Where are we at in this downturn?

[Blake Hampton]

10 minutes ago, Dalal.Holdings said:

The Biden WW2 levels of deficits were the stimulus the markets were addicted to. The market has been running on massive fiscal stim for a while now.

These deficits are here to stay until Congress gets serious about taxes and entitlements.

 

Edited April 8, 2025 by Blake Hampton

[Dalal.Holdings]

2 minutes ago, Blake Hampton said:

These deficits are here to stay until Congress gets serious about taxes and entitlements.

 

 

What happens when the Tariff revenues add up to real dollars? U.S. imported some $4 Trillion worth of goods last year...

 

Tariffs are taxes by another name...

 

Edited April 8, 2025 by Dalal.Holdings

[Blake Hampton]

4 minutes ago, Dalal.Holdings said:

What happens when the Tariff revenues add up to real dollars? Tariffs are taxes by another name...

 

Even if tariffs are a large slug, will federal spending programs adjust to the new price level? Congress is currently planning on cutting trillions in taxes. Interest rates will at least stay steady if not increase, which will amount to an upward pressure on our interest expense as Treasury debt roll overs. Tariffs might raise $800 billion? Our current net deficit is $2 trillion.

 

Edited April 8, 2025 by Blake Hampton

[Dalal.Holdings]

10 minutes ago, Blake Hampton said:

 

Even if tariffs are a large slug, will federal spending programs adjust to the new price level? Congress is currently planning on cutting trillions in taxes. Interest rates will at least stay steady if not increase, which will amount to an upward pressure on our interest expense as Treasury debt roll overs. Tariffs might raise $800 billion? Our current net deficit is $2 trillion.

 

 

Republicans have not lately had a good track record at cutting expenses and raising revenue, but there are some new signs that I found shocking:

 

https://www.bloomberg.com/news/articles/2025-04-07/republicans-warm-to-millionaire-tax-hike-to-pay-for-levy-cuts

 

Quote

Republicans are splintering over a proposal to create a new 40% tax bracket for those earning $1 million or more as a way to offset a raft of new tax cuts Congress is looking to pass later this year.

 

House Freedom Caucus Chairman Andy Harris says he is open to the creation of a new 40% tax bracket for those earning $1 million or more, lending credence to an idea being discussed at the White House to increase levies on the highest earners.

Harris said in an interview on Monday that he views the millionaires’ tax rate as a “reasonable way to pay for” President Donald Trump’s campaign pledge to eliminate levies on tipped wages.

 

[Blake Hampton]

1 minute ago, Dalal.Holdings said:

Republicans have not lately had a good track record at cutting expenses and raising revenue, but there are some new signs that I found shocking:

 

https://www.bloomberg.com/news/articles/2025-04-07/republicans-warm-to-millionaire-tax-hike-to-pay-for-levy-cuts

 

That surprises me too but I can't imagine Trump himself agrees with it. I think republicans generally will follow that man off a cliff.

[Dalal.Holdings]

1 hour ago, Milu said:

Yes agree with majority of this. Nobody has any clue how this current saga will turn out, could be a 50% drawdown or could rally from here to all time highs. Once the next year of two plays out everybody will proclaim how obvious it was what would happen. Best bet is to just ensure you will be fine in either scenario. If you don't use leverage and are investing for the long term (5-10 years out) then what happens to good companies over the next 12 months is mostly meaningless, sure on paper you net worth will be lower but if you aren't selling or are a net buyer the opportunity to buy things at lower prices removes a lot of the risk, not increases it. The world will still be here in 10 years and good companies will still be doing business in 10 years, just focus on holding or buying them at reasonable prices.

 

If you are buying FICO at 80x earnings, PLTR at 60x sales, COST at 53x earnings then even a 5-10 year horizon probably will not be enough no matter how "good" these companies may seem. See what happened to MSFT or CSCO from people who held from 2000 on. So much opportunity cost wasted.

[Dalal.Holdings]

3 hours ago, rogermunibond said:

+1 @Dalal.Holdings

 

This is not a GFC 2009-2010 or even a COVID 2020 market.

 

 

 

GFC pangs started in Summer of 2007. It took over 18 months for markets to bottom in March of 2009. Sure, the GFC was much bigger than whatever this will end up being, but it hasn't even been a week since "liberation day".

 

I can't believe people are talking about blowing their loads on 10% drawdowns over 3 trading days. What is this, a bear market for ants ?

 

Edited April 8, 2025 by Dalal.Holdings

[mattee2264]

 

This is a trade war and the problem with any war is that no one knows when or how it will end. 

 

What we do know is that trade wars are bad so it is not surprising there has been a negative market reaction. Whether it is an overreaction is impossible to tell as there simply isn't enough information at this point and the range of outcomes is very wide just as it was during COVID in the beginning. With every bear market there are alternative histories but with the benefit of hindsight we get false confidence that we could have timed it. 

