Just letting you guys know I didn’t set myelf on fire over Tesla going up 40% on bad news (though I may still end up doing it). I’ve just been on a very busy segment on my trip to Europe. I was in the Netherlands for 5 days and pretty much wall to wall busy with very little time to post anything. I’m in Spain now and trying to chill out and rest up a little and take it easier so I’ll probably post more later.
Anyone happen to know who the major players are moving products over the US-Mexico border (e.g. trucking companies)?
Typing this before markets open on news of a temporary tariff deal with China. Dow futures up a thousand. Any predictions on how crazy the markets will get today?
At some point there’s going to be no reactions to flip flopping announcements and just recognition that economic damage is done, if maybe marginally less than could be.
I just doubt today is the day …
There will always be dumb money reacting to rumor or to news. So there will always be smart money trying to front run that to suck up the dumb money. I don’t think we’ll ever get to the place where there’s little to no reaction. Less reaction, maybe.
But that also depends on how much the turbulence is being deliberately created so insiders can profit. If it is, then those insiders want to stampede the dumb money, and some of the smartish money too. So they’ll be doing the kinds of publicity that encourage that reaction.
You and I and other similar folks may choose to become numb to the drama. But we’re not the target audience for the drama.
Of course there’s going to be a reaction, there’s always going to be a reaction. Knowing that economic damage has been done doesn’t and would never change that. 30% tariffs is less damage than 145% tariffs and we didn’t know about the 90 day reduction in tariffs until today.
The markets are still down a lot from pre-tariff talk, there’s your damage.
The markets are already far too up compared to the economic damages done. The market has risen under the expectation that this will all disappear and everything should be fine again. So the market shouldn’t spike up because this event was already priced in. But I wouldn’t be surprised to see it jump to an all time high on this news.
Which really makes no sense. Oh we’re undoing a fraction of the economic damage we did to ourselves let’s send stocks to the moon.
I’m sure Tesla is heading to $350. I might even buy calls.
It was not priced in. Movement disproves that statement.
The DJIA is down almost 3k point from before the tariffs, how is this sending stocks to the moon for undoing some damage? If the market thought it undid all the damage we’d be at 45k + whatever growth was expected in 4 months.
It’s up over a thousand points, to 42,263.20. But it’s got a ways to go to get to 45,014, which is the record high, posted on 12/4/24.
IMO the DJIA is just about the most useless stock index ever devised. For the USA, far better to follow S&P 500 or Russell 1000.
Thanks for the corrections on the all-time high. I don’t have the numbers to prove what the market should be doing, but see if this sits right with you.
So much of the damage Trump has been able to do is because of people’s sense of personal incredulity towards what he’s actually doing. Every time he makes a move to become a dictator and violate the rule of law, people have this deeply held belief that such things happen elsewhere. They happen in Russia and North Korea and banana republics, but that sort of thing simply doesn’t happen here. And it’s certainly uncomfortable to believe that such things could happen here. And so in their minds they simply decide that Trump isn’t really trying to do that, or that he can’t do that, because that’s not the sort of thing that can happen here. This lowers the opposition to what he’s been doing. And through a sane-washing media, it allows everyone to think that things really aren’t that abnormal, don’t worry.
So in the same way people are thinking “Trump can’t REALLY be a dictator who’s above the law, right? And the whole republican party can’t really support that, right? No, everything must be okay. It can’t happen here”, they’re thinking “Trump didn’t just commit economic suicide and completely ruin the US’ dominant position in the world markets, could he? And his whole party supported him? No, that’s ridiculous, how could that be? That must not be what’s really going on. This must just be some kind of tactic or false alarm and everything will be okay again”
The US dominated world trade and financial markets on the basis of trust and faith of the stability, good faith, and soft power/alliances of the United States. Trump threw that all away. A century of work, a massive advantage in the world, just thrown away for absolutely no reason. It’s hard to believe, isn’t it? Wouldn’t the other republicans stop it? Surely all the rich people would put a stop to it. This really can’t be what it looks like. Everything will be okay, it’ll all be undone soon, everything will be normal again.
