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[Passed Pawn @passedpawn]

Passed Pawn's Perspective

1. Markets finally pushed Trump to his limit on Wednesday. So Dump became Pump after the Treasury auction. It's like a financial markets version of Jekyll and Hyde. We always knew he had a limit, just not where it was. Turns out it was a combination of equities, bonds and Jamie Dimon on CNBC.

2. The pump was short lived and we dumped again on Thursday. Maybe we're just in a new volatile range. We can't logically get close to ATH, but under 5k SPX investors are finding value. Alternatively, markets may keep pushing for a better resolution.

3. So what did the 90 day pause really solve? Uncertainty remains extremely high and businesses are frozen. We won't be falling immediately into a recession, which is good, but the economic decline will happen as long as the ridiculous tariff rates are a possibility.

4. Speaking of ridiculous tariff rates, I guess the 125% on China had to be adjusted to 145% because the former would only end 99% of all trade between the two largest economies on the planet. Have to make sure we catch that last 1%.

5. And speaking of trade, I read that Europe and China are working on some side deals, and it's not just them. I guess this is what's meant by reorienting the global manufacturing economy. The bigger picture seems unfavorable for the US as other alliances are formed and broaden.

6. Speaking of which, notice the USD bleeding every day? To my US friends, we don't see the P&L from this in our brokerage accounts but if you listen carefully, you can hear the sound of our global purchasing power slipping away. The losses will be spread out over time, as we travel internationally and purchase goods and services at home.

7. Gold is the only asset reliably going up these days. Makes sense actually. Where else do you put your capital when stocks and bonds are both getting trucked? Bills are zero risk in theory, but you lost a year's worth of interest in just a week of currency depreciation.

8. The problem now is that we still have an absolutely massive shock to global trade with the minimum tariffs of 10% and of course the 145% with China. Many companies that rely on Chinese goods are heading toward bankruptcy. Layoffs will be inevitable.

9. We still don't know what the admin's goal really is. Zeroing the trade deficit is a fool's errand for so many reasons. Raising revenue won't work if the tariffs are reduced significantly, and if they aren't, we'll have lower trade volumes due to higher prices. And let's not forget falling tax receipts due to slower growth and lower asset prices.

10. Oh and we also have the minor issue of the US closing its global security umbrella. Forgot about that one didn't you? Now it's pouring on many countries that have to figure out how to keep dry again. It takes money to build their own umbrellas and they happen to own tens of trillions of USD assets that can be used to finance the construction.

11. Is the US becoming an EM? No, but the price action feels that way. The global reserve currency should appreciate during highly volatile risky episodes. Looking at my screens, what's appreciating is a combination of euros, yen, francs and gold. Tbh that sounds about right for the next chapter.

Have a great weekend.

-PP