 

The difference with COVID is that a) it was easy to mobilize a massive almost immediate policy response that dwarfed the response to the GFC to accompany and compensate for the lockdown measures b) the vaccine was a silver bullet and was developed at record time c) we had the technology to work remotely and the owners of that technology made hay and it accelerated adoption and usage of their technologies so they became vastly more valuable companies d) we continued to run the economy hot with massive fiscal stimulus long after the lockdowns had ended and vaccines had been rolled out. 

 

This time round it is hard to imagine the Fed riding to the rescue given the inflationary impact of tariffs and a desire not to aid and abet what is clearly a policy mistake on Trump's part. Nor is it likely that there will be a massive fiscal stimulus package with Trump trying to balance the budget and under the delusion that tariff revenue will fund tax cuts for the rich. Also while the impact of COVID and lockdowns on GDP was immediate and incredibly negative with tariffs the damage will take longer to materialize and the Fed is very data dependent. Especially as the extent of the damage will depend on how long tariffs stay in place, the extent to which they are diluted, the reaction of trading partners, and how long the uncertainty continues and how companies and consumers react to all of this. 

 

Lockdowns were a temporary policy measure designed to save lives and contain the spread of the virus. 

 

Who knows what the plan is with tariffs? I think a lot of market participants continue to think that Trump is bluffing and this is just a short term measure to get a few trade concessions and policy will get quickly reversed once he can claim a win. Or that he'll be forced to back down by the market reaction (the Trump put) or his party. But that seems optimistic. 

 

What we do know is that Trump plays by his own rules and has no respect for WTO or the terms of engagement that have been in place for decades with the express objective of trying to avoid trade wars. XI is another loose cannon and knows that on this occasion history is on his side and Trump is in the wrong. As for the EU we saw how long it took them to negotiate things with Britain so talks could drag on. Sure Japan and South Korea and Vietnam might fold quickly but without extracting concessions from China and EU it will be difficult for Trump to claim a win. 

 

An analogy I read that seemed apt was it is like expecting a pyromaniac to put out a fire he started. 

 

 

 

 

 

 

Edited April 9, 2025 by mattee2264

[Milu]

10 hours ago, Dalal.Holdings said:

 

GFC pangs started in Summer of 2007. It took over 18 months for markets to bottom in March of 2009. Sure, the GFC was much bigger than whatever this will end up being, but it hasn't even been a week since "liberation day".

 

I can't believe people are talking about blowing their loads on 10% drawdowns over 3 trading days. What is this, a bear market for ants ?

 

No loads blown yet . Just a small amount of purchasing in the retail sector where there seems to be ok price multiples. It’s a little bit more than 10% drawdown over 3 days, both the Nasdaq and S&P are down close to 20% from peak. Things also seem to move a lot faster these days so I wouldn’t necessarily expect a large scale drawdown to go for a couple of years, could certainly happen though. 
 

Still plenty of froth out there too though so I’ll be just keeping tabs on my watchlist and making some selective buys if the market serves up some deals. 

[brobro777]

11 hours ago, Dalal.Holdings said:

 

GFC pangs started in Summer of 2007. It took over 18 months for markets to bottom in March of 2009. Sure, the GFC was much bigger than whatever this will end up being, but it hasn't even been a week since "liberation day".

 

I can't believe people are talking about blowing their loads on 10% drawdowns over 3 trading days. What is this, a bear market for ants ?

 

speaking of bear markets, I remember like yesterday in Jan 2001, when my homeboy Greenspan did a surprise interest rate cut

 

i was in MMC at the time, insurance company Marsh McLennan. Out of nowhere everything went vertical, green candle through the top of the monitor kinda vertical, everything going crazy

 

MMC went off for something like 20 points I think and  I got a good chunk of it. And I got it without doing crazy amounts of research, reading books and industry reports like them value investor nerds, who are furiously typing with furrow brows on some Internet forum regarding competitive advantages or industry regulations

I learned a valuable lesson that day my friends - better to be lucky than good baby, better to be lucky than good

 

Haha

 

 

[Sinbius]

China to raise reciprocal tariffs on U.S. goods to 84%

[tede02]

Starting to see the impacts in the "hard data" as Walmart and Delta Airlines pull their financial forecasts for 2025. I would not be surprised to see another gap down 5-10%. But what's tough is there could also be a major rally if White House gets gets cold feet, announces a "pause" or some kind of deal. We already saw a preview of that with the erroroneous reporting on Monday. This will be another period for the history books. 

Edited April 9, 2025 by tede02

[Dalal.Holdings]

I think the most positive news that will come soon will be some deal with Japan / Vietnam or other allied trading partner. I think the administration will continue to go hard against China though.

[Dalal.Holdings]

The cavalry isn’t coming 

 

[Spekulatius]

I see right now that bonds are screaming higher. Falling equities and sharply higher treasuries is not something that one sees too often. I don’t think it’s a good thing.

