TRACK TARIFFS

“Alternative Asset Managers are very rate-sensitive. Higher for longer rates, they compress private equity deal activity, they slow realizations, they reduce fundraising momentum. There's definitely a lot of downside risk because of how private investments are valued and oftentimes you don't know how bad things are in private markets until they get really bad.”

“The industries where they said we'd see the most wage gains from reduced labor supply are actually seeing slower growth in the broader economy. Employment in those 41 immigrant dependent industries fell by 90,400 in February from the previous February, while overall employment grew 298,000. The fundamental economic concept at work here is a lump of labor fallacy.”

“There is a fundamental difference between financial markets and the real economy. They are not the same thing. Markets can be at all time highs while the economy is struggling. Now, where we are right now is not a struggling economy. It is a labor market that is a bit more weak, a bit weaker than it was last year. It's a consumer that is a bit more strained by inflationary pressures.”

“Probably the same threat that we identified a couple of years ago when we were here even before the new administration took power, which is the fiscal. So projections for the right now, federal debt to in the hands of the public to GDP is around a 100%, which is historically high in peacetime for The United States. But the projections are given current and future fiscal deficits for debt to GDP to go up to a 150% or higher by the middle of the century.”

“With the IEPA tariffs, my first reaction was, we've had deficits for fifty years. There's no emergency here. And I just told you there was no fundamental international payments problem. I just went through how the market functioning right now is inconsistent with the language of 122 as I think about it. So to me, why isn't 122 on its face ridiculous and out of bounds?”

“Goldman Sachs published a note late last Thursday, revealing that systematic hedge funds, the algorithm driven funds known as CTAs or Commodity Trading Advisors, bought 86 billion of stock exposure over the last five trading sessions. That ranks as one of the largest buying surges in the history of these funds. They further estimated another 90 billion could follow over the next five sessions if the signal stays aligned.”

“Well, they are obsessed with what they call monetary sovereignty. And it probably reflects long bristling resentments at the dominance of the dollar. I had the dubious pleasure of working on, I believe it was a g seven working group when Facebook first floated its idea for a the Libra stablecoin back in 2019. That got many members of the g seven very hot and bothered, very concerned.”

“Traders have abandoned their bets on a stronger dollar, and the greenback is on course for its worst month since August. Dollar index is down 2.3% from its late March peak. The euro has recovered almost all the losses it made in the conflict's first week. The dollar's loss ground against every major currency except the yen so far in April.”

“I basically said capitalism is effectively fractured and ending. And what I meant by that, as you read through it, is we are having 4% GDP. Nominal GDP in Q3 was annualized at 8%. And during those six months, we created zero jobs. And today we got the payroll number, but again, it's low numbers, and we revised down more than we created.”

“In a way, it is a toll road on America's aging water pipe replacement cycle. But daily average sales growth is down. There is a clear demand cooling trend. Private construction is soft. Tariff driven input costs, uncertainty, another overhang here. It is, in many ways, a high quality infrastructure distributor at a multi-year low valuation.”

“We also noted that if the dollar were to be dislodged, it would be not so much because of competition from Europe or China, but because of bad economic policies in The US. And if that were the case, then the loss of dollar dominance would be the worst of our problems. So fast forward to today and the article that Mark and I wrote recently, the list of bad policies has gotten longer, and it's actually happening.”

“In a way, it is a toll road on America's aging water pipe replacement cycle. But daily average sales growth is down. There is a clear demand cooling trend. Private construction is soft. Tariff driven input costs, uncertainty, another overhang here. It is, in many ways, a high quality infrastructure distributor at a multi-year low valuation.”

“I do think by the end of this year, people will start to realize that productivity gains are going up. And the question is, how much of this is around artificial intelligence? And I think a really, really high part of it is about artificial intelligence. We are having 4% GDP. This, the last two quarters that we have GDP numbers for combined were over 4%.”

“I actually see the last twenty five years of Chinese economic development as a series of rolling shocks. So in the early naughts, massive current account surplus, undervalued currency, along comes the GFC to replace the demand. China ratchets up investment. 2015, 2016, growth scares in China. The next thing you know, the Chinese are replacing the lost demand with a housing boom. And that has now petered out. So now to replace the lost demand, you have the credit from the state owned commercial financial sector going into state owned enterprises, which keep producing manufacturing, exports that can't be absorbed domestically.”

