In Episode One of our new podcast, Chris Versace and Peter Tchir discuss why trade deals trump tariff deals, Jamie Dimon’s pushback, China changing the rule book, and answer Pro questions.
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00:00Hey, folks, welcome to The Streets, Stocks and Markets podcast, where we'll be talking about all things relating to and interconnected with stocks and the market.
00:11The idea is to share some of the behind the scenes conversations that we're having, bringing you another layer of insight on your investing journey.
00:20I'm Chris Versace, Portfolio Manager of The Streets Pro Portfolio, and joining me today is Peter Chur, Head of Macro Strategy at Academy Securities and, of course, a Streets Pro Contributor.
00:38Peter, thank you so much for joining me.
00:40Thanks a lot for having me. Looking forward to this.
00:42Well, let me ask you a question that at least out of the gate might seem a little simple, but it's one that will hopefully set the tone for our conversation today.
00:51Peter, what does a head of macro strategy do and how can folks use your observations to improve what they're doing when it comes to investing?
01:02Yeah, so my background is a little bit different. I'm not an economist by trade.
01:05I actually wound up trading a lot of structured products, high yield credit derivatives.
01:09I actually helped create the CDX suite of indices of big short fame.
01:13I traded about a trillion dollars of credit throughout my financial career on Wall Street.
01:18So I've wound up probably coming at this from much more a fixed income credit background.
01:22That's kind of how I perceive the world.
01:25And through trading the beta products, I met a lot of good contacts elsewhere.
01:30And then I joined Academy Securities about eight years ago.
01:32And now I've gone from just advising large asset managers to we spend a lot of time with corporations.
01:36And the other really neat thing at Academy is we now have about 30 retired generals, admirals, two CIA people.
01:43You can never tell what the CIA people who contribute from a geopolitical standpoint, many of them who've worked in various administrations.
01:50So I think we got a lot of insight there.
01:52And I can kind of incorporate their geopolitical view, both from a tactical and a strategic point into my macro strategy.
01:58And that's how I tend to look at the world.
02:00So like most people, when they hear macro strategists, they're thinking, oh, boy, here comes a lot of economic data being thrown at me.
02:08But it sounds like you add a lot more to that.
02:12Yeah, to me, it's really looking for the narrative and what's changing, right?
02:16As an independent research provider, I don't need to be the thousandth person saying buy high yield or sell high yield.
02:21We're kind of trying to identify what's out there and what could be missing.
02:26And there's a lot of huge opportunity, I think, as Wall Street's become so good, big, they're very siloed.
02:31So someone's an expert on triple C, someone's an expert on triple B, someone might be an expert on cash bonds, CDS.
02:36And you have so many different things, it's hard to see these trends.
02:40And this ability to kind of sit at a very high level, cross markets, cross asset classes, I think gives you that advantage to be and respond to things quicker than maybe even some of the big firms can.
02:49Excellent. Excellent. Well, let's see what we can distill, because as you know, Peter, we have a lot of moving pieces right now between tariffs, what their impact is on the economy, corporate earnings, but as well kind of lurking in the background, what does it potentially mean for the Fed and monetary policy?
03:09And look, what we learn one day can shift the next day, possibly on a tweet.
03:14So I'm really kind of curious, as you slap on your, you know, macro hat, where do you think all of this is headed?
03:21What is the message that you're sharing with clients of Academy Securities?
03:26So I think on the one side, I keep going back to what's Trump's legacy, what does he really want to do?
03:33And I'm pretty convinced that he really wants his legacy to be a much more robust, stronger middle class.
03:39And he believes two key subcomponents to get there are deficit reduction and bringing jobs back to America.
03:45So I think that's his overlying kind of view, his strategy.
03:49I'm not 100% sure how he's implementing it is actually going to deliver on that.
03:53But he clearly believes very much in tariffs.
03:55And right now, I would say, three months ago, I was quite optimistic.
04:01I liked a lot of things what Trump was talking about doing.
04:04And I felt there was a way you could do this.
04:06You could isolate China.
04:07You could develop more things internally, right?
04:10Release the CHIP Act money that's still held back.
04:13You could maybe build some long-term contracts for Navy ships that have to be built in U.S. shipyards, maybe with U.S. steel.
04:19There were a lot of things we could have done.
04:21And then I look what he's done so far.
04:23And one, on the geopolitical front, he seems to have isolated a lot of our allies, right?
04:27It's the way he's handled Russia and Ukraine has pushed Europe a little bit away.
04:31If you asked me three months ago if Germany was going to spend hundreds of billions of dollars on military equipment, what would happen to U.S. defense contractors?
