1 00:00:00,080 --> 00:00:02,040 Welcome back everyone. Today on the Joseph Carlson 2 00:00:02,040 --> 00:00:04,680 Show, the Fair and Greed Index, which measures investors 3 00:00:04,680 --> 00:00:08,760 sentiment, is at a 4A4 out of 100. 4 00:00:08,800 --> 00:00:13,080 The extreme fair category starts at a 25 and we're at a four. 5 00:00:13,120 --> 00:00:16,400 If we take a look at the S&P 500 over the past five days, this is 6 00:00:16,400 --> 00:00:19,400 what it looks like. Basically everything is red now. 7 00:00:19,400 --> 00:00:22,480 It's not just the color red, which is unique because we've 8 00:00:22,480 --> 00:00:27,200 had red days before, but it's the numbers associated here -17% 9 00:00:27,200 --> 00:00:33,080 with Apple -10% with Meta minus 8%, with Amazon, ServiceNow, 10 00:00:33,080 --> 00:00:37,360 Intuit, Salesforce, Adobe, Uber, all down past 9%. 11 00:00:37,800 --> 00:00:40,960 These are massive declines in some of the most important US 12 00:00:40,960 --> 00:00:43,880 tech companies in the world, and they continue to go down. 13 00:00:43,880 --> 00:00:46,960 They were going down until there was this big reversal because 14 00:00:46,960 --> 00:00:50,240 there was news that Trump was considering a 90 day pause. 15 00:00:50,640 --> 00:00:54,440 Just this glimmer of hope that President Trump was considering 16 00:00:54,440 --> 00:00:59,560 a pause caused the stock market to go from -4% to plus 1% in a 17 00:00:59,560 --> 00:01:01,600 matter of 20 minutes. But this hope was quickly 18 00:01:01,600 --> 00:01:04,280 crushed as the administration said this was fake news. 19 00:01:04,280 --> 00:01:07,200 Stocks are now continuing their steep decline with incredible 20 00:01:07,200 --> 00:01:10,280 volatility whipsawing back from red to the green. 21 00:01:10,520 --> 00:01:13,760 We have commentary now that buying now is not buying the 22 00:01:13,760 --> 00:01:15,720 bottom. This is a suckers rally. 23 00:01:15,720 --> 00:01:17,760 It's now gotten to the point that even some of the most 24 00:01:17,760 --> 00:01:20,920 ardent vocal supporters of Trump like Stanley Drucken, Bill 25 00:01:20,920 --> 00:01:24,720 Ackman, have come out to speak publicly against the tariffs, 26 00:01:24,840 --> 00:01:27,840 saying they are a massive mistake, that they are not 27 00:01:27,840 --> 00:01:29,600 balanced, that they're not reciprocal. 28 00:01:29,760 --> 00:01:33,080 They are well in excess of what other countries are charging us. 29 00:01:33,120 --> 00:01:36,000 Other business leaders like Jamie Dimon of JP Morgan warns 30 00:01:36,000 --> 00:01:38,400 that the tariffs will raise prices and slow growth. 31 00:01:38,440 --> 00:01:41,040 And while this is going on, we have Peter Navarro, who is the 32 00:01:41,040 --> 00:01:45,520 senior trade counselor and advisor to Trump on the tariffs, 33 00:01:45,680 --> 00:01:49,520 one of the biggest advocates of this policy, coming on to CNBC 34 00:01:49,520 --> 00:01:52,440 in a long form interview to defend his policy. 35 00:01:52,440 --> 00:01:54,840 And while all this is unfolding, we have individual investors 36 00:01:54,840 --> 00:01:56,200 wanting to know what to do with their money. 37 00:01:56,400 --> 00:02:00,040 Is it time to step back from the US markets or is it time to buy? 38 00:02:00,040 --> 00:02:02,520 We're going to be going over all of this in this episode. 39 00:02:02,520 --> 00:02:05,080 Now let's go ahead and start off by taking a step back and seeing 40 00:02:05,080 --> 00:02:07,640 how we got into this mess. The reason that the markets are 41 00:02:07,640 --> 00:02:12,400 falling so much in a 2 day period, down 10 to 15% for most 42 00:02:12,400 --> 00:02:15,920 companies, the reason that US born investors and foreign 43 00:02:15,920 --> 00:02:19,760 investors are both pulling their money out of U.S. markets is a 44 00:02:19,800 --> 00:02:22,240 lost of trust in confidence in the US. 45 00:02:22,520 --> 00:02:25,640 It's because many investors now don't trust that the US is the 46 00:02:25,640 --> 00:02:28,240 place to put their money. And that lack of confidence is 47 00:02:28,240 --> 00:02:30,960 because of how this policy is being rolled out. 48 00:02:31,280 --> 00:02:34,160 For example, we can break down what we were promised. 49 00:02:34,520 --> 00:02:37,360 President Trump ran on promising tariffs. 50 00:02:37,720 --> 00:02:40,760 Most investors agreed that tariffs aren't inherently a bad 51 00:02:40,760 --> 00:02:43,200 thing. In fact, we were promised that 52 00:02:43,200 --> 00:02:45,120 the US is not always treated fair. 53 00:02:45,480 --> 00:02:49,280 In many cases, Many other countries charge US tariffs, and 54 00:02:49,280 --> 00:02:52,000 they have trade barriers in which the US does not. 55 00:02:52,240 --> 00:02:54,480 We don't have tariffs against them and we don't have large 56 00:02:54,480 --> 00:02:57,360 trade barriers. This creates a trade imbalance. 57 00:02:57,440 --> 00:03:00,120 So President Trump's goal was to enact different measures to 58 00:03:00,120 --> 00:03:04,480 create reciprocal or fair responses to those countries, to 59 00:03:04,480 --> 00:03:07,480 incentivize them to come to the bargaining table and to strike 60 00:03:07,480 --> 00:03:09,200 deals. We were promised that the US 61 00:03:09,200 --> 00:03:12,200 would be eager to strike deals with other countries so long as 62 00:03:12,200 --> 00:03:14,200 they lower their tariffs and trade barriers. 63 00:03:14,600 --> 00:03:17,400 This was the basic pitch that most people had an understanding 64 00:03:17,400 --> 00:03:21,560 of. the US would have moderate tariffs, reciprocal or fair 65 00:03:21,560 --> 00:03:24,120 responses, and would be eager to strike deals. 66 00:03:24,160 --> 00:03:26,280 But what we received in the rollout of this policy was 67 00:03:26,280 --> 00:03:29,360 something entirely different. President Trump held up a board 68 00:03:29,360 --> 00:03:31,120 with two different columns of numbers. 69 00:03:31,360 --> 00:03:33,680 One of them was the tariffs charged to the US. 70 00:03:33,680 --> 00:03:37,000 The other was the quote UN quote discounted reciprocal tariff 71 00:03:37,280 --> 00:03:40,680 that in most cases was half of the number off to the left. 72 00:03:41,120 --> 00:03:44,920 The only problem with this board and the formula to calculate the 73 00:03:44,920 --> 00:03:47,960 tariffs charge to the US is these numbers were not only 74 00:03:47,960 --> 00:03:50,320 wildly inaccurate, they were fabricated. 75 00:03:50,400 --> 00:03:52,040 It's a completely made-up number. 76 00:03:52,160 --> 00:03:55,280 President Trump described the tariff as reciprocal or equal to 77 00:03:55,280 --> 00:03:58,520 half the rate of the tariff of the non trade barriers imposed 78 00:03:58,520 --> 00:04:01,360 by other countries. However, they are nothing of the 79 00:04:01,360 --> 00:04:03,160 sort. The tariff that the United 80 00:04:03,160 --> 00:04:06,680 States is placing on other countries is equal to the US 81 00:04:06,680 --> 00:04:10,920 trade deficit divided by US imports from a given country. 82 00:04:11,240 --> 00:04:14,840 Or if we don't have a trade deficit, it's just 10%. 