“The rest of the world, because the cost of coding is going to zero, the ability for anyone to do it has become ubiquitous. That means companies around the world that are more bloated... it's much easier to make your profit margins go up with AI when you're starting from 10% than if you're starting from 75%. I think that's what we're starting to see because the companies that are at 75%, they're either coding companies or being disrupted by AI.”

“CTA flows are a short-term momentum signal. They are not, not, not, not, a fundamental endorsement. The algorithms are buying because prices are rising. They don't know and they don't care whether the war ends, whether earnings hold, or whether the consumer cracks. The smart money is in. But the smart money isn't always right. It's just faster.”

“When oil and gas prices surge, the economics of solar batteries and EVs improve instantly because the comparison shifts. A solar installation that had a seven year payback period at $70 of oil might have a four year payback period at a 100. A battery storage system that was marginally economic becomes a no brainer. An EV that saved 800 a year in fuel now saves 1,500. China manufacturers all of these products at scale and at cost that no other country can match. The Iran war didn't create China's advantage. It accelerated the timeline on which that advantage became decisive. The geopolitical leverage this creates, it's significant. China has been regarded as a low cost supplier, but is increasingly treated as a long term energy transition partner by countries across Africa, Asia, and Latin America.”

“There is a fundamental difference between financial markets and the real economy. They are not the same thing. Markets can be at all time highs while the economy is struggling. Now, where we are right now is not a struggling economy. It is a labor market that is a bit more weak, a bit weaker than it was last year. It's a consumer that is a bit more strained by inflationary pressures.”

“On the exorbitant principle privilege issue, I agree with Steve. I think Americans are shielded from foreign exchange risk, which is also advantage. This notion that one hears from all over the world that The US has some exorbitant privilege is overrated.”

“Big Oil is printing cash from the war, but they won't spend it on new production. Since 2022, when Russia's invasion of the Ukraine sparked the last energy crunch, Exxon, Chevron, and Conoco have spent a combined $301,000,000,000 on dividends and share buybacks. Their capital expenditures over the same period came to 22,000,000,000. They've returned 79,000,000,000 more to shareholders than they've invested in finding and producing new oil. Exxon returned 9,200,000,000 to shareholders in q one alone. That was 4.3 in dividends and 4.9 in buybacks while keeping its 20,000,000,000 annual buyback plan unchanged. And oil prices have surged nearly 20%. I'm sorry. I don't know why I came up with that number. 80% since the start of the year.”

“The industries where they said we'd see the most wage gains from reduced labor supply are actually seeing slower growth in the broader economy. Employment in those 41 immigrant dependent industries fell by 90,400 in February from the previous February, while overall employment grew 298,000. The fundamental economic concept at work here is a lump of labor fallacy.”

“The reason it's up there, we're still early in the data counting, so this is very early, but the reason is because the trade deficit is falling. And again, the trade deficit is the other side of this. We've been running a deficit, trade deficit in the country for a long time. That has led to a capital account surplus, meaning the money leaves the US, it goes to these other countries.”

“The interesting thing that happened after April 2 was that the dollar, which previously had always been a flight to safety currency rising during times of financial turbulence, actually fell instead. In the four years before Liberation Day, on average, the dollar had always risen in response to increases in the VIX. But for several months after Liberation Day, that sensitivity turned negative. When volatility went up, the dollar fell, making the dollar less like a safe haven currency and more like an emerging market style risk on currency.”

“Steve and I both will admit there's no precise way to estimate how much currency is undervalued or not. And when we do, Steve and I are probably thinking about the trade weighted currency. But for a bilateral pair, the idea of a bilateral equilibrium exchange rate's kinda ridiculous. Countries do follow bad harmful practices at time. But on balance, I just think using trade tools to tackle currency perceived woes is a sketchy idea.”

“Also, I see stable coins basically as a pass through mechanism for crypto. Crypto to me is about criminality, money laundering. Tether is the largest stablecoin in the world. It's in El Salvador. Who knows what it's invested in and whatnot? I think this could end unhappily.”