04:38You'd think they'd skyrocket.
04:39But they're trying to avoid that.
04:41I think the messaging around Greenland has kind of made people a little bit uncomfortable.
04:45And I am Canadian, but I think the 51st state stuff was funny about the first 1,000 times.
04:50But then it went beyond just Trump talking about it.
04:53It went to Marco Rubio talking about it.
04:55It went to Howard Lutnick talking about it.
04:57And so I think you've kind of pushed people away.
04:59I've left some degree of confusion there.
05:01And then I think this fixation on trade deficits is short-sighted.
05:06I think there is, you know, we don't count the fact that we have services trade surpluses with most countries.
05:14So focusing just on goods seems a mistake.
05:19And I think we had a lot of benefits.
05:20And so what I'm kind of concerned about right now is what we've been calling the damage to the American brand.
05:26And part of it's geopolitical.
05:27Part of it's how we've implemented the tariffs.
05:29Particularly, you know, rather than trying to isolate China, we went after the entire world.
05:34We made up seemingly almost random numbers, which clearly they were because they've had to back them down to, say, 10%.
05:39Well, Peter, you didn't like that formula?
05:41Yeah, that formula is kind of like bizarre.
05:44I got in some trouble for some very pro-Trump people.
05:47And I'm not anti-Trump.
05:48I was just like, this looks like some kid who's like trying to sketch something together because his homework's due and they forgot to do it.
05:54And so they've had to walk that back.
05:56They've caused a lot of disruptions.
05:58I think they've made a lot of mistakes even.
06:00First, to me, you should have seen that, hey, anything that's compliant with USMCA should probably be exempted.
06:07They didn't do that at first and they had to cut back.
06:09Things like potash.
06:09So I'm looking at this and, you know, and this is going to sound a little bit maybe over the top.
06:15But you go back to the Soviet Union and Levi's represented freedom.
06:20And to this day, I believe that US brands benefit globally from almost these intangible things.
06:26Right.
06:26There's a people want to be associated.
06:29They want to be affiliated.
06:30There's an aspirational quality to US brands.
06:32And I'm really concerned that in this fixation on trade, we've done two things.
06:38One, we miss capital flows, which has been bad because I think capital flows were one of the things that drove American exceptionalism.
06:45And I'm a little bit concerned that you're going to see damage to American brands going forward.
06:49Right now, travel's way down.
06:50That might be temporary.
06:51You've seen things like Tesla do, you know, poorly kind of global sales.
06:56Again, have we done something to damage our brand?
06:59And I think we've got so fixated on these obvious and tangible trade deficits that we missed all these intangible benefits.
07:06And that's why I'm kind of worried about the longer term outlook right now.
07:09Well, let's talk about that longer term outlook, because, you know, if you take a look at what Trump is trying to do with tariffs and stuff, you could say that, OK, maybe there's some near term wins.
07:20But when you start, you know, messing with historic relationships, redrawing them with our allies, you have to start to wonder about the longer term.
07:29And you really touched on this in a piece earlier at the Street Pro, where you wrote, I think, Monday earlier this week, it was, and this is a quote, a generational change in attitude towards global trade and global relations.
07:45Yeah, I think where we are a year from now is going to look dramatically different.
07:51One thing, again, that makes so I could see maybe this all works out right now.
07:55That's not my base case, but I could see it all working out.
07:57And then we're going to be up 30 some odd percent.
07:58I'm really concerned, though, that the downside actually plays out.
08:02When I look at it, you know, we keep talking, you know, the administration keeps talking about who has the cards or not.
08:07I've watched Xi in particular.
08:09I think Trump 1.0 is so new on the scene, no one knew how to respond to him.
08:13Right.
08:13I think Xi has had time.
08:14And if you look, Trump 1.0, Xi was the first one to Mar-a-Lago.
08:18Every time Trump brought up tariffs, Xi put forward trade delegations.
08:22This time it's been, yes, sir, may I have another.
08:24Yes, sir, may I have another.
08:25And what I'm concerned is China has spent the last four years preparing for the potential of a Trump win.
08:32And I think they put, you know, a lot of data to work.
08:35I think they built a lot of things.
08:36I think they've tried to, you know, insulate themselves from this risk of a trade war.
08:41So I think they're much better prepared for it than us.
08:44That's fracturing things.
08:45Because my other, you know, 40% of S&P 500 earnings come from, you know, foreign sales.
08:53So, again, how are we impacting that?
08:55And I did play one neat war game this summer.
