Hard Truth in a World Inflamed with Lies

The stock market flaunts its stupidity in abundance today. It opened up 1400 points based on nothing but jaw-flapping by President Trump. This happened for two reasons, and will keep happening. The greedy are needy, so they cling to any vapid hope the president (or anyone of stature) gives, and the market is run by brainless algorithms that grab onto any vapid headlining hope the president or anyone gives. What the president said to create today’s rise was that China was dying to make a deal. Everything China has done says that China is digging in for the long game and not even close to making a deal under pressure. Not even close.

Here’s the simple and obvious fact: Trump’s words were as empty as a prize fighter talking about the guy he is going to battle in a championship match in a week saying, “He’s trembling in his boots.” Or, as Trump put it, “China really wants to make a deal.” China did not call Trump. China did not offer a deal. In fact, Trump betrayed the emptiness of his words when he said the problem was that China just didn’t know how to get started.

In other words, China did nothing! The president just believes or wants to believe or wants YOU to believe that China is dying to call him and make a deal. China did not call.

None of that matters. The market was ready for rebound after days of plunging clear into a bear market, so it took whatever it heard that it wanted to hear and ran with it this morning. Thus, the headline I lead off with in the news below says that the market opened up 1400 points on the Dow, but by the time I finished gathering headlines, the headline had already been rewritten to the market opens up 1,100 points. I kept it as it was. By the time I copied and pasted it into this post, it was already revised down to 900 points. By the time I hit “publish,” it will probably be down to 500 points. Why? Because it was based on fumes—VAPID. The market is trading on fumes.

The wannabe bulls rose on nothing but jawboning. Just like Peter Navarro. Trump’s top guru, Elon Musk, is now calling Navarro the “moron” that he is, even saying he is “dumber than a sack of bricks.” Navarro IS dumber than a sack of bricks. Musk even points out something I spelled out years ago about Navarro. To show you what a fraud that old stick is, Musk pointed out that, in the book Navarro wrote that got him his first job with Trump, Navarro frequently quotes an expert named “Vara” to back up his points. It turns out “Vara” is just a variation of his own name, “Navarro.” Vara is a made-up Harvard expert—a mere stick figure—that Navarro leans on for his source of factual support. What a fraud! Trump’s son-in-law read the book and recommended Navarro for the post he has held with Trump in charge of trade ever since. He’s a stick figure just like his “Vara.”

Tariff inflation is already soaring

This is the guy running the tariff show, and what a show it is! This is the guy telling you tariffs won’t create inflation when they are already doing so! Another article today talks about small farm towns along the Canadian border from one side of the nation to the other being hit by tariffs as farmers bring feed and fertilizer down from Canada. One farmer in upstate New York says he got hit with a $2,200 premium on his last load of feed, which was the tariff. He didn’t think he had to pay it because he had been told Canadians had to pay the US tariffs! He found out the hard way that he had no choice but to pay it. The fee gets added as a tax to the feed as the truck crosses the border.

And now he’s stuck because there are no feed dealers close enough to him in the US to ship feed to his farm. So, he will be paying an extra $2,200 (or more if tariffs rise) on loads of feed for as long as the Trump Tariff War goes on because, YES, Americans do pay for US tariffs on imported goods. He now knows he will also be paying those tariffs on all the fertilizer he has shipped across the border. That is the hard truth, but Trump and Navarro keep telling everyone otherwise, and people keep believing them.

I know first hand about American farmers shipping feed across the border because I live in one of those border towns and I once drove a big semi trailer full of feed that I loaded in Canada to an American farm across the border. At that time we had “free trade” so there was no import tariff applied when I walked into customs and presented my papers to the customs officer. It was duty free. Had it not been, I would have had to add the tariff to the delivered load. Lots of farmers where I live buy their feed and fertilizer from Canada.

When I owned a farm, I bought trailer loads of fencing material for my rail horse fences from Canada because the price of lumber was much lower there. Who do you suppose would pay the duty at the border if there had been a duty on the material at that time? Me, of course! The Canadian retailer doesn’t add the tariff to your bill of sale when you buy the goods in Canada. Customs does … at the border! Canada does not pay for it! That kind of claim by Trump has always been a lie. And could I have talked the seller in Canada down by the amount of the duty. No. He was a lumber retailer with no willingness to barter. Sure, sometimes you can, but often you cannot.