83 00:04:14,960 --> 00:04:17,959 If we were to use the correct math to calculate the actual 84 00:04:17,959 --> 00:04:21,079 tariff that other countries are charging us, they look entirely 85 00:04:21,079 --> 00:04:22,720 different. For example, the tariff that 86 00:04:22,720 --> 00:04:25,880 we're going to be applying to China's 34%, it would reduce it 87 00:04:25,880 --> 00:04:29,400 to 10% if we were using correct reciprocal tariffs. 88 00:04:29,760 --> 00:04:32,840 The tariff we're applying to Thailand is 36%. 89 00:04:33,280 --> 00:04:36,120 It would be 10% if we were using the correct formula. 90 00:04:36,120 --> 00:04:38,840 Based on the actual math, most of the tariffs would be in a 91 00:04:38,840 --> 00:04:42,320 range of 10 to 13%. And originally when this was 92 00:04:42,320 --> 00:04:45,160 announced that there would be reciprocal tariffs, the market 93 00:04:45,160 --> 00:04:49,840 was expecting 10 to 13% tariffs. The market actually went up 1% 94 00:04:49,840 --> 00:04:53,280 based on this news, and then it immediately dropped as soon as 95 00:04:53,280 --> 00:04:56,000 President Trump started showing this different math. 96 00:04:56,040 --> 00:04:59,160 Investing is a confidence game. In order to invest your money 97 00:04:59,160 --> 00:05:02,160 into a company, you have to have confidence in the nation you're 98 00:05:02,160 --> 00:05:04,560 investing it in. That they will have predictable, 99 00:05:04,560 --> 00:05:08,400 sensible, and reliable policies when the math doesn't add up, 100 00:05:08,400 --> 00:05:11,160 When these tariffs are based on numbers that don't make sense, 101 00:05:11,520 --> 00:05:13,440 it doesn't build trust with investors. 102 00:05:13,440 --> 00:05:17,200 So capital all across the world, including within the US, has 103 00:05:17,200 --> 00:05:20,360 fled the US equity markets. The fear in the market today is 104 00:05:20,360 --> 00:05:22,640 not based on an irrational fear of the future. 105 00:05:22,840 --> 00:05:25,560 It's based on the lack of trust and predictability with the 106 00:05:25,560 --> 00:05:29,120 White House's policy that these policies of enacting extreme 107 00:05:29,120 --> 00:05:32,200 punitive tariffs on every country across the world will 108 00:05:32,200 --> 00:05:35,640 make the United States a place to avoid doing business with a 109 00:05:35,680 --> 00:05:39,080 hermit turtling into their shell, not wanting to do any 110 00:05:39,080 --> 00:05:41,440 type of commerce or business with the rest of the world. 111 00:05:41,480 --> 00:05:44,120 And even the most historically ardent supporters of President 112 00:05:44,120 --> 00:05:47,880 Trump, business leaders, people that voted for him and publicly 113 00:05:47,880 --> 00:05:51,440 supported him, are now coming to the realization that this policy 114 00:05:51,440 --> 00:05:55,080 will damage America, will create trade barriers and formations of 115 00:05:55,080 --> 00:05:58,720 other countries to circumvent doing business with America. 116 00:05:58,840 --> 00:06:01,320 Bill Ackman is one of the latest business leaders to join the 117 00:06:01,320 --> 00:06:04,760 pact of them that are growing in opposition of these tariffs. 118 00:06:04,880 --> 00:06:08,200 Bill Ackman called for a 90 day pause in the tariffs to 119 00:06:08,200 --> 00:06:11,640 negotiate with other countries, warning that the alternative was 120 00:06:11,640 --> 00:06:14,800 a, quote, self induced economic nuclear winter. 121 00:06:14,800 --> 00:06:17,400 He says we're in the process of destroying confidence in our 122 00:06:17,400 --> 00:06:20,840 country as a trading partner, as a place to do business and as 123 00:06:20,840 --> 00:06:23,960 the market to invest capital. Despite pushback from a growing 124 00:06:23,960 --> 00:06:27,120 number of Republicans and Trump supporters and business leaders, 125 00:06:27,320 --> 00:06:30,160 he still continues to hold strong with this tariff plan. 126 00:06:30,160 --> 00:06:32,960 At least of now he's pushing back saying, I don't know what's 127 00:06:32,960 --> 00:06:35,480 going to happen to the markets. I can't tell you I don't want 128 00:06:35,600 --> 00:06:37,960 anything to go down, but sometimes you have to take 129 00:06:37,960 --> 00:06:41,200 medicine to fix something. Trump still views this as short 130 00:06:41,200 --> 00:06:43,120 term suffering for long term gain. 131 00:06:43,200 --> 00:06:46,160 But now there is a growing chorus from big names on Wall 132 00:06:46,160 --> 00:06:49,480 Street and politics, including those who back the tariffs in 133 00:06:49,480 --> 00:06:52,600 theory, that the current plan is misguided and will cause 134 00:06:52,600 --> 00:06:55,120 irreparable damage. Even Elon Musk has been 135 00:06:55,120 --> 00:06:58,480 critical, calling for free trade agreements between the US and 136 00:06:58,480 --> 00:07:02,720 Europe while criticizing Navarro, slamming his ego and 137 00:07:02,720 --> 00:07:04,960 brains. We have people like Elon Musk, 138 00:07:04,960 --> 00:07:08,000 Ted Cruz, news, Bill Ackman, various supporters from 139 00:07:08,000 --> 00:07:11,200 political leaders to business leaders who have supported Trump 140 00:07:11,280 --> 00:07:14,960 up until now pushing on the brakes saying that this tariff 141 00:07:14,960 --> 00:07:18,760 plan is not rolled out well and will damage the United States. 142 00:07:18,760 --> 00:07:21,680 But the Trump administration so far hasn't changed course. 143 00:07:21,680 --> 00:07:24,480 Led by the White House senior trade counselor Peter Navarro, 144 00:07:24,480 --> 00:07:26,720 they continue to defend their tariff plan. 145 00:07:26,840 --> 00:07:30,000 The first thing that he does in this interview is defend the 146 00:07:30,000 --> 00:07:34,360 methodology of calculating other countries tariffs and our 147 00:07:34,360 --> 00:07:36,320 reciprocal tariffs. I mean, first of all, the 148 00:07:36,320 --> 00:07:39,000 methodology was perfectly sound. It was done by the Council of 149 00:07:39,000 --> 00:07:43,520 Economic Advisers based on long term studies that are in the 150 00:07:43,520 --> 00:07:46,080 academic literature. And the people taking potshots 151 00:07:46,080 --> 00:07:48,640 at us are the same people that always take potshots. 152 00:07:48,640 --> 00:07:50,680 American Enterprise Institute, Peter. 153 00:07:50,920 --> 00:07:55,200 Of course, of course, the Joe come on, the American Enterprise 154 00:07:55,200 --> 00:07:56,960 Institute has been against. Conservatives. 155 00:07:57,160 --> 00:08:00,320 Larry Lindsey. Let's not get buried down in 156 00:08:00,320 --> 00:08:02,480 those weeds. Now you asked me a serious 157 00:08:02,480 --> 00:08:04,360 question. He mentions that the people 158 00:08:04,360 --> 00:08:07,920 taking potshots at the methodology of calculating these 159 00:08:07,920 --> 00:08:11,400 tariffs have always taken potshots at the president, and 160 00:08:11,400 --> 00:08:14,080 that is an inaccurate portrayal of what's going on. 161 00:08:14,320 --> 00:08:17,120 Many of the critics of this tariff plan are people that are 162 00:08:17,120 --> 00:08:19,920 new critics of the president, people that have previously 163 00:08:19,920 --> 00:08:23,840 supported almost everything the president has done up until now. 164 00:08:24,360 --> 00:08:27,400 Blackman is a great example. He has overwhelmingly supported 165 00:08:27,400 --> 00:08:31,480 a President Trump up until now. This isn't taking potshots. 166 00:08:31,480 --> 00:08:35,000 This is real criticism of a deeply flawed methodology. 