08:57I was at the U.S. Naval College.
08:58And it was about a potential blockade of Taiwan by China.
09:01But what was really neat to me was two different teams.
09:05One was the U.S. government and one was U.S. corporations.
09:08And at first that didn't make sense.
09:09And then as it plays out, right, China and China Inc. are one and the same.
09:12There is no real differentiation to me between Chinese companies and China the government.
09:17In the U.S. it is.
09:18And look at our companies.
09:19They're a huge global.
09:20Every single company in the U.S. I think had supply chains that were well done, A, to be efficient.
09:26But they also have constituents across the globe that they have to satisfy, right?
09:29If you're selling something in Italy, well, you might have to have a plant in Italy or some sort of office in Italy to keep the Italians happy with you.
09:36And so on and so forth.
09:37So this concept of American and foreign, I think that all made sense 100 years ago when companies were smaller.
09:45They weren't necessarily global in stature.
09:47I think that's a big mistake is this.
09:49So that's why I think we have more potential downside.
09:52I've been very happy he's backed off for the last little while.
09:55But I think it was a very simplistic approach that's not going to play out well if we continue down it.
10:00Well, he seems to be, you know, continuing to, you know, taunt the big stick.
10:05You know, just like we saw earlier this week, yes, he might have he might be dialing back some of the tariffs on autos.
10:11But then with a new Section 232 going after chips, pharmaceuticals, doing something similar to what he did to lumber and to copper.
10:18But I think what stands out, though, and you touched on China a moment ago, is kind of how they're shifting the conversation, right?
10:26Over the weekend, while Trump was kind of saying, well, you know, we might give a reprieve to certain chips and solar, you know, components and things like that.
10:34China's out there going, hey, we are going to stop exporting rare earths.
10:38And then, you know, earlier this week, they said, hey, our airlines are going to stop taking planes from Boeing.
10:46We're going to tell them to stop taking auto parts from U.S.
10:48Sorry, airline parts from U.S. companies.
10:51They're altering the playbook, don't you think?
10:54Yeah.
10:54And I think honestly, though, some of this playbook should have been obvious.
10:57One of my theories for the last two years we've written about in the street as well has been that we're seeing a shift from made in China to made by China.
11:04And what I've meant by that is China is no longer content just to make our brands and sell them and let us sell them globally and reap the profits.
11:11They are trying to sell their own brands.
11:13If you go to India, I believe the top three top selling cell phones are all Chinese brands.
11:18They are trying to push this BYD.
11:20I honestly had barely heard of BYD two or three years ago.
11:23To me, it was still the ticker symbol for Boyd Gaming.
11:26And now it's like ubiquitous, right?
11:27You can't get rid of it.
11:29Timu, never heard of.
11:29So I think they're trying to sell their brands.
11:31And this airline is another perfect example where you had Comac, right?
11:35It started flying some domestic flights.
11:37Comac's the Chinese branded aircraft.
11:39There's some domestic flights.
11:40I think there's one foreign airline that uses it.
11:42It's a fairly poor country and it's in their, you know, no frills sort of tourist airline.
11:48But this is a perfect opportunity, right?
11:50China's going to apply leverage to countries and say, hey, if you're doing flights to and from China, you're seeing the Comac come in.
11:56Why don't you buy this?
11:57We can subsidize that.
11:58And what always struck me as, you know, somewhat dangerous, even with this, is they were the last country to free up Boeing after, you know, a lot of Boeing planes got grounded with the Supermax crashes.
12:09China was the last major airspace to allow them to come back.
12:12So I think these are non-tariff barriers and things that China does.
12:16I'm not sure this administration was all prepared for that.
12:19So all of a sudden, you've got one of the best companies that's trying to, you know, rebound, has some great success, I think, in terms of the military, the fighter jet, the F-47.
12:27But now this will be a setback in China.
12:29And I hate to take this back to almost geopolitical.
12:32But if you're any country in and around China, are you convinced that the U.S. Navy is going to be a presence five years from now, 10 years from now, right?
12:42Sometimes Trump and Vance talk that way, and sometimes they talk really about pulling back, right?
12:48And that we can't be there.
12:50And so if you're South Korea, Thailand, Vietnam, all countries that have to ship right by China, you probably have to make sure that your relationships with China are stronger than you would have before some of these shifts.
13:00So I think it's all playing into countries kind of negotiating with China.
13:05And again, this, I'm not a military expert.
13:07I don't think every kid learns this pretty early on, right?
13:09Divide and conquer.
13:10Well, the U.S. at $30 trillion has seemingly picked a fight with the $80 trillion global economy.
