[XutvJet]

Originally Posted by DrVenture

Yesterday was a peek at how the markets will react to tariffs. The reversal told the same story. Which leads me to strategize. My portfolio is up 4% YTD. I could exit to MMF right now and get 5%, basically risk free. That would put me at ~8.5% gain at year's end. More if I exit a little higher and use ultra short term bonds to good effect. I ask myself, do I want to take the sure thing, or roll the dice after two straight years of +25% gains.

It looks like I have about a month to figure it out.

Most savvy countries and investors saw through the Mexico and Canada tariff bluff. The bluff was so clear with the Tuesday tariff deadline rather than making it a Monday deadline. The China tariffs are minor thus the market is generally unfazed. We've been playing this tariff game with China for decades. I do agree with being pushy with China though, especially with them going into other countries and doing what they do. Until that government implodes from civil unrest (I give it another 5 or so years), the Chinese government will probably be our biggest headache. Russia is just an annoying drunk uncle. That country is doomed. Always has been.

From a common investor standpoint, I'd just stay and not do any moving. Just weather the temporary chaos.

[DrVenture]

Originally Posted by XutvJet

Most savvy countries and investors saw through the Mexico and Canada tariff bluff. The bluff was so clear with the Tuesday tariff deadline rather than making it a Monday deadline. The China tariffs are minor thus the market is generally unfazed. We've been playing this tariff game with China for decades. I do agree with being pushy with China though, especially with them going into other countries and doing what they do. Until that government implodes from civil unrest (I give it another 5 or so years), the Chinese government will probably be our biggest headache. Russia is just an annoying drunk uncle. That country is doomed. Always has been.

From a common investor standpoint, I'd just stay and not do any moving. Just weather the temporary chaos.

That is the other side of the coin. I left a lot out of my post, for brevity. There could be a quick "deal" that averts a real showdown. And the markets will rejoice and settle down into fundamentals again.

Part of my thinking has to do with the fact that I don't need to take any risk anymore, as I am ridiculously far ahead of my retirement needs. I should have de-risked years ago, according to general thought.

Doing the "advisable thing" and also having the dry powder to capitalize on a significant correction would be win/win. I did this in 2020 by raising cash early in the year and deploying it at the market bottom in March/April. And I did a similar thing in 2022 by raising cash (Q1) which I deployed into commodities for a quick 40% gain in 6 months. In both cases the writing was on the wall.
This is less clear cut.

What I will probably end up doing is selling off some growth funds in my tax-advantaged accounts, to deploy in the event of a significant correction. This to avoid cap gains and still get 5% while I wait. A bit of a hedge. I am on the cusp or retirement, anyone early or mid-career should just ride things out. My situation being a bit more unique.

[DrVenture]

From Weekly Business Digest Feb 3.

"OTHER VOICES. William PESEK, Japan-based Asian Affairs Writer and formerly at Barron’s. While events in DC are moving very fast, CHINA has been calmly talking about mutual cooperation and respect. President TRUMP has also toned down his election rhetoric on China tariffs. The experiences by Canada, Mexico, Columbia, Brazil have been different. But Trump administration has several China hawks (Rubio, Waltz, Hegseth, Ratcliffe, Navarro, Lighthizer) and it won’t be a smooth sailing for China. Musk wants Chinese access for X/Twitter in exchange for rescuing TikTok in the US, but that’s unlikely.

Chinese President XI is a tough negotiator, and he knows that Trumponomics 2.0 isn’t good for China or Asia. Some say that AI – DeepSeek was a high-profile Chinese response to the US $500-billion AI – Stargate announcement. China had a bad 2024 and its property crisis isn’t over. But Xi is unlikely to prematurely capitulate just from some loud talk. It has also launched investigations into what it called abusive practices of several US and European companies. China has been reducing its holdings of the US Treasuries. Fasten your seatbelt as Xi may force Trump to deliver on his campaign pledge on 60% China tariffs and the global chaos and shock that may follow.

[DrVenture]

More from the above, moving on from tariffs:

"This bull market has provided a boost to the economy through the WEALTH EFFECT. When households feel wealthy from their fund and/or brokerage statements, they also spend more. Consumer spending is 67% of the US GDP and it has grown faster than income/wages. The Fed remains on hold. The longer-term rates have risen despite past cuts in fed funds rates. Based on GDP growth, sticky inflation and strong labor market, some doubt whether the financial conditions are really restrictive, as Powell has said repeatedly.