167 00:08:35,360 --> 00:08:37,880 Whoever came up with this methodology and the calculations 168 00:08:37,880 --> 00:08:40,640 for these reciprocal tariffs should be fired. 169 00:08:40,760 --> 00:08:43,840 They came up with a calculation of other countries tariffs that 170 00:08:43,840 --> 00:08:47,360 doesn't make mathematical sense and therefore our reciprocal 171 00:08:47,360 --> 00:08:49,520 tariff for applying is erroneous. 172 00:08:49,600 --> 00:08:53,400 And when you apply nonsense mathematical formulas to global 173 00:08:53,400 --> 00:08:57,040 trade policy, it creates a lot of insecurity in the markets. 174 00:08:57,480 --> 00:09:00,720 The reason that the market is so concerned about what's going on 175 00:09:00,960 --> 00:09:03,720 is because of how unclear this policy is. 176 00:09:03,800 --> 00:09:06,680 But the way that Peter Navarro's framing this is as though the 177 00:09:06,680 --> 00:09:09,800 critics are just the same old critics of the president the 178 00:09:09,800 --> 00:09:13,040 entire time, the globalists that don't like President Trump. 179 00:09:13,080 --> 00:09:14,840 And that couldn't be further from the truth. 180 00:09:15,080 --> 00:09:19,280 One of the critics of this plan is Elon Musk, who helped Trump 181 00:09:19,280 --> 00:09:21,920 get elected. Elon Musk is not someone that 182 00:09:21,920 --> 00:09:24,840 takes potshots at the president. Now he goes on continuing to 183 00:09:24,840 --> 00:09:28,400 defend this formula, emphasizing that it's not not the tariff 184 00:09:28,520 --> 00:09:31,640 other countries are charging, not just their straightforward 185 00:09:31,640 --> 00:09:34,800 tariff that really matters. It's the non tariff trade 186 00:09:34,800 --> 00:09:36,880 barriers. And he gives an example. 187 00:09:36,880 --> 00:09:40,560 But let's understand what the problem is when you have a 188 00:09:40,560 --> 00:09:42,920 country like Vietnam. Let's take Vietnam when they 189 00:09:42,920 --> 00:09:45,680 come to us and say we'll go to 0 tariffs. 190 00:09:46,080 --> 00:09:50,520 That means nothing to us because it's the non tariff cheating 191 00:09:50,520 --> 00:09:52,360 that matters. Let's do Vietnam, Joe. 192 00:09:53,160 --> 00:09:58,440 They sell us $15.00 for every $1.00 we sell them about $5.00 193 00:09:58,440 --> 00:10:03,600 of that 15 is China trans shipping to Vietnam to evade 194 00:10:03,800 --> 00:10:06,440 their tariffs. What is what is Vietnam? 195 00:10:06,920 --> 00:10:10,560 What is Vietnam? Do they dump into our markets 196 00:10:10,560 --> 00:10:13,840 killing our shrimpers, our people who make metal brackets, 197 00:10:13,840 --> 00:10:18,720 kitchen cabinets, agricultural products, they engage in the 198 00:10:18,720 --> 00:10:22,200 intellectual property theft. They have the biggest number of 199 00:10:22,200 --> 00:10:25,400 cases aside from China at the Department of Commerce on the 200 00:10:25,400 --> 00:10:28,080 dumping. So the point is, the point is 201 00:10:28,520 --> 00:10:32,640 anybody who wants to come to talk to us, talk to us about 202 00:10:32,640 --> 00:10:34,840 lowering your non tariff barriers. 203 00:10:35,160 --> 00:10:39,840 Vietnam has a 10% vet, Europe has a 19% vet. 204 00:10:39,840 --> 00:10:43,680 We can't compete against that. We have tried help us on Trade 205 00:10:43,680 --> 00:10:46,840 Organization to get Andrew. Let me just make this point. 206 00:10:46,840 --> 00:10:51,200 We have tried at the World Trade Organization since the 1970s to 207 00:10:51,200 --> 00:10:55,000 get VAT tax relief and they've told us no every single time. 208 00:10:55,000 --> 00:10:59,640 We've won case after case at the World Trade Organization on 209 00:10:59,640 --> 00:11:03,880 things like our agricultural products, pork, beef and other 210 00:11:04,120 --> 00:11:06,120 and. Corn he brings up a valid point 211 00:11:06,120 --> 00:11:08,880 that these non trade barriers are an effort of other countries 212 00:11:09,120 --> 00:11:11,600 to make it very difficult to do business in their country 213 00:11:11,800 --> 00:11:14,680 without a specific tariff. And that's the problem with this 214 00:11:14,680 --> 00:11:17,800 policy overall. There's so much grey area. 215 00:11:18,040 --> 00:11:20,920 There's so many different things specific to every country. 216 00:11:20,920 --> 00:11:23,600 That's why many people are suggesting a 90 day delay to the 217 00:11:23,600 --> 00:11:26,120 tariffs, but it doesn't seem like that's going to happen 218 00:11:26,200 --> 00:11:28,120 right now. Peter Navarro saying that these 219 00:11:28,120 --> 00:11:31,840 countries going to 0% tariff is just simply not enough. 220 00:11:32,160 --> 00:11:34,200 So what is it that these countries have to do? 221 00:11:34,400 --> 00:11:35,800 He tries to lay it out. Here. 222 00:11:35,800 --> 00:11:38,360 So what is enough? OK, you take any given country, 223 00:11:38,360 --> 00:11:41,120 they're like fingerprints. They all cheat us in a different 224 00:11:41,120 --> 00:11:42,880 way. So here are the things they 225 00:11:42,880 --> 00:11:45,120 cheat us on. Some of them engage in currency 226 00:11:45,120 --> 00:11:47,800 manipulation. Some of them have a hefty VAT 227 00:11:47,800 --> 00:11:50,480 tax. All of them dump into our 228 00:11:50,480 --> 00:11:52,400 markets. All of them engage in heavy 229 00:11:52,400 --> 00:11:55,080 export subsidies and government subsidies. 230 00:11:55,320 --> 00:11:59,840 All of them put up these phony technical and phytosanitary 231 00:11:59,840 --> 00:12:03,360 barriers to our AG products and our autos and everything in 232 00:12:03,360 --> 00:12:06,040 between. Many of them steal our 233 00:12:06,040 --> 00:12:09,720 intellectual property. A lot of them runs sweatshop 234 00:12:09,720 --> 00:12:12,040 labor, including forced child labor. 235 00:12:12,040 --> 00:12:14,880 They have pollution havens. So when you say to me, aunt, 236 00:12:15,440 --> 00:12:18,040 what do we want from them? We want fairness. 237 00:12:18,200 --> 00:12:23,720 We don't want them to kill American workers by inundatis 238 00:12:23,840 --> 00:12:27,320 with this non tariff cheating. And it would be really 239 00:12:27,320 --> 00:12:31,840 refreshing to have the media talk more about that this zero 240 00:12:31,840 --> 00:12:34,240 tariff thing. It's a it's, it's a 241 00:12:34,320 --> 00:12:37,600 misdirection. No, it's a misdirection. 242 00:12:37,720 --> 00:12:40,880 It's the non tariff where. All these problems are real and 243 00:12:40,880 --> 00:12:43,520 the challenges are real, but the question is whether or not this 244 00:12:43,520 --> 00:12:45,520 can be accomplished in a short timeline. 245 00:12:45,800 --> 00:12:49,640 These tariffs again go into effect very soon and it seems 246 00:12:49,640 --> 00:12:53,640 like these problems are so big, so vast, so wide and somewhat 247 00:12:53,640 --> 00:12:56,160 subjective that this level of unclarity of what these 248 00:12:56,160 --> 00:12:58,880 countries specifically need to do and what timeline they have 249 00:12:58,880 --> 00:13:02,120 to do it is causing people to lose confidence overall. 250 00:13:02,120 --> 00:13:05,560 The market can get behind real reciprocal tariffs that are in 251 00:13:05,560 --> 00:13:08,320 line with the tariffs. Other countries are charging us 252 00:13:08,720 --> 00:13:11,480 a smart methodical rollout of policy. 