13:16Had we picked and chose, I think we could have done this very differently.
13:20But I think we're forcing people's hands to look at alternatives.
13:23And finally, when I look at these deals that we may or may not get, I think Wall Street now is making a mistake.
13:29I read too many people talking about tariff deals.
13:32I think these are going to be trade deals.
13:34And that is going to be much harder to get to.
13:37So you're not expecting a lot of clarity in the next couple of weeks then because trade deals take much longer to hammer out.
13:45Yeah, I think it's going to take very long.
13:47I think there's going to be a lot of pushback.
13:49I think we are going to talk about requiring import quotas, right?
13:52Going back to my thing, right?
13:53He wants manufacturing to come here.
13:55I think tariff barriers alone really don't impact it that much, right?
13:58I think Europe has 10% import tariffs on U.S. cars.
14:03We make some cars there because of that.
14:05But I'm not sure that getting rid of that 10% is going to open up a landfill, you know, a huge landslide of people being able to buy U.S. cars, right?
14:12The cars that we make in the domestic market are very big.
14:15You know, Ford and GM make a lot of their money from pickups.
14:19Those don't sell very well in Europe because of the size of the road, how people park.
14:22So I think he's going to try and do import quotas.
14:25And the other thing that I think will be a bigger issue is he may try and force countries not to trade with China or put tariffs on China.
14:33Because one concern you would have is China just backdoors everything, right?
14:36And China manufactures most of it.
14:38So I think this could be pretty contentious.
14:40And I think EU announced today that they're making scant progress, I think, with their exact words.
14:44And that's why, because this isn't about tariffs, this is about trade.
14:48And we have this agenda that I think doesn't really fit the global agenda very well.
14:52Well, I also think, too, about some of the food products that we have where, you know, it's pretty well known that, you know, the food that, you know, Americans consume in some cases are littered with GMOs.
15:03And, you know, the European Union in particular, you know, they are much more stringent on that, not just for food, but for other products as well.
15:12And I think asking them or telling them that they're going to have to take these products, A, it's going to be a very difficult fight.
15:20But to your point, it's going to take a very long time to get that block across all of them to agree to change the types of products they're willing to import.
15:30So I don't see it, you know, this is not going to be a short, you know, duration by any stretch of the imagination.
15:36But, Peter, as you look across, you know, key imports, you know, into the U.S. or key exports out of the U.S., are there other areas that you're watching that, you know, we could wind up seeing, to your point, a real difficulty as we start to eventually come around and thinking about trade deals?
15:55Yeah, I think I just don't see a ton of excess capacity in the U.S.
15:59So I don't know how we, you know, even if we get some good trade deals, how we sell a lot more right away.
16:04The ag, I think, is an obvious one, except a lot of the issues you just brought up.
16:08So how are we going to take advantage of that?
16:11And again, as China starts clamping down on rare earth critical minerals, where do we get that?
16:15There are certain types of steel.
16:17You know, I've been told for razor blades, for example.
16:19Right now, the only steel that's good enough quality for razor blades, generically, is German steel or Japanese steel.
16:25So we don't have the ability to make steel that fits into razor blades.
16:29So I think we have all these potential hiccups.
16:32I think the tariff policy has been so confusing that we will start seeing some price hikes.
16:37We might see some supply shortages.
16:39And the one thing, when I look at China, I think China's ability to clamp down on its citizens is way, way higher than ourselves.
16:46Oh, yeah.
16:47We could barely last two weeks of volatility, and we're having to get concerned.
16:51So I think we're picking fights in a way that I don't know that we have the consistency to go through.
16:57And I just see so many potential issues.
17:00And I've also been talking a lot in my writing and my clients is we also have to separate low per capita income countries from high per capita income countries.
17:09Countries that only make $6,000, $7,000 per person.
17:12What are they really going to buy from the U.S.?
17:14Right.
17:14That's going to be meaningful and changing.
17:17I think exporting services, we're great at that.
17:20We should keep that.
17:21Instead, we kind of have alienated people and put tariffs on those potentially on the table.
17:26We need AI.
17:27We need chips.
17:27We're making some progress there.
17:29I think we need pharma.
17:30We should be all doing that.
17:31But I would have started by doing subsidies or something to encourage investment in the U.S., giving tax breaks, and let these businesses grow up a year, two, three years from now, and then maybe start hitting other countries harder.
17:44Because right now, we've kind of hit other countries fairly hard, and we're not necessarily in any position to ramp up production quickly ourselves.