Drowning in a VAT of lies

Nevertheless, these are the baldfaced lies Navarro tells, and just like those algos that suck up whatever the president says then buy stocks on that basis, much of the public sucks up whatever swill the administration offers on tariffs. For example, when Navarro says the tariff rates were set based on unfair value-added taxes, he demonstrates what a bag of bricks he is, just as Musk says; yet, much of the public accepts that those high taxes are an unfair hit on US goods. Well, they simply are NOT. They are typically applied equally by the nations that have a VAT to their own domestic goods and to imported goods. So, they do not create any unfair trade imbalance.

They are a sales tax. They are no different than when the state I live in charges a sales tax on all goods sold inside the state, even if the goods came from another state. That sales tax is not a state tariff on the goods of other states when it is charged on those goods as they are sold in my state because it is charged on all goods. A tariff between states is directly unconstitutional and cannot be done. However, because my state simply charges a sales tax on all goods, it is treating all other states equally, so the tax stands.

Many states do this, and it is no different when nations have a national sales tax (VAT) and apply it to goods coming into their nation, just as it has already been applied internally to their domestically produced goods. If they didn’t add the VAT to imports, they would be putting their own companies out of business by giving tax-free status to the products of all other nations, except their own. (Mind you, VAT is the dumbest form of sales tax there is, but that is a story for another time. It is a child that should be regarded as ugly even by its own mother.)

Navarro’s insistence that nations must change their entire tax structure to eliminate a tax that does not punish US goods over the goods of those nations is categorically dumb as a brick.

Getting head banged

And, so, we see the stock market showing the same kind of stupidity, trading on meaningless memes put out by people like Navarro and Trump who know that whatever they say will drive the market algos. Trump knows he can jawbone the market. Monday and last Friday each saw the largest equity trading volume in the history of the markets. The Dow also made the largest intraday swing in its history on Monday. At one point it was as high as 892 points and then plunged as low as -1,703 points for a 2,595-point swing, beating its 2020 gyrations and all others. As a result of the turbulence, market volatility ended the day at its highest level in five years.

All of that happened because a headline came out that said Trump was about to come down on tariffs. No one seemed to know where the news came from, and it was completely fake, as the White House later declared, but the brainless algos traded it. Simple as that. (The White House probably “leaked” the initial lie, too, to keep the market guessing and flaming up on mere gas.) By such nonsense, the market will get its head slammed from floor to ceiling to floor and from wall to wall again and again … like this:

Some people just have to learn the hard way.

The bottom line for the market, however, is this: As one investor who has done extremely well in bear markets says in the headlines today, the Dow needs to plunge about 80% before it finds its bottom, and it eventually will. When, he doesn’t know. Whether he’s right on the 80%, I don’t know; but what I do know is that the stock market has a lot more losses to take as this trade war drags out, but it’s going to get banged around a lot because it likes to trade on fumes.

The Dow and Nasdaq Composite have already erased more than the entirety of last year's gains. The Dow rose 4,855 points last year, and the Nasdaq, 4,299. The Dow has now dropped 5,660 points, and the Nasdaq has fallen more than 4,400.

Laughing stocks

The stock market may not be laughing, but others are laughing at it … and at the US. As the stock market convulsed and wretched like a sick stomach last week, Russia reveled in the news with several prominent Russian television commentators praising Trump for single-handedly doing what Russia had never been able to accomplish on its own in destroying the entire Western economy, including the US economy foremost. (See the headlines below for the video.) Several commentators had a good laugh in saying Trump should be given an award by Russia equal in stature to the Nobel Prize for singlehandedly taking down the West.

(Oh, I just checked the Dow headline again after adding the above paragraphs, and it is now down to 800 points.)

BlackRock’s CEO, Larry Fink, says other CEOs are telling him they think the US economy is already in a recession. Good for them. They’re catching up with me. Yes, it is already in a recession, which means the market has a lot of catching down to do, but how many times the market might try to soar on vacuous news of tariff hopes, I don’t know. There is no limit to stupidity.

"Most CEOs I talk to would say we are probably in a recession right now," Fink told the Economic Club of New York on Monday. Tariffs are expected to make a wide variety of products more expensive, exacerbating inflationary pressures that have been persistent in recent months.