253 00:13:11,480 --> 00:13:14,040 But the market's lack of confidence is a reflection of 254 00:13:14,040 --> 00:13:17,120 this haphazard and confusing policy rollout. 255 00:13:17,320 --> 00:13:20,960 Unclarity and unpredictability continue to over shadow any 256 00:13:20,960 --> 00:13:24,360 effort of this tariff policy. It's creating doubt and business 257 00:13:24,360 --> 00:13:26,560 leaders, investors in the capital markets. 258 00:13:26,560 --> 00:13:29,360 And this has been the problem since the announcement of these 259 00:13:29,360 --> 00:13:31,160 tariffs. Investors don't know what to 260 00:13:31,160 --> 00:13:33,120 expect. Business leaders don't know what 261 00:13:33,120 --> 00:13:35,040 to expect. They don't even know the 262 00:13:35,040 --> 00:13:39,200 intended goal of these tariffs, the long term plan right now, 263 00:13:39,200 --> 00:13:42,640 capital allocators, CEOs, investors, business leaders, 264 00:13:42,800 --> 00:13:45,800 they're all working blind. And perhaps nobody has pointed 265 00:13:45,800 --> 00:13:47,520 this out better than Derek Thompson. 266 00:13:47,520 --> 00:13:50,880 What bothers me most, honestly, is not that I don't know which 267 00:13:50,880 --> 00:13:53,360 side is which. It's that I don't think the 268 00:13:53,360 --> 00:13:57,440 folks who are in charge know what they're doing or why. 269 00:13:58,240 --> 00:14:01,160 If you look at the justifications for this policy, 270 00:14:01,160 --> 00:14:04,080 they're all over the place. You've got Peter Navarro saying 271 00:14:04,080 --> 00:14:06,760 the tariffs are going to raise $600 billion a year. 272 00:14:06,760 --> 00:14:08,720 That suggests they're going to remain in place. 273 00:14:09,120 --> 00:14:11,640 You've got the tech folks who are associated with the Trump 274 00:14:11,640 --> 00:14:13,880 White House saying that actually this is just an opening 275 00:14:13,880 --> 00:14:16,240 negotiation tactic to force other countries to bring down 276 00:14:16,240 --> 00:14:18,160 their tariffs, and then we'll bring down ours. 277 00:14:18,440 --> 00:14:21,960 Well, wait, pause. You cannot raise taxes with a 278 00:14:22,520 --> 00:14:25,680 tariff is designed to go away. So already you have parts 1 and 279 00:14:25,680 --> 00:14:27,640 2 not making any sense. Then you have this third 280 00:14:27,640 --> 00:14:29,720 strategy, that sort of Stephen Marens idea that what we need to 281 00:14:29,720 --> 00:14:32,680 do is de dollarization. Well, you just showed about 30 282 00:14:32,680 --> 00:14:35,080 seconds ago that the dollar is actually appreciating right now 283 00:14:35,080 --> 00:14:37,000 because the entire global economy is puking. 284 00:14:37,600 --> 00:14:40,120 I don't think the folks in charge know what they're doing 285 00:14:40,120 --> 00:14:42,000 or why. And the reason that scares me on 286 00:14:42,000 --> 00:14:44,880 top of all of the obvious is that there's this theory that 287 00:14:44,880 --> 00:14:47,920 Donald Trump is this mastermind of uncertainty. 288 00:14:47,920 --> 00:14:50,200 And there's there's some reason to this, that if you have 289 00:14:50,200 --> 00:14:53,440 someone who is so great about uncertainty, they can get other 290 00:14:53,440 --> 00:14:55,240 countries to do what we want them to do. 291 00:14:55,680 --> 00:14:58,160 But the problem is that uncertainty is a double edged 292 00:14:58,160 --> 00:15:00,440 sword. Domestic businesses need 293 00:15:00,440 --> 00:15:03,640 certainty to know how to invest. Domestic manufacturers need 294 00:15:03,640 --> 00:15:05,520 certainty to understand how to expand. 295 00:15:05,760 --> 00:15:08,720 If there's uncertainty in terms of our trade and tax and 296 00:15:08,720 --> 00:15:12,480 spending policy, how is a manufacturing company supposed 297 00:15:12,480 --> 00:15:15,360 to figure out how it's supposed to finance a doubling of their 298 00:15:15,360 --> 00:15:18,160 factory base? They cannot do it. 299 00:15:18,280 --> 00:15:20,920 What we need now is absolute, clear certainty. 300 00:15:20,960 --> 00:15:24,520 It might be good in some very specific unique deals to have a 301 00:15:24,520 --> 00:15:27,760 level of uncertainty, to be unpredictable, but in terms of a 302 00:15:27,760 --> 00:15:31,560 global economy and preparations of large CapEx investments, 303 00:15:31,880 --> 00:15:34,840 businesses preparing for tax policy, certainty is a good 304 00:15:34,840 --> 00:15:36,920 thing. Certainty and predictability is 305 00:15:36,920 --> 00:15:39,440 a very positive thing. It allows businesses and 306 00:15:39,440 --> 00:15:41,800 investors to plan for the future with confidence. 307 00:15:42,120 --> 00:15:43,960 And right now they're losing that confidence. 308 00:15:44,080 --> 00:15:46,120 Now, not everyone is negative on the tariffs. 309 00:15:46,120 --> 00:15:48,800 There are still ardent Trump supporters that view this is a 310 00:15:48,800 --> 00:15:51,240 positive development, Kyle Bass being one of them. 311 00:15:51,240 --> 00:15:54,240 He went on to CNBC to share his view that he thinks this 312 00:15:54,240 --> 00:15:57,000 strategy will ultimately work. I think the tariffs are 313 00:15:57,000 --> 00:15:58,560 thoughtful. I think they will work. 314 00:15:58,840 --> 00:16:01,000 I think you've already seen Vietnam ask for a 90 day 315 00:16:01,000 --> 00:16:04,160 reprieve to negotiate. You're going to see a lot of 316 00:16:04,160 --> 00:16:08,000 first cash, plane tickets, delegations from all around the 317 00:16:08,000 --> 00:16:10,240 world coming to meet with the president to try to hammer this. 318 00:16:10,240 --> 00:16:12,760 Out he's on the side where he believes this is a negotiating 319 00:16:12,760 --> 00:16:15,840 tactic that will lead to more fair and balanced deals between 320 00:16:15,840 --> 00:16:18,320 the US and other countries. This back and forth debate 321 00:16:18,320 --> 00:16:21,240 continues between the few people that are supporting the rollout 322 00:16:21,240 --> 00:16:24,320 and implementation of this policy and the growing chorus of 323 00:16:24,320 --> 00:16:25,600 people that are now coming again. 324 00:16:25,760 --> 00:16:28,920 And here again, we have Derek Thompson listening to that past 325 00:16:28,920 --> 00:16:31,680 interviewee Kyle Bass and responding to it. 326 00:16:31,760 --> 00:16:34,240 Be totally honest, Kelly, I've been listening the last 10 327 00:16:34,240 --> 00:16:37,880 minutes of this show. I cannot believe what I'm 328 00:16:37,880 --> 00:16:40,400 listening to. I, I heard your last guest say 329 00:16:40,400 --> 00:16:42,600 if the economy shrinks, that's good. 330 00:16:43,160 --> 00:16:45,360 If the stock market goes down, that's good. 331 00:16:45,400 --> 00:16:47,880 If the housing market crashes, that's good. 332 00:16:48,160 --> 00:16:50,240 If there's a trade war, that's good. 333 00:16:51,280 --> 00:16:54,640 When did the capital class get taken over by degrowther 334 00:16:54,640 --> 00:16:58,120 protectionists seeking 19th century autarky? 335 00:16:58,200 --> 00:17:00,880 OK, But Derek, let me just jump in for a second, because if 336 00:17:00,880 --> 00:17:04,200 there's one refrain we've heard from millennials over the past 337 00:17:04,200 --> 00:17:07,040 several years, it's that the dream is gone. 338 00:17:07,319 --> 00:17:10,200 They can't afford a house. Groceries are too expensive. 