Richard Lindner

[Richard Lindner @rlindner81]

@pip_net Whether you distill from China or from xAI, both of them were distilled from the same sources.

[Evan @StockMKTNewz]

Walmart’ $WMT CFO just said on CNBC that price hikes from tariffs could start later this month

“We’re wired for everyday low prices, but the magnitude of these increases is more than any retailer can absorb,” he said. “It’s more than any supplier can absorb. And so I’m concerned that consumer is going to start seeing higher prices. You’ll begin to see that, likely towards the tail end of this month, and then certainly much more in June.”

[Dan Niles @DanielTNiles]

With the first of the Magnificent 7 set to report tonight, these are my thoughts on earnings season in general.

Tariff uncertainty has likely pulled in demand a tremendous amount as companies and consumers alike rush to get in front of price increases. Therefore results and guidance during this upcoming earnings season is likely to be better than feared. To be clear, I still think estimates go lower but probably not as much as expected.

CQ1 results and CQ2 guidance are probably relatively meaningless given the uncertainty of what happens when the 90 day pause on tariffs ends. Tariffs went from ~2% to ~3% under President Trump’s first term and are now set to go to ~20%. But obviously everyone expects many trade deals before that 90 day deadline but what is the ultimate increase?

Today the tariff headlines are a deal with Japan and India are "close" which is helping the stock market. But my thought would be that tariffs are still going significantly higher than the 3% in total and still detrimental to growth in the short-term.

Due to this pull-in of demand, my belief is stocks on balance are likely to go up between now and the end of most significant earnings reports in early May. Investors have been trained since the start of easy money policies following the Global Financial Crisis in 2008 to view any dip as temporary and stocks being down from their highs as an indication that they are cheaper. Even during a global pandemic, the S&P went up 14% when the long-term average gain is 9%.

And despite, the "tariff terror," there are some positives for earnings such as the drop in the US dollar, oil prices and interest rates. A drop in the US dollar from $110 early in the year to $99 currently will help revenues for the big multi-nationals. Oil also has dropped from $80 early in the year to below $70 which will help growth and reduce inflation. And finally interest rates have gone down from 4.8% early in the year to 4.4% currently.

Reaction to $TSLA results tonight will probably be a good indicator as to the balance between risk and reward in the very short-term. If the stock goes up tomorrow despite earnings estimates needing to be cut (everyone knows this but not the magnitude), this will increase my conviction that the FOMO/BTD crowd will probably be in control for the rest of earnings season for the market in general.

Remember that Tesla had deliveries go down slightly in 2024 for the first time in over a decade. Tesla’s issues are not just political as much as many would like to believe that. This decline in Tesla deliveries is despite EVs growing by roughly 25% globally in 2024 driven by Chinese competitors like BYD growing over 30% and taking market share. Tesla deliveries in Q1 were even worse and already released as dropping over 10% y/y.

But here is where I have an issue on a longer-term basis for the stock market: earnings and the multiple on those earnings. Stock prices are determined by only these two factors. Both of these are influenced by the supply of money from both the government (is deficit spending increasing or decreasing) and the Federal Reserve (fed funds rate and balance sheet changes.)

In looking at the US government, I believe spending is rightly being reigned in by the new administration given the current path of deficits is ultimately unsustainable. The level of current debt to GDP is likely sustainable but if it keeps increasing, it ultimately will not be.

In looking at the Fed, tariffs are putting inflation in the pipeline so on balance on the Fed’s dual mandate, they are closer to full employment than inflation at 2%. Inflation is between 2.4-2.8% depending on the measure of CPI/PCE and core/headline. It has been above the Fed’s 2% mandate since 2021. But employment is at very low levels of 4% and there are still amazingly more job openings than people unemployed. The economy was strong coming into this tariff terror with 2.4% GDP growth in Q4. I do not see any rate cuts this year as a results and if I do, it will probably be for the wrong reasons due to a looming recession and spike in unemployment.

So bottom line, both fiscal policy and monetary policy are restrictive and is not likely to change any time soon.

As a result, S&P earnings estimates for CY24 which are now currently above 10% growth are likely to come down to closer to flattish in an optimistic scenario with no recession. While recession odds have undoubtedly gone up and I believe GDP will go negative during Q3 due to the pull-in of demand during the first half of 2025, I do not believe GDP growth goes negative in 2025 for the full year. If we do get a recession earnings are likely to go negative.

With regards to stock market multiples, the S&P entered the year at a trailing PE of 25x which is high. This is normally around 19x when inflation is between 2.5-3.0%. But in the case of a recession, this is closer to mid-teens. With the trailing PE down to 22x, the math indicates at least another 10%+ of potential downside from here on multiples. I use trailing PE because that is known while forward PE multiples are not given the earnings estimates are changing.

So at least 10% downside on earnings and 10% downside on multiples leaves another 20% of downside risk on the market over the longer-term.

