drug cartel or otherwise well all of

a sudden the Trump put seems a whole lot

weaker what about Jerome Powell Donald

Trump is going to pressure him to lower

rates

right maybe not Trump when asked about

Powell not cutting rates Donald Trump

just said I think holding rates was the

right thing to

do what that was the opposite of what

you said two weeks ago bro

and then people are like all right all

right well well at least you haven't hit

the European Union yet because you know

we've got a pretty big $300 billion

deficit with the European Union and to

this Donald Trump says oh those will

definitely happen Europe is really

taking advantage of us you think Canada

and Mexico is bad let me get started on

Europe um yeah so this is leading a a

lot of people including cartoonists to

say Donald Trump doesn't realize what

he's doing and he is literally pissing

in the wind here is said cartoon now

look it's entirely possible that this is

all just part of Donald Trump's Chaos

Theory after all the art of the deal the

more chaos you create the more you are

in control of the narrative and you get

to solve the problems and maybe all of

this will get solved over a few

different phon calls and Donald Trump

will get exactly what he wants after all

we still have until the fourth for these

tariffs to take effect so that gives

us well about two business days and

that's not even for an expiring coupon

code on the courses because we don't

have one right now it's for expiring no

tariffs it's like a reverse coupon

anyway uh if the tariffs stay in effect

for 12 months Piper Sandler believes

that Canadian real GDP will Collapse by

5% negative 5% that is right Mexican

real GDP will Collapse by 8% it's

negative 8% and US GDP will fall from 2%

to 1% so obviously indicating that the

United States has significant

significantly more leverage here but

let's be real there's really no part of

North American industry that isn't

affected here there's a reason why GM

and Ford are down as much as they are

currently in the pre-market you've got

Tesla down about three and a half Ford

down about 4 and a half and GM down

about 7% because of how much our supply

chains have been integrated batteries

coming from Mexico critical minerals

coming from Canada GM and Ford having

sign and as well as other auto

manufacturers having significant

factories built out in Canada and Mexico

now Tesla having a unique Advantage here

given that they canned the Giga Mexico

plans and essentially have American

manufacturing which is exactly what

Donald Trump wants Texas and Fremont you

still have risks when that European

trade war begins but how this trade War

plays out between Mexico and Canada will

probably set the stage for how we expect

the trade War to play out in Europe and

I have to say when Wall Street starts

turning fearful I start getting at least

a little bit excited I I kind of start

thinking to myself you know what like

when Wall Street does this

I happen to get more bullish uh see take

a look at this uh here's just a piece

from Wall Street where they say in the

back of my mind I'm worried that the

administration will like the revenue

generated from tariffs uh and there's a

nonzero risk that the tariffs end up

staying I'm moderately bearish now bonds

and Equity but moderate is the key word

you should stay

Nimble okay that is the first time in

about 20 months that I've actually seen

someone you know you know from an

Institutional point of view start

getting

nervous sometimes those are really good

buying opportunities now let's be real

is the economy currently pricing in a

recession as a result of this I would

argue no how can we see this well it's

actually pretty simple just look at the

yield curve the yield curve is actually

compressing right now usually when we

have a recessionary shock you see you

see the yield curve steepen well the

difference between the 10 and the right

now is about 27 points which is about 12

points lower than what where we were you

know a week and a half ago so in English

no the market doesn't appear to be

pricing in a near-term recession rather

the market appears to be pricing in an

earning shock that is the fundamental

well and part of this is probably just

an overreaction as it usually is so who

knows we might end up having a nice

recovery today uh we'll see especially

after we get some good news out of the

phone phone call oh you know oh looks

like we'll be able to work out a deal

Market just skyrockets maybe or No Deal

happens and the market might fall a

little bit more but what you really have

in the short term is people trying to

price in that everything is going to

potentially get a little bit more

expensive and while this will be

inflationary it will be limited by how

much those companies can actually pass

on those higher prices remember we

expect oil prices to go up because of

those energy uh tariffs on Canada about

10% but food prices will also go up

especially since 86% of our Tomatoes

come from Mexico 83% of our imported

beer made from malt comes from Mexico

83% of our cabbages cauliflower uh kale

and other items come from Mexico as well