So even as Trump doubled down on blowing up the US economy, the markets grudgingly went lower. But not at the rate that would make sense for the amount of damage being done. Even if Trump decided to reverse his decisions entirely, the damage is stilll done. Everyone is going to reinvent a world trade network that excludes the US as much as possible.
So when the market should have rationally down down massively, like, great depression levels, perhaps losing a third, it only grudingly went down 10%. And then when Trump doubled down and actually got worse, it basically held steady. Because everyone still thought this wasn’t real.Everyone was so eager to hear good news that when even the hint that some damage would be undone, the market soared on the news. And when there was bad news that Trump was doublign down on this approach, the market held steady when it should’ve fell.
So now that Trump is undoing much less than half the damage he already did, everyone was so eager to collectively decide everything is okay that the market is again going way up even though we 1) still have 25% tariffs on Mexico and Canada and 2) 30% tariffs on China, which would be CATASTROPHIC policies in any normal time, but somehow now seem not quite so bad since it’s better than the total insanity that came before it.
We basically won’t acknowledge the reality of this situation until we actually have to, and by then it will be far too late to do anything about it. That applies both politically and economically. We’re in a mass delusion bubble that Trump isn’t as bad as he actually is, and that’s what’s left us too passive to put a stop to it.
Sorry for the very long post. I’ve been watching this effect for 10 years now. It is a large part of what has allowed the republicans to destroy the United States. I’ve been fucked by it by living in a shitty country and now I’ve been fucked by it by losing huge amounts of money when I assumed the market would be more rational than that.
I agree.
Both of those are off their earlier highs too.
They pretty much move in tandem. I think the DJI just makes for a more clickable headline: up a thousand points!! More exciting than up 2% or S&P up a hundred and twenty…
You make all good points, length or no.
The old aphorism that “the market can remain irrational longer than you can remain solvent” certainly applies here.
Decades before trump I coined a parallel aphorism about the national debt and separately about the trajectory of Social Security funding: “Congress can remain irrational long after even irrational markets have woken up and smelled the coffee.”
As applied to the present circumstances: …
So very very much of the upper reaches of American finance capitalism cannot stand to have the trump vandalism destroy the markets. So, much like Wile E. Coyote once run off the cliff, they are steadfastly refusing to look down. And so far it’s working.
Somebody somewhere will be forced to look down eventually. But that might be 18 months from now. Hell, it might be 3 more years. Once somebody does look down, the entire crowd will plummet.
But any of us can lose an awful lot of short term bets before that day of reckoning arrives. It always takes longer than we thought.
Exactly: just sensationalism, large numbers look more important.
Percentages are boring…
I have thought for quite a long time that the overall market can’t keep going up indefinitely, even before Trump’s shenanegans.
There used to be a concept of the ‘yield gap’: the idea that the value of a stock was based on future dividend earnings.
This has not been true for… probably longer than most of us have been investing.
Nowadays the perceived value seems to be based on the hope of future appreciation.
There is a technical term for this: it is called ‘gambling’.
As I’ve speculated upthread, the whole system may be a house of cards.
The question is, how do we navigate this? What assets are usefully durable and fungible?
I’m probably going to liquidate some more appreciated assets soon, and damn the capital gains tax…
I keep telling my investment adviser that the capital gain tax is the tax I am most glad to pay. It means I had gains. I would love to pay a couple of millions on capital gains taxes. Every year.
He does not seem convinced… yet.
At least once it’s paid, the IRS has no further claim, the remaining money is yours.
The thing with IRAs or 401Ks is that, while they accumulate tax-free, when you withdraw from them it is counted as income. So realistically you may think you have $X0000 in the account… but depending on your tax bracket, the taxman is going to get a significant bite.
And it should go without saying that you need to have taxes withheld when you withdraw.
Unless you like a really big tax bill on April 15.
Or you make appropriate quarterly estimated tax payments. Which darn near any retiree who’s not just living on their SS payment and any other pension-type income should be doing.
When your annual calendar of taxable transactions is lumpy in time and/or in dollars, you definitely should be doing quarterly estimated tax payments and planning to “annualize” your income reporting as part of your 1040 filing come April. Which really means “chop it into quarters and pay accordingly”, but for some oddball reason the IRS chose the term “annualize” for that process.