17:51And that, to me, I guess, is the biggest disconnect between what the administration seems to be doing and why I don't feel it's fitting their goals right now.
17:59So I'm hearing, as you just said a little while ago, the potential for price increases.
18:06We know there's a lot of uncertainty.
18:08We take a look around at some of the other data.
18:10Consumer spending is slowing.
18:13Consumers are trading down increasingly.
18:16Given the uncertainty in the environment, businesses are likely retrenching or rethinking some of their spending.
18:21So as you kind of game it out, are you concerned that a recession is in the cards?
18:26And if so, do you think the Fed has to cut rates?
18:29And I'm asking that last part because, you know, the last couple days, the CME FedWatch tool has been showing four, maybe five rate cuts.
18:38Yet we're hearing Fed officials say, I don't think so.
18:42Yeah.
18:43One, we're at one of the weirdest economic data periods ever.
18:46I talked to one midsize bank recently, and they said they had the two highest weeks of auto loan applications.
18:52And I think their view is everyone wants, if you're going to buy a car, you want to buy it now because you don't understand the uncertainty.
18:57So you've had all this demand pulled forward.
19:00So the economic data doesn't look that bad.
19:02But it's really hard to decipher how much of that's an ongoing strength, how much of this is pulled forward.
19:07And when I take a look at where we were a couple months ago, I think the underlying trends were already a little bit negative.
19:13You're seeing homes for sale increase in Florida.
19:16We're now well above 2016 levels.
19:18I think even in Texas, you're approaching pre-COVID levels.
19:21So some of the areas that everyone was moving to seem to be under a bit of pressure.
19:25You're seeing delinquency rates creep higher.
19:27I think the Fed is going to be forced to react.
19:30But I don't think they can really, maybe they cut 25 in May just to get something on the table.
19:34But you really are struggling with the potential for supply shortages, the potential for inflation shocks.
19:41Because I agree, if you bought in a bunch of stuff, say, ahead of the tariffs, you're now sitting here probably not buying any more inventory, hoping that the tariffs go away.
19:50But if the tariffs are here, will you be able to order inventory in time?
19:53So I think we could see a little bit sort of COVID-type shocks where you go to the store and all of a sudden there's a run on toilet paper because no one was importing the pulpwood needed to make the toilet paper.
20:03And I think that will be very disruptive.
20:06And I think China did learn one thing under the Biden administration.
20:09The U.S. does not live with inflation very comfortably very long.
20:13So they kind of have that.
20:15And, yeah, I think they're going to have to cut three or four times.
20:18But I think they're going to be bad cuts because I think the economy is going to slow.
20:22And they're going to be somewhat handcuffed because you are going to see these price increases at the same time you're seeing an economic weakening.
20:27So maybe I'm surprised when we get all these good trade deals and this all, you know, mellows out or Trump, you know, pivots, which he could do into some of those things we talked about earlier.
20:38Hey, let's focus on subsidies.
20:39Let's focus on guaranteed contracts from the government, things that are within our hand that don't alienate the rest of the world.
20:45Then I'd be positive.
20:46Until then, I just don't see this playing out.
20:49All right.
20:50Well, it sounds kind of, you know, worrisome, Peter.
20:54I'm not going to lie.
20:55But as we game these things out, you know, one of the things I always try to do is look at different scenarios and weigh the probabilities as new information kind of becomes available.
21:04Is there a way that we could be surprised to the upside?
21:07You just mentioned if, you know, Trump kind of let's just say it capitulates a little bit and backs off or the Fed cuts rates.
21:16Are there other things, you know, in your scenarios that could kind of surprise us on the upside?
21:21Yeah, I think if you made some changes to the administration and took some of the maybe extreme tariff champions and reduce their role, either, you know, officially or unofficially, you stop seeing some of those, you know, talking heads like a Peter Navarro, who's so gung ho on tariffs as the sole solution.
21:38Yeah, I think the market would start responding positive to that.
21:41I think, you know, the more you get to delays and pauses, right, some of these things will be nasty and problematic.
21:48But if you have a year or two years, sort of people will figure out ways around that.
21:53Again, I think if he's already starting to turn on Putin a little bit, right?
21:57So maybe you win NATO and Europe back a little bit more comfortable that you've changed your behavior.
22:02So I think there's possibilities and that could turn fairly quickly.
22:05But I do think, you know, it's like those relationships where you say something and there's certain things, you know, that you're never really going to be able to take back.
22:13Right.
22:13And I can't quite tell whether we've had one of those moments or not.
22:16I'm a little bit concerned we have.