339 00:17:10,200 --> 00:17:11,440 It's. Only the first chapter of. 340 00:17:11,440 --> 00:17:13,319 Abundance. Apparently the 1st chapter of 341 00:17:13,319 --> 00:17:15,680 your book. So aren't you a little surprised 342 00:17:15,680 --> 00:17:18,480 to hear the globalists, the pro stock market types who are 343 00:17:18,480 --> 00:17:22,359 supposed to be at fault for all of this, now reading out of your 344 00:17:22,359 --> 00:17:24,839 book and saying we're bringing prices back down? 345 00:17:25,560 --> 00:17:27,640 They're, no, they're, they're crashing the economy. 346 00:17:27,960 --> 00:17:30,200 That's very, very different than making housing affordable. 347 00:17:30,480 --> 00:17:32,320 If you want affordable housing, you need a job. 348 00:17:32,320 --> 00:17:34,400 If you crash the economy, you're going to have unemployment. 349 00:17:34,640 --> 00:17:37,200 And whenever unemployment hits an economy, as we just saw in 350 00:17:37,200 --> 00:17:41,320 2008 and we saw before in the 1990s, who loses their jobs 351 00:17:41,320 --> 00:17:43,600 first? It's last one in, first one out. 352 00:17:43,600 --> 00:17:46,760 It's young people. So if your job or if your plan 353 00:17:46,760 --> 00:17:49,640 is to crash the economy in the short term for the purpose of 354 00:17:49,640 --> 00:17:52,880 helping young people afford a house, you have got it totally 355 00:17:52,880 --> 00:17:55,600 backward. Young people need jobs, they 356 00:17:55,600 --> 00:17:58,200 need money, and then they need a plan to make housing affordable, 357 00:17:58,320 --> 00:17:59,440 right? Donald Trump could have come 358 00:17:59,440 --> 00:18:02,160 into office and said what I want to do is to make the 359 00:18:02,160 --> 00:18:05,480 construction of housing affordable, and that means the 360 00:18:05,480 --> 00:18:08,520 inputs to housing. Instead, he slaps a 25% tariff 361 00:18:08,520 --> 00:18:11,960 on Canada, which we import our lumber from, and a 25% tariff on 362 00:18:11,960 --> 00:18:14,720 Mexico that we get drywall gypsum from, thus immediately 363 00:18:14,720 --> 00:18:17,320 raising two of the most important inputs for housing by 364 00:18:17,320 --> 00:18:19,520 25%. This is the strategy to make 365 00:18:19,520 --> 00:18:21,840 housing less affordable at the same time that you make it 366 00:18:21,840 --> 00:18:24,400 harder for young people to keep a job because the stock market's 367 00:18:24,400 --> 00:18:26,360 puking. This is not the way to go about 368 00:18:26,360 --> 00:18:28,040 abundance. This is scarcity meeting 369 00:18:28,040 --> 00:18:30,320 scarcity. This is Trump saying we we don't 370 00:18:30,320 --> 00:18:32,760 have enough housing, So, you know, we need fewer immigrants 371 00:18:32,760 --> 00:18:34,800 or we don't have enough manufacturing in the US, so we 372 00:18:34,800 --> 00:18:38,240 need less trade. Abundance is a positive, some 373 00:18:38,240 --> 00:18:42,440 way of looking at the economy. It says we can grow if we invest 374 00:18:42,640 --> 00:18:45,000 in housing. We can have a strategy that 375 00:18:45,000 --> 00:18:48,640 seeks to make more of what we need in the US without trying to 376 00:18:48,640 --> 00:18:51,320 cut ourselves off from the entire global economy. 377 00:18:51,560 --> 00:18:54,960 I completely reject the idea that what Trump is pursuing is 378 00:18:55,000 --> 00:18:58,080 anything like abundance. Derek is correct that the path 379 00:18:58,080 --> 00:19:01,960 the US seems to be pursuing is 1 of scarcity, one of cutting 380 00:19:01,960 --> 00:19:04,400 ourselves off with the rest of the world, wanting to live in 381 00:19:04,400 --> 00:19:07,080 our own little shell and do everything within the United 382 00:19:07,080 --> 00:19:09,280 States. Not wanting to do any type of 383 00:19:09,280 --> 00:19:12,480 trade with any other country because in each case what 384 00:19:12,480 --> 00:19:15,320 they're doing is unfair. This is not a policy of 385 00:19:15,320 --> 00:19:18,520 abundance and confidence and growth and growing the pie, 386 00:19:18,760 --> 00:19:21,520 making America a place of business and to invest. 387 00:19:21,960 --> 00:19:23,920 It's the opposite. And the reason that stocks are 388 00:19:23,920 --> 00:19:26,480 trading down so much is because investors are assessing the 389 00:19:26,480 --> 00:19:29,400 situation, looking at the potential future cash flow 390 00:19:29,400 --> 00:19:32,400 impacts, and realizing that they're going to go down. 391 00:19:32,680 --> 00:19:36,120 These companies will earn less money as a result of these 392 00:19:36,120 --> 00:19:39,280 policies, and there's broader implications of risk and 393 00:19:39,280 --> 00:19:42,960 uncertainty that can happen if these policies continue in the 394 00:19:42,960 --> 00:19:45,000 long term. For example, many of the best 395 00:19:45,000 --> 00:19:47,760 companies in the United States have an enormous amount of their 396 00:19:47,760 --> 00:19:49,640 revenue outside of the United States. 397 00:19:49,720 --> 00:19:53,920 Microsoft has around 50% of their total revenue outside of 398 00:19:53,920 --> 00:19:55,920 the US. Other great U.S. companies like 399 00:19:55,920 --> 00:19:59,720 Amazon, Netflix, Google, Meta, you name it, have an enormous 400 00:19:59,720 --> 00:20:02,480 amount of their revenue in their business from without the United 401 00:20:02,480 --> 00:20:04,120 States. They're overseas. 402 00:20:04,120 --> 00:20:06,760 They do business in Europe, they do business in Asia, for 403 00:20:06,840 --> 00:20:08,480 example. Example, if we look specifically 404 00:20:08,480 --> 00:20:12,120 at Netflix and the revenue broken down by region, you can 405 00:20:12,120 --> 00:20:16,400 see that over 50% of the revenue from Netflix is outside of the 406 00:20:16,400 --> 00:20:20,000 United States and Canada. This orange bar hair on the 407 00:20:20,000 --> 00:20:23,440 bottom represents the United States, grouped in with Canada. 408 00:20:24,000 --> 00:20:26,880 Then we have this lighter orange bar, which is Europe, the Middle 409 00:20:26,880 --> 00:20:29,920 East and Africa. We have Latin America here, and 410 00:20:29,920 --> 00:20:32,480 we have Asia Pacific. All of these countries are 411 00:20:32,480 --> 00:20:35,800 enjoying US products. They're buying US services. 412 00:20:36,080 --> 00:20:38,880 And even though there's no direct importing and exporting, 413 00:20:38,920 --> 00:20:41,960 these companies will become reciprocal targets to this trade 414 00:20:41,960 --> 00:20:44,080 policy. We've already seen many other 415 00:20:44,080 --> 00:20:47,560 leaders from different countries threaten to retaliate with 416 00:20:47,680 --> 00:20:50,840 strong restrictions on U.S. companies and even blocking them 417 00:20:50,840 --> 00:20:53,440 from their markets, and there's a high chance of future 418 00:20:53,440 --> 00:20:54,920 escalation. So right now, we have a 419 00:20:54,920 --> 00:20:57,840 situation of increasingly greater risk every hour that 420 00:20:57,840 --> 00:21:01,160 these policies remain in place. And unless there's a quick off 421 00:21:01,160 --> 00:21:05,200 ramp offering relief for a greater path of clarity or time 422 00:21:05,200 --> 00:21:08,040 to negotiate, stocks will continue to fall and be 423 00:21:08,040 --> 00:21:11,040 discounted further and further. And during time periods like 424 00:21:11,040 --> 00:21:14,880 this, I continue to buy. I'm buying companies at a faster 425 00:21:14,880 --> 00:21:17,920 pace than I have in years. In fact, I continue to transfer 426 00:21:17,920 --> 00:21:21,200 new money out of savings to aggressively buy this dip. 427 00:21:21,280 --> 00:21:24,320 This morning, I bought $3000 of Equifax stock, and I have 428 00:21:24,320 --> 00:21:27,760 another order of $7000 going into Equifax. 