“While Western economies have been grappling with $100 oil, broken supply chains, and an inflation resurgence from the Iran war, China's quietly been running a different playbook, and the numbers from March tell a pretty remarkable story. Chinese exports of solar technology hit 68 gigawatts, surpassing the previous record by about 50%. 50 countries set new records for Chinese solar imports. Exports of solar, batteries, EVs rose 70% year over year. Chinese EVs and hybrid exports hit an all time high increasing 140% from the same period a year ago. These categories, what Beijing calls the new three, have replaced clothing, furniture, and appliances as the export engine of the Chinese economy. China is structurally benefiting from this crisis in ways that go well beyond opportunistic exporting. The country spent the past decade building the world's most vertically integrated clean energy manufacturing ecosystem from polysilicon and wafers to solar panels, from lithium processing to battery cells, from battery packs, all the way up the chain to finished EVs. That investment often at the expense of profitability, well, it created overcapacity that analysts criticized. Now with global energy price spikes and every import dependent country scrambling for alternatives, that's a strategic asset.”

“Stablecoins can be helpful, but they're not a panacea. In a context where our termites had been working diligently on the foundations of the house of dollar dominance, leading it to become precarious and crash, it's unclear that stablecoins would be the dollar savior. In this adverse scenario where the dollar is becoming more precarious in terms of its role and we look to stablecoin for rescue, at that point, stablecoins themselves might be a very viable entity in financial markets, but people would presumably stop pegging them to the dollar and start pegging them to other currencies.”

“Exxon CEO made an important observation. The global market hasn't yet seen the full impact of the supply disruption. Tankers are still delivering cargos loaded before the war. Countries have released strategic dessert reserves. Once these buffers are exhausted, buyers will race to snap up supplies to refill inventories, which will continue to drive demand and lift prices. Even if the street reopens, it'll take one to two months for traffic to normalize. For investors in energy stocks, this discipline is a double edged sword. On one hand, it's exactly what shareholders have been demanding, capital returns over production growth, cash flow over market share. Energy stocks have been among the best performers this year. On the other hand, the refusal to invest in new supply means the structural supply constraints that drove prices higher will remain.”

“Traders have abandoned their bets on a stronger dollar, and the greenback is on course for its worst month since August. Dollar index is down 2.3% from its late March peak. The euro has recovered almost all the losses it made in the conflict's first week. The dollar's loss ground against every major currency except the yen so far in April.”

“I mean, it's crazy in the fact that it's unthinkable, but at the same time, whenever I do on-site presentations, I always talk about the fact that you should think the unthinkable because AI is moving at such a fast pace. If GDP is 120 trillion, it's estimated that compensation is 60 trillion across the globe. Well, if you're going to take, if you're going to replace 60 trillion with AI over the course of the next five years, then 10% to me is not out of the question.”

“For US investors, the question of whether China's clean tech and industrial companies represents a contrarian opportunity, it's genuinely complex. On the bullish side, Chinese companies are trading at steep discounts to develop market peers with the MSCI China index at roughly 10 to 11 times forward looking earnings versus 20 plus for the S and P 500. The structural demand for their products, it's accelerating thanks to this energy crisis, and the clean tech export surge is generating real revenue and real cash flow, not speculative growth. On the bear side, the risks are substantial, and they are hard to hedge. US tariffs on Chinese EVs remain at a 100%. Solar panels face tariffs and anti dumping duties. Rare earth export controls could be weaponized in trade escalation. Regulatory risk, both from Washington imposing new restrictions and from Beijing imposing new requirements on Chinese companies, It's elevated, and it's unpredictable. The practical approach for investors who are evaluating any company with significant Chinese exposure is to separate the structural thesis from the political risk.”

“CTA flows are a short-term momentum signal. They are not, not, not, not, a fundamental endorsement. The algorithms are buying because prices are rising. They don't know and they don't care whether the war ends, whether earnings hold, or whether the consumer cracks. The smart money is in. But the smart money isn't always right. It's just faster.”

“Goldman Sachs published a note late last Thursday, revealing that systematic hedge funds, the algorithm driven funds known as CTAs or Commodity Trading Advisors, bought 86 billion of stock exposure over the last five trading sessions. That ranks as one of the largest buying surges in the history of these funds. They further estimated another 90 billion could follow over the next five sessions if the signal stays aligned.”

“Alternative Asset Managers are very rate-sensitive. Higher for longer rates, they compress private equity deal activity, they slow realizations, they reduce fundraising momentum. There's definitely a lot of downside risk because of how private investments are valued and oftentimes you don't know how bad things are in private markets until they get really bad.”