22:18But, you know, no one really wanted to deal with China very closely.
22:21Everyone understood the IP theft you get from China.
22:23Everyone understood China is completely out for themselves.
22:26So maybe we can turn this back away from China.
22:28Things like that will look for optimism.
22:32And, you know, as we're investing, yeah, I think there are opportunities across the rest of the globe, right?
22:36I think foreigners are going to pull out some of their money back to their domestic markets.
22:41And you can see that, I think, already happening.
22:43And listen, there are Germany.
22:45If Germany is going to spend $300 billion or some number on military, they're trying to figure out ways around that.
22:50They're trying to figure out ways to use things other than Starlink, right?
22:53There are opportunities across the globe, ex-China, where I think you can like, okay, I should maybe have a much more diversified portfolio.
23:01We really haven't had that in a long time as a strategy that works out.
23:05And I think this is just the beginning phases of a much more diversified global economy where you want to look at those individual things.
23:12And, again, European banks, if Europe's going to grow and borrow, they could do much better than people have thought.
23:17So I kind of like diversifying away from the U.S. for now.
23:20I think that gives you a fair degree of protection.
23:22I do think the problems that have been caused by the U.S., if I'm right, will affect everyone, but they're going to be not hit as bad.
23:29And then, as you say, you keep looking.
23:30What's a true turning point?
23:32Where does it come?
23:33Let's say one other thing that I think was a good turning point.
23:35Jamie Dimon last week seemed to be the first major CEO who was not afraid to very publicly and vocally come out against what the administration was doing, right?
23:44You've had people like Ray Dalio and stuff, but they're investors.
23:47They're private investors.
23:48They're not subject to the government kind of maybe screwing with them.
23:53Jamie Dimon came out.
23:55It sounds like Apple kind of came out, tried to negotiate stuff.
23:57So I think if all these big corporations say, hey, you haven't been listening to us or you kind of kept us to the sidelines, here's what we're telling you.
24:06And we've got the experience in the field, I think that could, again, be this turning point and like, oh, we can breathe a sigh of relief.
24:12We'll need to it.
24:13But I think we almost need to pivot through this administration and who's there representing it to get comfortable with that.
24:19I think you're right, though.
24:20To the extent that we hear more high-level companies kind of talking about the pains of, you know, the tariffs.
24:26And, you know, we're just at the mouth of the March quarter earnings season.
24:30I think a lot of folks are very concerned, you know, about June quarter guidance, but really about where the S&P 500 earnings could go.
24:38We've seen a lot of firms already cut their S&P 500 targets for the year.
24:42I think the latest was Jeffries that took it all the way down to 5,300 as they cut their EPS expectations.
24:48You know, I've been talking about this, you know, with the portfolio subscribers over the last several weeks.
24:54And, you know, to the extent that those numbers from those earnings numbers come down, I think we're going to have a revaluation on the market P.E.
25:02But, you know, you know, the degree to which we'll know all of this is going to play out over the next couple of weeks, not the next couple of days.
25:10But hopefully, hopefully, you know, we will see more people kind of push back a little bit and fuel that rethink by Trump and potential tariffs.
25:20But let's move into the Q&A portion, Peter.
25:23Now, one of the things that we've done is we've taken some questions from members of the Street Pro.
25:29And what we'll be looking to do is ask our guests, like Peter in this case, what are your answers for these questions?
25:36So, Peter, I'm going to ask you right now, are you ready for the Q&A?
25:41I'm ready as I'm going to be, I guess.
25:43All right. First question.
25:45What are your thoughts on the reality of achieving a 0% tariff level between the U.S. and the EU?
25:52I think it's possible.
25:54Again, you look and I think the average tariff level, trade-weighted average, is only like 3% or 5%.
26:00Like, we could see this.
26:02And again, I think if you really analyze it, so on autos, right, they're 10%, we're 2.5%.
26:07Sure. Take those both down to zero.
26:09I don't think that's going to be what drives it.
26:11I think it's going to be much harder to convince people that, oh, well, it's fake science about GMO food.
26:18Those are going to be the things I think that are going to be much harder to negotiate away because I think they are longstanding in Europe.
26:24And again, you know, champagne can only be made in Champaign, you know, Champaign region.
26:29So I think getting rid of some actual tariffs relatively easy, getting to, you know, through all the regulations will be difficult.
26:38And I just don't think that'll matter.
26:40It'll be one of those moments like, oh, the tariffs are all gone.
26:42Okay, what have we really accomplished?
26:44And I think the answer is going to be it's not changing the overall sales of each other's countries very much.