as things like dates and fakes and

pineapples avocados guavas mangoes and

uh well fresh or really dried fruits in

general lots of these over 70% of these

come from Mexico maple syrup obviously

from Canada we send them Florida orange

juice but the point of these things are

these are usually excluded from our core

measures of inflation now core measures

of inflation could trickle up as well

that's what people are concerned about

but usually that is limited by how much

companies can actually raise prices in

this market it's become a little bit

harder for companies to raise prices so

it's likely that Wall Street is simply

pricing in that worst case companies are

just going to have to take it in the

margin

that is any kind of extra tariffs they

face from Supply chains they might have

to absorb those costs and therefore you

end up seeing EPS decline if you look at

Tesla for example you actually saw in

the fourth quarter earnings per share

from Energy Products declined from about

30% to

24.6% that's an example of a company

starting to take it in the margin and

that's not great because Tesla is really

right now propped up on high earnings by

energy and then of course a lot of Hope

around optimism Optimus optimism around

Optimus uh and Robo taxis uh but what's

very important here is that Wall Street

is trying to price in fundamental

earnings per share impacts of something

that honestly in a week from now could

blow over now maybe it won't maybe it

won't blow over maybe this this will

continue to go on uh and I think that's

where we'll have to see where the

sentiment of today's uh phone call so to

speak goes and how progress evolves here

progress over the next few days will be

critical to monitor can these tariffs be

recessionary in the longer term

absolutely but that's not what the

market is responding to right now now

yes crypto markets were liquidated to

the tune of $2.2 billion one of the

largest liquidations we've seen in quite

a period of time certainly over the last

year and a

half it's going to hurt for people who

are on margin to go through this

volatility but this volatility could end

up creating a buying opportunity I

generally love tariffs for buying

opportunities as long as they don't rise

to the level of being recessionary I

don't think Trump is going to push it

that far especially since remember

tariffs Beyond being a negotiating tool

they are economically inefficient and

Steve Basset knows he knows that they

are economically inefficient and that a

stronger dollar does not actually bring

us more us manufacturing now we'll see

how this actually weighs on their

opinions do recognize that the currency

markets already already discounts some

of the impact of tariffs now this is a

little bit more complicated to

understand I'll just give you a very

quick example let's say that uh you're

going to go buy something that costs 100

Canadian dollars okay you're going to

buy 100 Canadian dollars of maple syrup

well in September you would have paid

$74 for that because every Canadian

dollar is worth about 74 to the USD well

today we would only pay about 68 oh but

wait now you have to add the $25

Canadian dollar tariff so multiply that

100 Canadian dollar by 1.25 costs you 1

or $125 * 68 is

$85 okay so now compare your total cost

today with tariffs $85 today us compared

to what you paid in September before the

trade War

$74 well the difference you can see is

14.8% so the market has already

discounted the these tariffs for you by

10.2% the currency Market does some of

this for you so yes some of the

dislocation you see in the markets are

basically just markets calibrating to

all right we might see earnings down a

little bit stronger dollar weaker dollar

you know or a weaker foreign currency or

whatever that is also going to mean that

Revenue that comes in from Europe uh to

the United States for companies like

apple is going to be weaker Revenue

that's collected in China from Starbucks

is potentially weaker as the US dollar

gets stronger remember all those FX

currency adjustments you know FX charges

basically companies end up taking in

their earnings reports and their

earnings are lower because of the strong

dollar this is exactly that keep in mind

also

the Euro has not been at close to parity

uh since about the summer of

2022 and right now the euro is trading

at a bucko 3 uh for a US dollar so this

is really um you know it's almost back

at 1:1 which is kind of wild so to

clarify that it costs a13 C to buy one

Euro they're basically almost equal

which does mean we're probably going to

have pretty cheap European vacations

coming up if you have any plans to go to

Europe uh in the spring or summer here

assuming this tariff War keeps going and

the dollar keeps its strength up becomes

desirable to actually go vacation in

some of these areas you know Justin

Trudeau is like don't come vacation in

Canada or sorry don't don't go vacation

in the United States sorry that's what

he said don't go vacation in the United

States stay in Canada but it actually

becomes more desirable for Americans to

go vacation in Canada because know the