Meanwhile, Trump’s Treasury Secretary, Scott Bessent, never seems to run out of inane things to say, as if he is in a running competition with Peter Navarro to see who can talk the funniest after inhaling helium. Yesterday, light-headed Bessent got ripped for saying that fired government staff will go to work in the new US factories that will be built due to tariffs.

“Yahoo Finance reporter Jordan Weissmann called the comment "beyond parody…."

The Capitol Forum correspondent Jarrod Facundo encouraged folks to "learn to weld."

Those pretend new factory jobs, as I wrote yesterday, will arrive in 2-5 years, if they arrive at all. For example, a cartel that owns factories in Cambodia says in the news today there is zero chance they will relocate to the US even though they are looking to relocate out of Cambodia to avoid the exorbitant US tariffs that will hit their products if produced there. Why? Because they are sweat shops! Their entire business model is based on having cheap peasant labor. Because they cannot find that in the US, their business model doesn’t work for relocating to the US. So, they will settle for moving to a location with lower US tariffs and cheap manual labor as the best they can do.

For those factories that do relocate to the US, the 2-5 years it takes to get through all the red tape, raise funds, make decisions, create plans, buy land, retool, find a labor pool, etc. makes their arrival a little late to do any good for displaced US workers now! So, Bessent displays what a tone-deaf idiot he is when he throws something like that out as being the salvation of the displaced American workers.

MSNBC’s Stephanie Ruhle agrees:

“She hasn't heard ‘one single CEO’ saying that they will build a new plant in the U.S. It also takes three to five years to set one up, she said.”

The timeline is an obvious truth, so the idea that relocated factories are going to help the US avoid the recession that Larry Fink says we are already in is all flabberjaw nonsense. But I suppose the algos that drive the stock market will snatch onto some of that to try to find a truly non-existent reason to trade up, only to get hammered down again.

All of this is not to say government doesn’t need to be trimmed by firing some people, but just to say don’t kid yourself about the economic damage that comes with that. Don’t listen to the vapor-heads who keep telling you that there is no sign we are about to slip into a recession or that inflation won’t rise. It is already happening in small pockets, and soon will be happening all over the nation. They are flam-flam artists. And the collapse is being made worse due to needless damage from government haircuts given by kids barely out of high school who sometimes lop off a useful ear, instead of hair.

“Veteran investigative reporter Phil Williams pointed to another Bessent comment in which he "argued that tariffs will eventually lead to increased income tax collections 'from all the new jobs,' then admits much of the new manufacturing will be done by AI/robotics."

It is so obvious those two things don’t add up. Just like things obviously do not add up when Team Trump tells you that tariffs will be the new US tax system, which people outside the US will finance, and then tell you in the same breath that these tariffs can be avoided if nations just drop their trade barriers. You cannot have it both ways: “tariffs will be our new revenue system going forward” and “they can all be removed right away and don’t even have to happen if nations will make a deal.” You cannot base the nation’s revenue and budget on a system you are telling everyone is going to be transitory. Yet, Navarro talks both sides at the same time.

And then you have to listen to this kind of disingenuous stuff from them:

Bessent went on to tell Carlson, “I believe that this is going to work. What I do know is that the old system wasn't working. And if you look at a system that's not working, you've got to be brave to change it.”

It would also help if you knew what you were doing and didn’t give glib answers for everything. When a billionaire tells you the old system wasn’t working, you have to wonder what part of it wasn’t working for him. He seems to have done quite well by it. Is he just suddenly concerned about me after all these years and the inequitable distribution of wealth that solely benefits people like himself, or does he greedily see ways he can wring even more money out for himself?

Powell didn’t put

Comparable examples ignorance can be found in the bond market right now:

Investors have already started pricing in an aggressive move by the Federal Reserve, even before its next scheduled policy decision. Overnight interest-rate swaps are now showing 125 basis points of expected rate cuts by year-end, equal to five 25-basis-point reductions.

Powell put the kibosh on that in a hurry yesterday, making it clear the Fed was standing pat. He said that tariffs could lead to “persistent inflation” and economic stagnation at the same time so the Fed would have to wait to see which force eventually prevailed in order to know whether to stimulate the economy or not.