26:51Okay. All right. Let's move on to the next question then.
26:54What is your view regarding private credit, in particular, CLO equity tranche performance in this environment and perhaps the near-term environment as well?
27:05You know, I always, every year, and this year I forgot to do it, during March Madness, I put out something about the CLO AAA tranches,
27:13that it's easier to get a perfect terminant bracket than it is to break a AAA tranche of a CLO.
27:18So the equity and private credit, I'm a little bit nervous about.
27:21I think some of the credit, private credit deals, if we do see a recession, they might have some issues.
27:26But again, I think people have planned really well within that.
27:29I think it's going to be tolerable how it's done.
27:31I think there'll be some opportunities there.
27:32So I'm not shying away from private credit.
27:35When I look at the CLO equity space, I might be a little bit cautious there.
27:38I think if you move up to some of the MEZ tranches, and I haven't looked at JBBB,
27:42which is a BBBB sort of CLO tranche, I think those could offer some interesting value,
27:48because you do have some subordination below you.
27:50I don't think, you know, these things got carried away too much.
27:53So I'm not a big, I'm not worried about private credit.
27:56If I had seen a lot of private credit products that incorporated leverage on leverage,
28:00then I'd be worried.
28:02But I think, yeah, some countries, some companies will do poorly, some won't.
28:05But you can restructure, you can move along.
28:07So I'm comfortable with that right now.
28:10I would say on the CLOs, I might want to be up from the equity and into the MEZ sort of
28:13tranches.
28:14But again, I'm not seeing this wholesale thing.
28:17And BDCs, I think, are very similar into that, right?
28:19There's still an area that I think you can be comfortable with, because I think this is
28:22going to be more about valuation and a slowing of the economy, but not a complete disaster for
28:28most companies.
28:29Okay.
28:29All right.
28:30Let's get back with this question into Trump and trade and tariffs.
28:34Do you think Trump is simply kicking the can down the road over the next three months,
28:39kind of like he did with the TikTok ban?
28:42And is this just really a pushing out of things?
28:46No real change is coming.
28:48And if you're an investor, per the question, should we use things like this when we see
28:53a bump in the market, maybe to raise some extra cash?
28:56What do you think?
28:57Yeah, I think you're supposed to, my view of Trump all along has been, things are never
29:01as good as they seem, and they're never as bad.
29:03So I should have followed my own advice and been much more bullish last week.
29:07I got bullish the weekend before, because I thought he might pull back before the tariffs
29:10went into place and kind of had to dance around that.
29:13But now that things seem good and it seems all rational, this is where I get worried
29:17he's going to lash out at something else.
29:18So I would take this recent rip that we've had, reduce exposure.
29:23Again, I think one thing that I think is going to try to drive us lower from here is Wall
29:28Street keeps talking about tariff deals.
29:29And I think this is about trade deals, and trade deals are not going to be anywhere near
29:33as simple.
29:34So that's kind of how I would play it.
29:36You sell every rip a little bit, reduce your exposure, see where you can play out somewhere
29:40else.
29:41So you see a real pivot away from this whole fixation on tariffs.
29:46So then what is it then that would get you excited enough to kind of back up the truck
29:51and be like, okay, from a technical perspective, the market's bottomed.
29:54You know, oh, there's a real turn coming, you know, is there something where you just
29:59draw a line in the sand and you go, okay, I got to put chips in instead of, as you just
30:02discussed, maybe pulling some incremental chips out.
30:05If I saw something too that looked like a much more coherent, you know, exemption plan,
30:10right?
30:11And Canada announced some exemptions, right?
30:13Anything that's imported that goes into products that then Canada finishes up and sells
30:17on, that's now exempted, right?
30:19So the chips thing, it was kind of silly almost that you could import a computer now with no
30:24tariffs, but if you imported the parts to make a computer, you still had tariffs.
30:28So I would like to see something where it's really like, A, we're dialing back on tariffs,
30:33but we're dialing back in a creative, you know, thoughtful way.
30:37And here's where we're going to spend money.
30:39We are going to commit to let's, you know, give chips, you know, again, maybe even start
30:45really aggressive, um, income tax reductions for R and D things like that, that you can
30:50say, okay, when I started this, you know, my big belief on Trump was we tried to turn
30:54it from drill, baby, drill to refine, baby, refine to, you know, anything for national
30:58security that develops into national production.
31:01Let's get back to focusing on that.
31:03We not only need to get the rarest and critical minerals, we need to be able to refine those
31:07here, give subsidies, let that start.