429 00:21:28,000 --> 00:21:31,120 That is $10,000 of that stock just today. 430 00:21:31,200 --> 00:21:34,160 And simultaneously, while I'm buying Equifax, I'm increasing 431 00:21:34,160 --> 00:21:37,480 my stake in Google, buying another $3000 of this stock in 432 00:21:37,480 --> 00:21:39,520 the story fund. I don't have any buys going 433 00:21:39,520 --> 00:21:41,880 through today, but I'll continue to buy these companies 434 00:21:42,000 --> 00:21:44,760 throughout the week. In fact, in just the past five 435 00:21:44,760 --> 00:21:48,240 days, I've bought over $20,000 of Amazon. 436 00:21:48,560 --> 00:21:51,680 That is the most aggressive pace I've bought that company since 437 00:21:51,680 --> 00:21:54,920 the lows of 2022. Overall, I'm digging deep to try 438 00:21:54,920 --> 00:21:58,200 to buy this dip as aggressively as I can, even though I know the 439 00:21:58,200 --> 00:22:00,960 dangers and uncertainties in this market and I'll explain 440 00:22:00,960 --> 00:22:02,280 why. Let's go ahead and go through 441 00:22:02,280 --> 00:22:04,040 some of the facts about buying the dip. 442 00:22:04,040 --> 00:22:06,920 This whole idea that as investors, as good investors, 443 00:22:07,440 --> 00:22:10,400 we're going to strike when opportunity arises, when stocks 444 00:22:10,400 --> 00:22:13,840 are super cheap, when other investors are fearful we're 445 00:22:13,840 --> 00:22:16,120 going to jump in. Well, that's great in theory, 446 00:22:16,200 --> 00:22:19,680 but that whole idea of buying the dip is much easier said than 447 00:22:19,680 --> 00:22:22,880 done for a couple of reasons. First of all, buying small dips 448 00:22:22,880 --> 00:22:25,440 is easy. Buying huge dips is hard. 449 00:22:25,760 --> 00:22:28,280 This is something that I've observed as an investor for a 450 00:22:28,280 --> 00:22:31,800 long period of time is that investors are always eager to 451 00:22:31,800 --> 00:22:35,520 buy small dips. The market drops 3% or 4%. 452 00:22:35,880 --> 00:22:39,120 That's all fun and games you buy in, you get a little dip on a 453 00:22:39,120 --> 00:22:42,600 company that's easy to do because there's no real risk 454 00:22:42,600 --> 00:22:44,360 there. There's no real uncertainty. 455 00:22:44,640 --> 00:22:47,240 You're just buying when price is fluctuating due to natural 456 00:22:47,240 --> 00:22:50,320 volatility of trading. The real challenge comes into 457 00:22:50,320 --> 00:22:52,360 play when you're buying huge dips. 458 00:22:52,880 --> 00:22:56,240 Buying huge dips is a lot more mentally challenging, mentally 459 00:22:56,240 --> 00:22:58,640 tasking. It requires a lot more resolve 460 00:22:58,640 --> 00:23:03,360 when stocks go down 10% or 15% to want to buy. 461 00:23:03,760 --> 00:23:06,520 And part of the reason it's harder to buy huge dips that 462 00:23:06,520 --> 00:23:10,920 keep dipping is because buying the dip always runs the risk of 463 00:23:10,920 --> 00:23:13,920 stocks dropping further after you buy. 464 00:23:14,360 --> 00:23:16,720 And that's psychologically difficult to deal with. 465 00:23:17,320 --> 00:23:21,080 What if you buy today and stocks are down another 5% tomorrow 466 00:23:21,160 --> 00:23:24,680 because of the same tariff news? Would you have been wrong to buy 467 00:23:24,680 --> 00:23:26,760 today? Well, that remains to be seen. 468 00:23:27,160 --> 00:23:30,120 But either way, the psychology of this makes it difficult. 469 00:23:30,680 --> 00:23:35,000 It's difficult, in fact near impossible, to time the bottom. 470 00:23:35,480 --> 00:23:38,280 It is impossible to reliably time the bottom. 471 00:23:38,280 --> 00:23:42,120 Nobody has ever proven over any length of time that they can 472 00:23:42,120 --> 00:23:44,680 reliably time the bottom in the market. 473 00:23:45,040 --> 00:23:48,480 It is unknowable. Investors will claim that this 474 00:23:48,480 --> 00:23:50,040 is the bottom or that is the bottom. 475 00:23:50,360 --> 00:23:53,200 Those are guesses. Investors focus their attention 476 00:23:53,200 --> 00:23:56,120 on trying to time the bottom rather than investing in quality 477 00:23:56,120 --> 00:23:58,840 companies when they're intrinsically undervalued, when 478 00:23:58,840 --> 00:24:03,120 the opportunity today, right now in front of them offers them an 479 00:24:03,120 --> 00:24:06,640 assortment of great quality companies at reduced prices. 480 00:24:07,080 --> 00:24:09,760 But instead, they look at the risks, the risk of the stock 481 00:24:09,760 --> 00:24:12,360 market going further in the red after they buy. 482 00:24:12,720 --> 00:24:16,040 How disappointing would that be? The risk of them not being able 483 00:24:16,040 --> 00:24:20,000 to accurately time the bottom. Now, another thing that scares 484 00:24:20,000 --> 00:24:24,240 people out of the market during times like this is people say, 485 00:24:24,840 --> 00:24:27,400 you know, the, the great financial crisis was one thing. 486 00:24:27,480 --> 00:24:31,600 The.com bubble is another. We also had COVID, but this time 487 00:24:31,600 --> 00:24:34,160 it's different. This time we don't have the Fed 488 00:24:34,160 --> 00:24:36,480 stepping in to help. We don't have stimulus. 489 00:24:36,800 --> 00:24:40,400 We have a a leader that has this policy and he's not listening to 490 00:24:40,400 --> 00:24:42,680 anyone. This time it's different. 491 00:24:43,120 --> 00:24:46,760 And while that's true, it is different this time and there's 492 00:24:46,760 --> 00:24:50,040 unique risks this time that didn't exist the last time or 493 00:24:50,040 --> 00:24:53,440 the time before. It's also true that literally 494 00:24:53,440 --> 00:24:56,400 every time it's different. Every dip is different. 495 00:24:56,400 --> 00:24:59,160 Stocks don't fall unless it's different. 496 00:24:59,520 --> 00:25:02,360 If we face the same challenge that we faced 1000 times, 497 00:25:02,640 --> 00:25:05,520 investors will know the outcome and stocks will not become 498 00:25:05,520 --> 00:25:08,080 discounted. The inherent nature of 499 00:25:08,080 --> 00:25:12,520 unpredictability, unknowable futures, is what causes equity 500 00:25:12,520 --> 00:25:15,440 price declines. That's what causes stocks to get 501 00:25:15,440 --> 00:25:18,160 discounted. This is called the risk premium, 502 00:25:18,400 --> 00:25:22,000 the price that you have to pay to get the alpha in the market. 503 00:25:22,080 --> 00:25:24,200 You're not going to get a premium in the market. 504 00:25:24,200 --> 00:25:27,960 You're not going to get alpha over other investors by avoiding 505 00:25:27,960 --> 00:25:30,080 investing during any times of uncertainty. 506 00:25:30,080 --> 00:25:33,960 This is also the case where big dips almost always coincide with 507 00:25:33,960 --> 00:25:36,960 times of great uncertainty. This relationship of big dips 508 00:25:36,960 --> 00:25:39,680 being tied to great uncertainty almost always happen. 