There were concerns about the shot heard around the world from DeepSeek that it could achieve competitive generative AI results much cheaper with smart programming (use of MoEs). The US stock market cap/GDP ratio is 2.09, or 209%, a record – it’s called Buffett indicator, and ironically, Warren Buffett has been very heavily into T-Bills for quite a while. Investors believe that if this market breaks, this business, market and crypto friendly Administration will do something about it."

That last part suggests that excessive risk-taking may be enabled by the expectation of taxpayer bailouts. Moral hazard.

Note: Bolding is mine.

[XutvJet]

Originally Posted by DrVenture

That is the other side of the coin. I left a lot out of my post, for brevity. There could be a quick "deal" that averts a real showdown. And the markets will rejoice and settle down into fundamentals again.

Part of my thinking has to do with the fact that I don't need to take any risk anymore, as I am ridiculously far ahead of my retirement needs. I should have de-risked years ago, according to general thought.

Doing the "advisable thing" and also having the dry powder to capitalize on a significant correction would be win/win. I did this in 2020 by raising cash early in the year and deploying it at the market bottom in March/April. And I did a similar thing in 2022 by raising cash (Q1) which I deployed into commodities for a quick 40% gain in 6 months. In both cases the writing was on the wall.
This is less clear cut.

What I will probably end up doing is selling off some growth funds in my tax-advantaged accounts, to deploy in the event of a significant correction. This to avoid cap gains and still get 5% while I wait. A bit of a hedge. I am on the cusp or retirement, anyone early or mid-career should just ride things out. My situation being a bit more unique.

This post and you're last two posts are excellent. Keep it up. You're definitely more knowledgeable and educated on this. The China/US treasury matter is something I forgot about. Trump should tread VERY carefully with Xi.

I'm 50, and like you, I'm aiming to retire early in about 2 or years. My portfolio has performed exceptionally well over the last 8 or so years and I plan to stay put for now. I'm just hoping that any correction happens sooner rather than later. I've been down this path so many times since 1998 when I started investing. Patience is key. It just really annoys me when those in power threaten other governments just screw with them, cause chaos, and/or make do on ill-advised and silly promises to save face.

[DrVenture]

And still more:

"INTERVIEW/Q&A. Ray DALIO (75), Retired Cofounder, Bridgewater. There may soon be a global financial “heart attack”. Strong dollar may create a crisis for highly indebted countries with weak currencies. Populist governments aren’t taking corrective actions but instead are loading up on more debt. He mentions a 9-stage debt cycle. All asset classes may be hit initially – stocks, bonds, real estate, etc. The US bond market is critical for the health of all other assets (in his heart analogy, the credit flow is like the “blood flow”). Selling of existing debt when a government is also trying to issue more debt can lead to a massive crisis (“heart failure”). Debt and debt services are like the “plaque” that builds up slowly. It’s hard to say when the crisis will happen. But watch debt servicing that is contributing to the US deficit of 6% of GDP now, 7.5% if TCJA is simply extended.

The deficit of 3% would be more normal but that will require hard choices for spending cuts and higher tax revenues. It was actually done during 1992-98 with tight fiscal policy but loose monetary policy (now both are loose). We also have examples of credit shocks of 1971 and 1994 when bond yields rose, and currencies weakened. Global political instability is causing higher defense spending and local onshoring, both globally inflationary. Foreign investors also evaluate the impact of sanctions. China is now facing the debt issues that Japan faced in 1990 or the US in 2008. The cure would be aggressive monetary and fiscal easing and debt restructuring (most Chinese debt is domestic). His advice for the US investors is to control risks, diversify and use tactical allocations. He is negative on the US sovereign debt, corporate debt and AI highflyers; he suggests including alternatives (including some gold and cryptos), selected EMs (India, Indonesia, ASEAN and GCC countries). Forthcoming book, “How Countries Go Broke”, 09/2025."

A lot to unpack here. What jumps out to me is that an extension of the TCJA is going to increase our debt servicing from 6% to 7.5% of GDP. Definitely the wrong direction - a 25% increase. Spending cuts and tax increases being the only realistic solutions. Those will hurt consumers which will hurt corporations and that hurts GDP. Probably the reason we keep pushing it down the road. And it isn't going to happen until we hit a wall.