Canadian dollar is is weakening 68 cents

right now uh so uh you know that's

that's a bit on tariffs and really I

think this is going to be a very fluid

situation so I don't think it makes

sense to spend much more time on this

Beyond saying it doesn't appear to be

right now uh something that we're

pricing in as recessionary uh and it

does not appear to be something that uh

uh markets don't at least somewhat

discount as potentially disappearing

soon we'll see uh now what I do want to

talk about very briefly is I want to

talk about musk spaces with uh Joanie

erns I really dislike this that I will

say I only listen to

about 20 minutes of it and then I I shut

down so it was Elon Musk Viv and Joanie

Ur and basically on Ur goes on the

spaces and she's basically the tool for

you know why doge is so

great she goes on and kind of spews this

stuff that we've heard a million times

before things like there are reports

that indicate there were earmarks for

how money was spent for shrimp to work

out on a treadmill and you know studies

were done on penis sizes and we spent

multi-million dollar GR to agencies

doing these things and what you really

had was this situation where Joan s is

is throwing out this information this

this data only 6% of the federal

Workforce shows up in person and then

you have Elon who's not asking like hey

like how much was specifically going to

the shrimp on

treadmills you know obviously even $1

seems like it's too much how much was

going on to penis size papers you know

tell me more about this federal worker

issue there was no critical debate there

was no factchecking it really honestly

it felt like a

politician throwing out their political

talking points and elon's just

like that's ridiculous oh my gosh that's

crazy do you need a few billion dollars

to go fight

this because the reality is the money

that was spent on the shrimp treadmill

study which had to do with uh changes in

water quality for shrimp like how do

they respond it actually a very small

experiment somewhere around 1,000 bucks

now I'm not saying we should have spent

a thousand bucks on a

treadmill to help understand how shrimp

CH you know respond to changes in water

quality I I'm not a

scientist but that all of a sudden has

become this blown up thesis that see how

wasteful government is just like the

penis study example where a small Grant

was given to I believe it was two

authors to study uh you know to to

basically write a report or whatever uh

and it was it a fraction of uh the

entire budget essentially of uh whatever

was granted here I'm not saying that

either is these two things should have

had money spent on them but what's

happened is these smaller expenses have

defined the entire

grants and so now they're political

talking points so they'll say oh we

we're wasting 50 million ion Dollar on

this agency because they're training

shrimp on treadmills it's like well no

like $1,000 went to a little side

project out of $50 million and so you're

mischaracterizing all of that money that

was spent and so some people are looking

at this going oh my gosh Elon if if

you're not looking at this stuff

critically what if you actually are

starting to cut things that matter I'm

not again saying the penis SI study or

that the shrimp stuff matters that's

just what has been highlighted but what

about all the stuff that hasn't been

highlighted and the fact that Elon

wasn't critically questioning into this

especially

concerning Joanie says only 6% of the

federal Workforce shows up but this was

based on a survey of 6,300 federal

workers that was a non-scientific

survey that had to do with should people

go back to work uh you know can they

work at home this that or

whatever the office of personnel

management indicates that right now 54%

of federal workers work fully on

site that only 10% of the federal

Workforce Works remote which is almost

exactly the opposite of what a senator

said that 6% of federal workers show up

but you know Elon hears the data oh my

gosh this is terrible I'm not saying my

data is

right I'm not here to defend the

government I think there's a lot of

waste in the government I'm just saying

I just thought that somebody who's

supposed to be as you know with it as

Elon

musk really seems like he doesn't care

about anything other than all the

government spending is evil and

ridiculous and Republicans can do no

wrong like I'm not trying to take

political sides here I don't really care

I'm just pointing out that when I like I

got kind of grossed out by how the um

Twitter spaces was going so I stopped

listening to it because it was

just it seemed like logic was missing

from it and I didn't want to spend so

much time going super deep on shrimp

studies I really don't

care but this was my initial

reaction so we'll see anyway and again

I'm not arguing that there's not a lot

of get waste there's a lot of waste but

it did make me uh somewhat concerned at

least anyway uh there you have it for

today thank you so much for watching

we'll see you in the next one uh goodbye

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