31:09As soon as I see him kind of really going towards a, something that's more domestic focused,
31:14where we don't have to annoy the rest of the world, then I'll get very bullish.
31:17Cause that was kind of the plan I thought we'd have all along, right?
31:20That we become independent, not from just kind of taking it from other countries, but by pushing
31:24it on ourselves, giving us that kind of opportunity to grow, be pro business, right?
31:29I think every business person I talk, that was the excitement about Trump pro business.
31:33And all of a sudden it became pro tariff and right.
31:36Too hard.
31:38Too much uncertainty.
31:40Yeah.
31:40What, so as you kind of game this out, are there areas that you think from an investment
31:46perspective that might be a little more insulated, a little more resilient that folks should
31:51be taking a look at?
31:52Not, not necessarily specific companies, but just from a sector perspective.
31:56You know, I'm taking a closer look at utilities.
31:58Again, I think, you know, they've kind of all sold off pretty hard.
32:01They bounced a bit, but we are going to need that.
32:03We are going to continue on data centers.
32:05And I do think ultimately we are going to do more and more refining and processing here.
32:10So I, I think you can look at some of the big industrial companies that will benefit
32:14from that.
32:14Who's going to sell equipment into there?
32:16Some of the farm stuff, I think some of the ag, we probably will get the ability to
32:20sell more of that.
32:21So you could, so I think I kind of want to own the logistics, right?
32:23The companies that would be a logistics slash the builders.
32:27I think there's a good opportunity there.
32:28If we do get a peace deal somewhere with, you know, Russia and Ukraine, it could be
32:32an opportunity for our kind of construction companies to go there and help rebuild their
32:36energy.
32:37So I would probably stay long energy.
32:40I think there's going to be some fluctuation around energy prices, but the people who can
32:44kind of extract and process things from the earth, I think that those will do well.
32:49So I would not, I like buying those on dips as opposed to selling on rips.
32:53How's that?
32:54That's great.
32:55That's great.
32:55All right.
32:56Well, thanks for those questions, Street Pro members and listeners.
32:59If you want to hear your question asked and answered on the Street Stocks and Markets
33:03podcast, you'll need to be a Street Pro member.
33:07And Peter, thank you so much for joining us this week.
33:09But before we get out of here, just two quick things.
33:12One, anything we didn't talk about that we should have, any parting thoughts that you
33:16really want to share with the listeners?
33:20Yeah, I'm a little bit worried about the deficit.
33:22Everyone got so carried away last week talking about foreign selling, which I think is
33:25we missed the fact that on Thursday at the cabinet meeting, Doge came out and said the target
33:30now for 2026 is $150 billion.
33:33That was down from $2 trillion to $1 trillion to $150 billion.
33:36If that was a big part of our plan, that seems to be gone.
33:40The tariff revenue seems to be delayed.
33:42And Trump did, I believe, talk last Monday or Tuesday about upping the military budget from
33:47$800 billion to $1 trillion.
33:48So I think we all kind of became a little bit complacent listening to Trump and Besson
33:52say deficit reduction.
33:54The headlines last week had nothing else been going on, would have raised a lot of concerns
33:58about the deficit.
33:59And I think stuff like that may come back where it goes back, oh, we kind of took this
34:03for granted.
34:03It was off the radar screen.
34:05And we just had so many battling headlines.
34:08We missed this.
34:09So I think over the coming weeks, we might hear a little bit more discussion about, hey,
34:13the deficit's not on the track we were all hoping for.
34:15What does that mean for rates?
34:16And that, again, would slow the economy if the Fed can't, you know, we might have to
34:20cut.
34:20But if the deficit keeps growing, that's problematic.
34:23Well, Peter, it's not.
34:24It sounds like.
34:25In front of people.
34:26Sorry to cut you off there.
34:27I was going to say it sounds like you've got some topics for some upcoming articles over
34:31at the Street Pro that you'll be able to share your insights and break down what's
34:36happening and unfolding as we learn more.
34:39So that is great.
34:40And Peter, other than the Street Pro and Academy Securities, any socials or anything like that
34:46that folks can kind of get your latest thoughts, your insights, what have you?
34:50Yeah, I'm on Twitter with the handle at TFMKTS.
34:55So TFMarkets, basically.
34:57So TFMKTS out there a fair bit and do a lot of Bloomberg and FT and lately New York Times
35:03for some reason.
35:04So excellent, excellent.
35:06Well, Peter, thank you so much for joining us.
35:08And folks, that is today's episode of the Streets Stocks and Markets podcast.
35:14Thanks for tuning in.