[floridaorange]

Originally Posted by XutvJet

It's all theater and yeah, it would be more effective for everyone if the governments would talk, even forcibly if need be, before jumping in all and shooting first as you put it.

It is just so strange to me. We are a capitalistic country and businesses seek to make the most money possible. The US as a whole (i.e., government, business, workers, and consumers) decided decades ago that it would become a service/consumer-based society. A significant amount of manufacturing moved out of the US and workers and society adapted. Businesses have thrived, consumers have thrived, households have thrived, etc. And now, here we are, trying to punish other countries through tariffs? What am I missing here given our country's decisions of the past to make our economy and work force the way it is? We're punishing other countries for our own decisions. LOL

People certainly are NOT worse off now than they were back in the 1970s, 1980s, and 1990s, financially speaking. Are they happier? Very debatable, but that's another topic all together.

It is a GLOBAL economy now. You push manufacturing to less fortunate countries. Those countries get the opportunity to grow, expand, improve, you name it. Everyone generally wins with lower prices, more competition, more products, etc. Everyone adapts. We're not going back to the 1950s US way of life. Good luck finding enough manufacturing workers.

True except for all the towns in the US that are still devastated and struggling from
the gaping hole left by the lack of manufacturing jobs.

[ASAP]

Originally Posted by DrVenture

And still more:

"INTERVIEW/Q&A. Ray DALIO (75), Retired Cofounder, Bridgewater. There may soon be a global financial “heart attack”. Strong dollar may create a crisis for highly indebted countries with weak currencies. Populist governments aren’t taking corrective actions but instead are loading up on more debt. He mentions a 9-stage debt cycle. All asset classes may be hit initially – stocks, bonds, real estate, etc. The US bond market is critical for the health of all other assets (in his heart analogy, the credit flow is like the “blood flow”). Selling of existing debt when a government is also trying to issue more debt can lead to a massive crisis (“heart failure”). Debt and debt services are like the “plaque” that builds up slowly. It’s hard to say when the crisis will happen. But watch debt servicing that is contributing to the US deficit of 6% of GDP now, 7.5% if TCJA is simply extended.

The deficit of 3% would be more normal but that will require hard choices for spending cuts and higher tax revenues. It was actually done during 1992-98 with tight fiscal policy but loose monetary policy (now both are loose). We also have examples of credit shocks of 1971 and 1994 when bond yields rose, and currencies weakened. Global political instability is causing higher defense spending and local onshoring, both globally inflationary. Foreign investors also evaluate the impact of sanctions. China is now facing the debt issues that Japan faced in 1990 or the US in 2008. The cure would be aggressive monetary and fiscal easing and debt restructuring (most Chinese debt is domestic). His advice for the US investors is to control risks, diversify and use tactical allocations. He is negative on the US sovereign debt, corporate debt and AI highflyers; he suggests including alternatives (including some gold and cryptos), selected EMs (India, Indonesia, ASEAN and GCC countries). Forthcoming book, “How Countries Go Broke”, 09/2025."

A lot to unpack here. What jumps out to me is that an extension of the TCJA is going to increase our debt servicing from 6% to 7.5% of GDP. Definitely the wrong direction - a 25% increase. Spending cuts and tax increases being the only realistic solutions. Those will hurt consumers which will hurt corporations and that hurts GDP. Probably the reason we keep pushing it down the road. And it isn't going to happen until we hit a wall.

I think a reasonable solution would have been to do the following (albeit no one would agree on it)-

1) let the TCJA expire
2) remove SS tax cap- we can't raise retirement age anymore
3) cut spending in the absolute largest categories - namely defense which is actually easy to make cuts in financially but very difficult politically


this would have at least gotten us moving in the right direction... but no, the answer is to spend spend and make cuts in tiny categories that in the grand scheme of things dont do anything...

[hubbahubba]

Looks like AMD is on sale today.

[DrVenture]

Originally Posted by hubbahubba

Looks like AMD is on sale today.

According to Morningstar, AMD has a fair market value of $140 and is now around $109. This is a new 52-wk low. They are considered narrow moat, meaning lots of competition.