509 00:25:40,160 --> 00:25:42,400 There's never really time periods where investors 510 00:25:42,400 --> 00:25:45,680 willingly sell out of companies that have very predictable, 511 00:25:45,680 --> 00:25:49,080 forecastable futures. It always happens during a time 512 00:25:49,080 --> 00:25:52,160 where investor confidence is challenged, where investor 513 00:25:52,160 --> 00:25:54,640 emotion takes over. And in many cases, it gets to a 514 00:25:54,640 --> 00:25:58,360 boiling point where investors discount stocks to too great of 515 00:25:58,360 --> 00:26:01,160 an extent, where the dip is mismatched with the level of 516 00:26:01,160 --> 00:26:03,680 uncertainty. Just like the market can become 517 00:26:03,680 --> 00:26:07,080 overconfident, believing that the future is completely 518 00:26:07,080 --> 00:26:10,680 predictable, there is no risks and you can pay almost anything 519 00:26:10,680 --> 00:26:15,280 for stocks like we had in 2021. You can also get to the other 520 00:26:15,280 --> 00:26:19,080 end of the spectrum where stocks are so heavily discounted, where 521 00:26:19,080 --> 00:26:22,320 the uncertainty is so heavily factored in that stocks are 522 00:26:22,320 --> 00:26:24,360 trading for too cheap. One of the things that 523 00:26:24,360 --> 00:26:27,920 frequently happens with big dips in the market, especially 524 00:26:27,920 --> 00:26:30,760 challenging times of uncertainty, is it can cause 525 00:26:30,760 --> 00:26:33,200 investors to give up on their investing strategy. 526 00:26:33,680 --> 00:26:35,880 Investors have a strategy, they're sticking to it. 527 00:26:36,200 --> 00:26:39,800 Once that strategy comes under real pressure with equity prices 528 00:26:39,800 --> 00:26:43,120 going down, they start to divert and change their strategy. 529 00:26:43,400 --> 00:26:46,360 For example, a common one is they'll give up on individual 530 00:26:46,360 --> 00:26:49,320 stocks and move to ETFs. This is something that I see 531 00:26:49,400 --> 00:26:52,320 almost every time we go through any challenging environment. 532 00:26:52,760 --> 00:26:55,880 Investors have been previously investing in individual stocks, 533 00:26:56,160 --> 00:26:58,120 picking out what they believe are the best investments. 534 00:26:58,160 --> 00:27:01,360 As soon as those individual stocks start to go down, they 535 00:27:01,360 --> 00:27:03,680 throw in the towel and go to ETFs. 536 00:27:04,040 --> 00:27:07,920 While that's not bad per SE to invest in ETFs, in many cases 537 00:27:07,920 --> 00:27:12,160 investors move from high beta individual stocks to low beta 538 00:27:12,240 --> 00:27:16,280 ETFs, therefore lowering their exposure to the market and to 539 00:27:16,280 --> 00:27:19,120 volatility during the time period where they should be 540 00:27:19,120 --> 00:27:22,920 increasing it. So in many cases, this swap is a 541 00:27:22,920 --> 00:27:25,640 negative move for investors. If they were bullish on 542 00:27:25,640 --> 00:27:28,800 companies just two months ago, they should re evaluate the case 543 00:27:28,800 --> 00:27:32,080 on an individual basis and see if there's any reason to be less 544 00:27:32,080 --> 00:27:34,840 bullish on that individual company compared to other 545 00:27:34,840 --> 00:27:37,720 options available. When buying the dip, you're 546 00:27:37,720 --> 00:27:40,920 never going to have a situation where you'll have total clarity 547 00:27:40,920 --> 00:27:44,360 of what will happen. Investing in general requires a 548 00:27:44,360 --> 00:27:47,440 little faith that things will work out better in the future 549 00:27:47,680 --> 00:27:50,800 like they usually do. This is why good investors are 550 00:27:50,800 --> 00:27:53,320 naturally somewhat optimistic about the future. 551 00:27:53,680 --> 00:27:56,680 You can hear Warren Buffett over and over again saying 552 00:27:56,680 --> 00:27:59,600 notwithstanding the many challenges that the US has faced 553 00:27:59,600 --> 00:28:03,680 over decades of time, his entire life, he remains bullish on the 554 00:28:03,720 --> 00:28:05,680 US. He says we have this special 555 00:28:05,680 --> 00:28:07,320 ingredients, we can figure it out. 556 00:28:07,600 --> 00:28:10,200 We challenge people that make wrong decisions. 557 00:28:10,360 --> 00:28:13,920 We pressure people into change. If leadership doesn't work out, 558 00:28:14,200 --> 00:28:16,840 leadership changes. The tariff issue is a policy 559 00:28:16,840 --> 00:28:20,160 decision without congressional approval, and it can be changed 560 00:28:20,160 --> 00:28:22,160 just as rapidly as it's implemented. 561 00:28:22,200 --> 00:28:24,800 There's of course the option that it faces the long term 562 00:28:24,800 --> 00:28:28,280 reputation damage with trading partners and long term economic 563 00:28:28,280 --> 00:28:30,800 damage, but there's also the option that it's quickly walked 564 00:28:30,800 --> 00:28:32,440 back into a more reasonable range. 565 00:28:32,520 --> 00:28:35,360 As investors, we don't know what the outcome is and that is the 566 00:28:35,360 --> 00:28:38,800 unclarity in the market today. But if things move in a positive 567 00:28:38,800 --> 00:28:43,240 direction at all, if there is any semblance of hope or future 568 00:28:43,240 --> 00:28:46,840 clarity in this market, these same equities that are being 569 00:28:46,840 --> 00:28:49,400 discounted today will bounce quickly. 570 00:28:49,600 --> 00:28:53,000 The dip will suddenly turn into a massive bounce where investors 571 00:28:53,000 --> 00:28:56,040 clamor back into equities. Right now, investors are faced 572 00:28:56,040 --> 00:28:58,440 with this tough decision of whether or not they should 573 00:28:58,440 --> 00:29:01,480 continue to buy these companies during a time where they don't 574 00:29:01,480 --> 00:29:04,240 have total clarity. But in general, over my 575 00:29:04,240 --> 00:29:08,800 investing history, I've noticed that the time to buy is probably 576 00:29:08,800 --> 00:29:11,400 when it feels the most difficult to buy. 577 00:29:11,560 --> 00:29:14,320 The time to buy is when discounting has taken place, 578 00:29:14,480 --> 00:29:18,200 when investors are in extreme fare and panic pricing in the 579 00:29:18,360 --> 00:29:21,360 most bleak of futures. The time to buy is when equity 580 00:29:21,360 --> 00:29:23,880 prices are low and other investors are afraid. 581 00:29:24,040 --> 00:29:26,880 Now I want to reverse time and go back to a time period where 582 00:29:26,880 --> 00:29:31,120 we had a very significant dip. This was during one of the worst 583 00:29:31,120 --> 00:29:35,000 times in the world's history. We lived through a literal 584 00:29:35,000 --> 00:29:36,600 pandemic. We actually did. 585 00:29:36,600 --> 00:29:39,480 If you actually look back, it was crazy what went on 586 00:29:39,760 --> 00:29:42,520 requirements that we wear masks everywhere we go. 587 00:29:42,800 --> 00:29:45,840 People clamoring to Costco taking as much toilet paper and 588 00:29:45,840 --> 00:29:48,400 water as they can to the point where they say you have to have 589 00:29:48,400 --> 00:29:51,680 a limit of one per household and people guarding them. 590 00:29:52,160 --> 00:29:55,160 This was a crazy time period where shipping and logistic 591 00:29:55,160 --> 00:29:57,000 networks were completely dysfunctional. 