What he said is called “stagflation”—the very trap I said the Fed would be caught in where it is flummoxed about whether to lower rates to save us from the recession we are entering and, thus, light inflation back on fire or to hold tight against inflation and let the recession deepen into an all-out depression. Now we hear in Powell’s own words that dynamic is exactly what he knows he’s facing.

If bonds had not swung a major reversal yesterday and today, the Federal Reserve may have been pressed to rush in and cut interest just to look like it is still in charge. Of course, lowering interest to stimulate the economy at a time when inflation is rising and tariffs are going to be creating some shortages is a certain recipe for soaring inflation. If the shortages become bad enough and the Fed decides to power us out of a depression deep enough, doing so could even turn into hyperinflation.

The Fed knows how to manage us from a fire into a crisis and back into the fire again. We’ve done this cycle many times, and we are, once again, back in crisis-management mode. (I wrote a little humorous but hopefully penetrating book about those endless Fed recovery flops you can check out titled, DOWNTIME: Why We Fail to Recover from Rinse and Repeat Recession Cycles.)

Digging to China

I also wrote yesterday that Apple could not effectively move its production into the US because it would still be dependent upon China for all the rare earth’s that go into an iPhone. China, I noted, would simply cut off exports of rare earth’s to the US via applying high export tariffs on top of the Trump tariffs to its own rare-earth resources.

China must have been reading the Chinese edition of The Daily Doom (not) because it did exactly that before the pixels fixed themselves in place (“the ink dried”) on my article. Only it skipped right past the tariff mechanism and just went straight to an outright ban on selling rare earths into the US. So, no it doesn’t look like China is dying to make a deal with the US as Trump claimed. That is just Trump doing his usual say whatever he wants and create a new alternative fact out of nothing.

Also keep in mind what I wrote about the international teamwork against the US that I said we can all expect as a result of the rest of the world seeing that US has isolated itself into a position where it has tariff troubles from everyone, while all the rest of the world only has tariff troubles with the US. Here it is: China just announced that it will make sure all the other nations of the world have ample tariff-free rare earths so that its own rare-earth exporters don’t suffer.

That’s the downside of taking on the entire world at once. As I said, that is not how I’d do a tariff war if I were foolish enough to try one. All the nations on earth are free to trade with each other as tariff-free as they want, while the US has tariffs it has imposed on all imports from all nations (paid by our own importers and consumers), and all US products have tariffs imposed against them, making their prices much higher in all other countries so those products cannot compete because consumers in those countries will switch to the many other tariff-free sources they still have available to avoid their own nations’ tariffs, which is the real purpose of tariffs, not raising tax revenue.

Cutting off all our options for inexpensive goods from everywhere in the world at once was not a smart plan, especially when it leaves their alternatives wide open with a world full of nation that are all the more eager to strike trade deals.

China accounts for 70% of rare-earth production in the world. Trump better grab Greenland in a hurry. I hear they have some rare earth beneath all those glaciers; and there won’t be any problem cooling the miners’ drill bits in that environment, so drill, Baby, drill!

Chinese mining stocks actually soared after the announcement that China will be expanding its rare-earth exports while cutting the US off. Drill, Baby, drill!

The sound of hammers is a cacophony of chaos

Watch the Russians continue to laugh their heads off as “Big Balls” of steel and “Bag of Bricks” pound the US and the other economies of the West into rubble.

For anyone wanting a full discussion on why the Trump tariffs are a heap of confusion and nonsense, there are two good articles in the headlines that follow laying out the contradictions and lies embedded in Team Trump’s claims about other nation’s tariffs and trade restrictions. Sure, there are unfair practices that should be and must be ironed out, product by product, but not with across-the-board tariffs that are clearly not the least bit “reciprocal” as those articles will lay out. Many of the claims must have been calculated by dumb-as-a-sack-of-bricks Navarro. You could build a masonry wall out of that man’s head.

Meanwhile, watch markets bounce and plunge and ultimately get hammered as they embrace lies and then have those lies ripped away and as real analysts try to figure out how you trade rampant contradictions and vacillating major policies.

(Oh, and by the time I got to the end of writing this article, the Dow was down to 688 because flim-flam and flapping jaws don’t hold up. Oops, but after writing that sentence, I went back and proofread the whole thing, and now the Dow is down to 264, well below the 500 I promised we’d get down to by the time the article was finished, and I’m not making any of this up. Just noting it as I write. That’s what happens when you run on lies and vapors.)

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