Could be an opportunity. A snippet of the analyst report:

" Advanced Micro Devices has a wealth of digital semiconductor expertise and is well positioned to prosper from favorable trends in data centers and artificial intelligence. We consider AMD to be one of two notable firms in graphics processing units, which are especially well suited for AI. The company may play second fiddle to Nvidia in AI GPUs, but its GPU expertise should become increasingly valuable, and lucrative, in the years ahead.
AMD’s primary products include processors and GPUs tailored to PCs, game consoles, and servers. In our view, AMD’s PC and server success stems from the rare x86 architecture license that it possesses from Intel, which allows AMD and Intel to build x86 CPUs for Microsoft Windows PCs. We view it as a heavy lift for Windows to rewrite its x86 software to work with other processors, but Apple made this move in recent years to support its internal ARM-based processors. ARM will likely gain share in the PC market, but we still expect x86-based chips from AMD and Intel to retain leadership in the Windows PC market for quite some time.
AMD has benefited from its outsourced manufacturing model, as its tight relationship with industry leader Taiwan Semiconductor enabled AMD to grab a technological lead as its rival, Intel, stumbled with its internal manufacturing roadmap. We anticipate that AMD will continue to gain market share over the next few years as Intel strives to turn it around, but AMD's gains could be longer lasting if Intel were to stumble further.
We think AMD's data center business should boom over the next few years. Its server CPUs should be in high demand, as should its GPUs suited for AI workloads. AMD pegs the total addressable market for AI accelerators, such as GPUs, at $500 billion by 2028. While we foresee Nvidia capturing the bulk of this value over the next several years, we think that all AI vendors and customers will seek alternatives to keep Nvidia's dominance at bay, and AMD might be the best positioned to emerge as a second source in AI."

[hubbahubba]

DrVenture Thanks, good stuff. I picked up a couple 2/28 $110 calls this morning and I’m up slightly. Long term I don’t think you lose buying the stock at this price.

[DrVenture]

Originally Posted by floridaorange

True except for all the towns in the US that are still devastated and struggling from
the gaping hole left by the lack of manufacturing jobs.

You are not wrong. It is a complex problem. How does anyone guarantee that these locales are where any efforts to reinvigorate manufacturing actually take effect? Seeing once thriving communities fall into despair is discouraging and sad.

They need to have the workforce, the infrastructure, the skills. Is it a "built it and they will come" scenario? Will locals get pushed out by new people moving to the area, and by gentrification? Maybe we need to taylor incentives to certain needy locales that fit the requirements. Is the hand of government likely to produce flawed results?

One article that I found on what it might take:

https://www.upjohn.org/research-high...smart-policies

The result of one recent effort that started out quite hopeful:

https://www.jsonline.com/story/money...e/70037738007/

[IanH]

Originally Posted by DrVenture

You are not wrong. It is a complex problem. How does anyone guarantee that these locales are where any efforts to reinvigorate manufacturing actually take effect? Seeing once thriving communities fall into despair is discouraging and sad.

They need to have the workforce, the infrastructure, the skills. Is it a "built it and they will come" scenario? Will locals get pushed out by new people moving to the area, and by gentrification? Maybe we need to taylor incentives to certain needy locales that fit the requirements. Is the hand of government likely to produce flawed results?

One article that I found on what it might take:

https://www.upjohn.org/research-high...smart-policies

The result of one recent effort that started out quite hopeful:

https://www.jsonline.com/story/money...e/70037738007/

Generally, manufacturing will open locations where there are workers first and foremost.

The problem is that most of the places that manufactured in the US before were doing it quite some time ago. Thus the work force has either left or aged out. There's no saving those dead towns except by helping them how we can until they fade.

Plenty of opportunity for the US to do manufacturing, but its surely not going to be primarily raw materials or simple goods. Investment will make it happen fastest.

[floridaorange]

Or working for Dollar General. Drive through Coal & Timber areas like the Appalachia…. So many parts of our country offer zero purpose for this younger generation.

[DrVenture]

Originally Posted by floridaorange

Or working for Dollar General. Drive through Coal & Timber areas like the Appalachia…. So many parts of our country offer zero purpose for this younger generation.

To be fair, even when coal and lumber were thriving in Appalachia, the situation was not great for the workforce.

https://en.wikipedia.org/wiki/Harlan_County,_USA