[Paarslaars]

5 minutes ago, Dalal.Holdings said:

The cavalry isn’t coming 

 

That's the same guy from the fake news stuff about 90 day hold-off on tariffs?

[alpha]

This is like living in that movie Idiocracy

[Intelligent_Investor]

4 hours ago, mattee2264 said:

 

This is a trade war and the problem with any war is that no one knows when or how it will end. 

 

What we do know is that trade wars are bad so it is not surprising there has been a negative market reaction. Whether it is an overreaction is impossible to tell as there simply isn't enough information at this point and the range of outcomes is very wide just as it was during COVID in the beginning. With every bear market there are alternative histories but with the benefit of hindsight we get false confidence that we could have timed it. 

 

The difference with COVID is that a) it was easy to mobilize a massive almost immediate policy response that dwarfed the response to the GFC to accompany and compensate for the lockdown measures b) the vaccine was a silver bullet and was developed at record time c) we had the technology to work remotely and the owners of that technology made hay and it accelerated adoption and usage of their technologies so they became vastly more valuable companies d) we continued to run the economy hot with massive fiscal stimulus long after the lockdowns had ended and vaccines had been rolled out. 

 

This time round it is hard to imagine the Fed riding to the rescue given the inflationary impact of tariffs and a desire not to aid and abet what is clearly a policy mistake on Trump's part. Nor is it likely that there will be a massive fiscal stimulus package with Trump trying to balance the budget and under the delusion that tariff revenue will fund tax cuts for the rich. Also while the impact of COVID and lockdowns on GDP was immediate and incredibly negative with tariffs the damage will take longer to materialize and the Fed is very data dependent. Especially as the extent of the damage will depend on how long tariffs stay in place, the extent to which they are diluted, the reaction of trading partners, and how long the uncertainty continues and how companies and consumers react to all of this. 

 

Lockdowns were a temporary policy measure designed to save lives and contain the spread of the virus. 

 

Who knows what the plan is with tariffs? I think a lot of market participants continue to think that Trump is bluffing and this is just a short term measure to get a few trade concessions and policy will get quickly reversed once he can claim a win. Or that he'll be forced to back down by the market reaction (the Trump put) or his party. But that seems optimistic. 

 

What we do know is that Trump plays by his own rules and has no respect for WTO or the terms of engagement that have been in place for decades with the express objective of trying to avoid trade wars. XI is another loose cannon and knows that on this occasion history is on his side and Trump is in the wrong. As for the EU we saw how long it took them to negotiate things with Britain so talks could drag on. Sure Japan and South Korea and Vietnam might fold quickly but without extracting concessions from China and EU it will be difficult for Trump to claim a win. 

 

An analogy I read that seemed apt was it is like expecting a pyromaniac to put out a fire he started. 

 

 

 

 

 

 

With the moves in the treasury markets, fed may be forced to act

[Santayana]

Who had treasury market dislocation on their bingo card?

[mattee2264]

Yeah there is a lot of talk about basis trades blowing up. So naturally some hedge funds will probably get bailed out by the Fed. 

 

Moral hazard once again. But probably bullish. 

[gfp]

More likely a Japanese bank or two getting bailed out by their central bank

[Hsmpanl]

20 hours ago, Hektor said:

Hi @Hsmpanl, What is your take on OXY? Their CEO claims that their break even is about $40. Further, most of OXYs reserves seems to be in the USA, apparently a politically stable country. What, if any, differentiates OXY from the others?

Oxy is fine, their breakeven of $40 is probably accurate, but that’s on a project by project or well by well basis. All FCF seems to be recycled into additional acquisitions and not accruing to owners. If oil prices go up they’ll do well, but for all these companies you have to have a view on oil prices and then be confident that management will return that value to shareholders when the good times happen.

[Hsmpanl]

20 hours ago, Hektor said:

Hi @Hsmpanl, What is your take on OXY? Their CEO claims that their break even is about $40. Further, most of OXYs reserves seems to be in the USA, apparently a politically stable country. What, if any, differentiates OXY from the others?

Oxy is fine, their breakeven of $40 is probably accurate, but that’s on a project by project or well by well basis. All FCF seems to be recycled into additional acquisitions and not accruing to owners. If oil prices go up they’ll do well, but for all these companies you have to have a view on oil prices and then be confident that management will return that value to shareholders when the good times happen.

[rogermunibond]

In this environment there are much better companies to buy than OXY.  Buffett was buying OXY when the opportunity set was very limited.

[Hektor]

18 minutes ago, Hsmpanl said:

Oxy is fine, their breakeven of $40 is probably accurate, but that’s on a project by project or well by well basis. All FCF seems to be recycled into additional acquisitions and not accruing to owners. If oil prices go up they’ll do well, but for all these companies you have to have a view on oil prices and then be confident that management will return that value to shareholders when the good times happen.

Interesting. Is $40 not the average breakeven across all OXY assets?