592 00:29:57,000 --> 00:30:00,200 Every business shut down. And at the very bottom of this, 593 00:30:00,200 --> 00:30:03,760 I'll highlight it in red, that was the exact bottom of the 594 00:30:03,760 --> 00:30:06,440 market. The very bottom day of the COVID 595 00:30:06,440 --> 00:30:09,920 sell off, which was one of the lowest points of the whole past 596 00:30:09,920 --> 00:30:13,640 decade to buy equities. Stocks were selling at extremely 597 00:30:13,640 --> 00:30:17,400 low prices, discounted for the most extreme disastrous 598 00:30:17,400 --> 00:30:21,440 scenarios possible. The day was March 23rd of 2020. 599 00:30:21,440 --> 00:30:24,680 Let's take a look at an old CNBC interview that happened on that 600 00:30:24,680 --> 00:30:28,960 exact day, March 23rd of 2020. This is the exact bottom of the 601 00:30:28,960 --> 00:30:31,320 Covic dip. This is Mohammed El Aaron, a 602 00:30:31,320 --> 00:30:34,240 chief economic adviser, someone that seems wholly qualified. 603 00:30:34,360 --> 00:30:38,200 But listen to the tone, to the theme of what was being shared 604 00:30:38,200 --> 00:30:41,560 that day. Again, the exact bottom of the 605 00:30:41,560 --> 00:30:43,440 dip. People are suffering. 606 00:30:43,600 --> 00:30:46,120 There is real pain in the street. 607 00:30:47,120 --> 00:30:50,880 This is an economic sudden stop that takes away your livelihood, 608 00:30:51,160 --> 00:30:55,280 that makes you feel insecure, that takes away goods from 609 00:30:55,280 --> 00:30:58,200 shelves. I mean, this is a real, real hit 610 00:30:58,320 --> 00:31:02,040 and people are looking to Washington to to do something. 611 00:31:02,040 --> 00:31:06,880 But understand this is also a really tough policy design. 612 00:31:06,880 --> 00:31:10,160 The best you can do right now is protect and contain the damage. 613 00:31:10,160 --> 00:31:13,240 You can't erase it overnight. That's a health issue, not an 614 00:31:13,240 --> 00:31:14,880 economic and Financial Policy issue. 615 00:31:15,200 --> 00:31:18,360 You've got to do that, but designing it strictly. 616 00:31:18,360 --> 00:31:21,200 And I think we're going to see much bigger emphasis on people 617 00:31:21,440 --> 00:31:25,960 than companies compared to 2008. And that distinction is going to 618 00:31:26,000 --> 00:31:28,520 have implications for different segments of the markets. 619 00:31:28,720 --> 00:31:32,520 The theme is that things are bad, really, really bad. 620 00:31:32,640 --> 00:31:34,720 People are suffering, the future's bleak. 621 00:31:34,720 --> 00:31:36,440 We don't know how the White House is going to address 622 00:31:36,440 --> 00:31:39,040 anything, and it sounds like they're going to favor people 623 00:31:39,040 --> 00:31:41,840 over companies. He goes on to address investors 624 00:31:41,840 --> 00:31:44,680 specifically and directly. Here's what he has to say to 625 00:31:44,680 --> 00:31:47,880 them. But this I'm still for most 626 00:31:47,880 --> 00:31:50,680 investors out there, I'm still telling, you know, be cautious 627 00:31:51,000 --> 00:31:54,520 because that we are in completely uncharted what is 628 00:31:54,520 --> 00:31:56,560 here. Be cautious, we're in uncharted 629 00:31:56,560 --> 00:31:58,040 territory. I want to show you with my 630 00:31:58,040 --> 00:32:00,400 brokerage what I did during this same time period. 631 00:32:00,680 --> 00:32:05,480 In fact, what I did that exact same day, March 23rd of 2020, 632 00:32:05,680 --> 00:32:09,280 the exact bottom of the market. During that day, I not only made 633 00:32:09,280 --> 00:32:13,640 one, but I made two deposits into My Portfolio, 1 of $500 and 634 00:32:13,640 --> 00:32:17,480 another of $2000. This is to buy companies, to buy 635 00:32:17,480 --> 00:32:20,840 ones like Apple, to buy ones like Microsoft, these companies 636 00:32:20,840 --> 00:32:23,680 that were incredibly discounted. Now, I didn't know when the 637 00:32:23,680 --> 00:32:27,200 bottom was, and you can see that evident in my trading history. 638 00:32:27,560 --> 00:32:30,120 I didn't just buy on the exact bottom, but I bought a little 639 00:32:30,120 --> 00:32:32,160 bit too early and a little too late. 640 00:32:32,240 --> 00:32:35,560 If I had known that the bottom was March 23rd, you would see 641 00:32:35,560 --> 00:32:37,800 all my deposits happen on that exact day. 642 00:32:38,120 --> 00:32:39,520 That's when I would have bought everything. 643 00:32:39,640 --> 00:32:42,480 But of course, we don't operate with that knowledge in advance. 644 00:32:42,720 --> 00:32:45,360 What I was doing during this time period was investing 645 00:32:45,400 --> 00:32:48,080 aggressively. I was digging into my savings. 646 00:32:48,280 --> 00:32:50,440 I was buying companies at extreme discounts. 647 00:32:50,600 --> 00:32:51,920 Now I want to be clear on something. 648 00:32:52,000 --> 00:32:55,600 I'm not suggesting that today is exactly like March of 2020. 649 00:32:55,640 --> 00:32:58,920 There are so many differences and I don't know if it will work 650 00:32:58,920 --> 00:33:02,040 out the exact same way either. I don't know the timeline of the 651 00:33:02,040 --> 00:33:03,720 recovery. I don't know what deals are 652 00:33:03,720 --> 00:33:05,840 going to be negotiated. I don't have any type of 653 00:33:05,840 --> 00:33:09,440 foresight and exactly how things will turn out more than anyone 654 00:33:09,440 --> 00:33:12,000 else. But what I do know is consistent 655 00:33:12,000 --> 00:33:15,440 throughout time, buying extremely high quality companies 656 00:33:15,440 --> 00:33:18,680 that are deeply embedded with incredibly wide moats and 657 00:33:18,680 --> 00:33:22,160 profitable business models with great balance sheets during 658 00:33:22,160 --> 00:33:25,920 times of despair and uncertainty typically works out really well 659 00:33:25,920 --> 00:33:28,520 for investors. I know that these companies are 660 00:33:28,520 --> 00:33:32,280 going to be around for the next 10 or 20 years, irregardless of 661 00:33:32,280 --> 00:33:35,840 what type of restrictive or punitive policies governments 662 00:33:35,840 --> 00:33:38,120 enforce. These companies are used to 663 00:33:38,120 --> 00:33:40,000 going through restrictive policies. 664 00:33:40,320 --> 00:33:43,000 Half the time these companies are under lawsuit by the 665 00:33:43,000 --> 00:33:45,600 government, under threat, under taxation. 666 00:33:45,760 --> 00:33:48,080 They're under punitive measures all the time. 667 00:33:48,640 --> 00:33:52,680 These companies outlast and outstand administrations and 668 00:33:52,680 --> 00:33:56,560 government officials, and they only go on dramatic sales during 669 00:33:56,560 --> 00:33:59,640 time of dramatic uncertainty. Most of these companies have 670 00:33:59,640 --> 00:34:03,560 traded down 10 or 15% in just the past three days alone. 671 00:34:03,840 --> 00:34:07,400 So I'm going to be buying this dip aggressively, knowing that I 672 00:34:07,400 --> 00:34:10,120 don't know the future. I don't know how things are 673 00:34:10,120 --> 00:34:12,600 going to turn out. I don't know when this dip will 674 00:34:12,600 --> 00:34:14,920 turn into a bounce, but I'll be buying anyway. 675 00:34:14,920 --> 00:34:16,520 That's going to be it for this episode. 676 00:34:16,800 --> 00:34:18,760 Hope you enjoyed. See you in the next one, yeah?