But as a reminder, the biggest rallies happen during bear markets. During the Global Financial Crisis, the S&P had eleven rallies of 10% on average while losing 57% over one and half years. During the Tech Bubble, the S&P had seven rallies that averaged 14% on average while losing 49% over two & half years. Remember that 9% returns per year is the long-term average for the S&P so these gains over a very short period of time of 2-4 months are quite remarkable in the middle of a bear market. And each of those times, the desire to believe it was the bottom was quite high but earnings estimates had to still go lower which ultimately drove the stocks lower.

Stocks bottoming usually takes time barring unusual fiscal (eg stimulus checks) or monetary largess (rapid rate cuts) which as I discussed above is not likely to happened. Stock market bottoms are normally a process and not an event (up 9.5% in a day due to a pushback in tariffs.)

The S&P peaked on February 19th and as much as I would like to hope two months is all that is needed for a bottom to have been found, I find that unlikely with multiples needing to come down along with earnings over the course of the year.

But in summary, I believe Charles Darwin had the right advice for investors today: “It is not the strongest nor the most intelligent of species that survives, but the one that is most adaptable to change.” With all rapid changes in tariff expectations, these words have never been truer.

[Dr. Andreas Beck @drandreasbeck]

Neues Video online bei Mario Lochner: https://t.co/MZs4IfS3ZI

[THE SHORT BEAR @TheShortBear]

Few thoughts on tariffs.

• “Trump is doing it on purpose to get rates down and refinance the national debt.”

-> Wiping out $5-10T of value to refinance billions isn’t realistic. Refinancing isn’t a press and done either.

• “Trump is doing it to bring back jobs in manufacturing”

1. Supply chains will take years and billions to build
2. Rare earths, materials supply chain non-existent to supply those factories
3. Labour cost is too high, your products would cost a multiple of what they are now

-> Lutnick literally said they would replace the jobs through robotics and not workers.

• “The economy will boom and jobs will be created in the US”

-> Prices for products will increase, decreasing demand and thus killing both company worth as well as jobs overall.

-> For decades the US outsources low quality jobs to focus on a massive technological advantage that brought the US its economical power in this age. The US is back to focusing on manufacturing while China focuses on new technologies.

• “We will see an investment boom into the US”

-> Countries around the world boycotting the US who they considered an ally and friend as they impose their will on the world.

-> Investments are frozen as there is no stability in policy path and consistency. Most CEOs sitting and waiting until all negotiations are done and do not want to invest in multi-billion capex for something that will likely be reversed, latest with a new admin.

• “The new tariffs will help us eliminate taxes”

-> The Tariffs are paid by the consumer in the end, the difference between the old price and the new inflated cost is your new tax, thus until tax cuts you are being double-taxed.

[Morgan Housel @morganhousel]

You can, simultaneously:

- Dollar cost average, remain long-term optimistic.
- Not panic.
- Enjoy the outdoors, kids, good food, etc.
- Realize how unbelievably destructive and unnecessary this is.

[Richard Lindner @rlindner81]

@TheShortBear Who are the losers in this trade? The 50x swaps and future sellers were not really retailers...

[Richard Lindner @rlindner81]

@zerohedge Some want play young retail like they dumb
But remember, not a game new under the sun

[Dr. Andreas Beck @drandreasbeck]

Niemand kennt den Zustand des #Mittelstandes besser als die Regionalbanken. Im Gespräch mit Dr. Gregor Broschinski über die Lage der deutschen #Wirtschaft. Jetzt auf YouTube: https://t.co/gTkl7ZKpLI

[Reads with Ravi @readswithravi]

there is no secret ‼️

[Bindu Reddy @bindureddy]

This is pretty stunning AI spaghetti art...

Like modern/abstract art, AI art will be a thing, and creative pieces will be displayed in museums.

I can't wait for AI song to win a Grammy

[Markets & Mayhem @Mayhem4Markets]

We deserve better 😅

[ELDEN RING @ELDENRING]

In time, all shall thread their way through the Realm of Shadow.

The release schedule of #ELDENRING Shadow of the Erdtree is now available.

[Richard Lindner @rlindner81]

@deepnightfr @Dnilox @pentadrangle @devolverdigital Just wishlisted :-)

[Richard Lindner @rlindner81]

Love the progress, what an incredible game.

[Dave Lloyd 💾 Powerhoof @DuzzOnDrums]

Swing on over to Steam and check out The Drifter sneak peek demo! It's only up for a couple more days!

[Richard Lindner @rlindner81]

@nixcraft

[nixCraft 🐧 @nixcraft]

Google Ad from 1998.

[Richard Lindner @rlindner81]

@cmuratori Youtube @SkillUpYT and following devs on twitter

[Richard Lindner @rlindner81]

@dbrownst @NingiResearch These people don't know 💩 They did a completely discredited report on Arbor Realty in 2023