I worked in the ‘pits’ of the New York Mercantile Exchange for 26 years. In the ‘old days’ you traded stocks or bonds or, like me, futures contracts in a person-to-person, face-to-face way. No machines, no computers.
You needed to learn quickly what it takes to make money consistently and survive. Not many did.
But, you either learn or you go broke.
One thing I learned early on is that you don’t play in someone else’s sandbox. The “pit”was a big physical ring we all stood around, where all the orders for oil went through a real live person’s hand. Buyers matched with sellers, not electronically, but face-to-face. I knew all of the brokers who worked those orders for the oil companies and investment banks. I knew the other folks who were independent traders like me. And, because I saw these folks every day, I knew just a little bit more about how they operated, their approach to the markets, their moods. That helped a little with my trading.
But what helped much more was the fact that if anyone – IN THE WORLD – wanted to trade oil futures, they had to do it there, in my pit. I got to see, before anyone on the outside, who was buying and selling and often, because I knew them so well, I could guess how much they were going to buy or sell. I was getting a grand preview of the market’s ‘action’ that others on the outside couldn’t see.
You think that helped me in my trading decisions and profits? You bet it did.
The advantage was great enough that even in slow years, when oil moved only a little, I was still better off staying in the oil pit than roaming around to other pits. I stayed in my own sandbox.
The stock market is now Trump’s sandbox.
On Thursday at noon, Trump announced a 25% tariff on non-US automobiles. Instantly, Hertz (HTZ) and Avis group (CAR) shot up 22% and 23% respectively on the day, on the legitimate idea that suddenly their sales of used rental cars was going to magically get a lot better in a hurry – a key metric for driving profits for these companies. Trump said he “couldn’t care less” if auto prices rise because of his tariffs. If you were short either of these two stocks, stocks that have been slowly disintegrating since 2022, you lost money. Who made some?
Well, who knew about this tariff announcement? I know I didn’t.
Trump has been talking about a ‘liberation day’ this coming Wednesday (or Thursday?); an unveiling of more, new tariffs directed against Canada, Mexico, Europe, China – maybe Denmark and Panama (or Russia?) – no one seems to knows. How much are these tariffs going to be? Who’s going to get them? Who’s going to be exempted? How long will they potentially last? What is Trump looking to get from them?
No one, apparently, has a clue. “I can’t give you any forward-looking guidance on what’s going to happen this week,” National Economic Council director Kevin Hassett offered in a Fox News appearance on Sunday.
Well, thanks.
In my energy world, 2024 seemed to clearly be a turning point for the global energy portfolio. Supplies of fossil fuels have continued to rise in a marketplace that had reached it’s demand limits, on the back of increasing investment into renewable sources like solar, wind and nuclear. In the Spring of 2024, I suggested some long-term investment into these growth stocks to subscribers.
But, almost immediately upon entering office, Trump blocked all outgoing funding from the Inflation Reduction Act, a raft of incentives and tax rebates designed to spur a further massive build out of renewable infrastructure, passed by the Biden administration. For investors, to say this was an unexpected move from Trump – well, from any President – would be an understatement. No one, including me, had ever seen such a move before, looking to retroactively repeal economically beneficial legislation, already bought and paid for.
The IRA, approved by Congress during the Biden Administration is almost certainly being illegally blocked by the Executive branch, but of course proving that will require long court cases suing the Trump administration.
The market didn’t wait around. Renewable powerhouse stocks like First Solar (FSLR), trading around $200 a share in January now trades at $125, a loss of 37%. Constellation (CEG), the most dedicated renewable utility and infrastructure company has dropped from $325 a share in February to just over $200. I think the evolution to renewables is preordained, no matter what the Trump administration does. But do you, like me, want to sit for perhaps a year or more and hope for the best with the courts? That’s the question for renewable stock investors today.
Trump has equivalently targeted the Chips and Science Act of technology incentives, also passed by the Biden administration. AI and other tech stocks have similarly seen massive losses in the past two months. That government incentive program of $85 billion was predicted to generate at least $400 billion in corporate investment, with some estimates for $2 trillion of manufacturing investment. Now, most of all of these corporate investment plans are on hold, waiting to see if Congress will defend it’s power of the purse — or the courts will.
It gets worse.
In February, Trump signed an executive order directing the Secretary of the Treasury and Secretary of Commerce to design a crypto-currency sovereign wealth fund. This potentially will make the United States the largest ‘trader’ of cryptocurrencies, the largest over-the-counter, virtually untraceable, unregulated market in the world. Once it’s established, who will know when the US Treasury is going to add or subtract from their proposed stockpiles of Bitcoin, Ethereum, Solana or Cardano?
I know it won’t be me. But you know who it might be? It might be Eric and Don Jr. – both of whom announced today a ‘partnership’ with HUT 8, a bitcoin miner. The new business will be known as American Bitcoin, created according to the release “to become the world’s largest, most efficient pure-play miner while building a robust strategic Bitcoin reserve”. You know who else might get a preview of Trump and the US Treasury’s next move into crypto? It might be Commerce Secretary Howard Lutnick, the CEO of Cantor Fitzgerald, one of the biggest independent traders and clearinghouses of derivatives like futures, options, over-the-counter contracts – and crypto.
Yup, Lutnick knows a thing or two about sandboxes, let me tell you.
I’m not interested, at least in this newsletter, in talking about the massive corruption or lawlessness or unconstitutionality of any of these maneuvers by the Trump administration, although they are all, at least to me, self-evident. I guess the courts, or the voters will ultimately work that out – or not.
I’m more interested today in how I can help save my subscriber’s investment portfolios and what to do going forward. Today, I’m more interested in what I’m supposed to do to make a living — and I’m wondering what my colleagues on Wall Street are thinking too. Whatever guru or financial network, investment bank analyst or friend you listen to to help you with your investment choices, their advice and insight is, in my view, currently useless.
I don’t think the stock market is inherently weak. I’d like to invest in it, particularly at these lower levels. The S&P P/E ratio is down from 30 to 23. Get them down to 20 and I’m very interested in buying from a fundamental value standpoint, I’ve said that before. I think that Trump did inherit the ‘envy of the world’ economy, although he doesn’t seem interested in keeping it. In fact, he currently acts like an on-and-off advocate for inflation and slowing growth. Without knowing what his plan is, what the objectives are and how long these policies are going to continue, it is impossible to make any rational investment plans, much less investment suggestions.
Because somebody, at the very least the President of the United States if not others in his inner circle, has not just a preview to a lot of more information than you or I ever will – he has singular control of when, where and how much of that power to unleash at any time.
That means that we are only sitting there, completely powerless to do anything but have sand kicked, over and over, in our faces.
I fear that more retail investor money will be lost in the next two years, not necessarily because of a recession and market crash, but because investors who are looking rationally to put capital to work will get screwed, over and over, by unexpected tariffs either going on (or coming off), already approved government funding programs being delayed or canceled and, quite frankly, outright manipulation of our stock and OTC derivative markets.
And I refuse to be one of them. For now, I can only counsel to stay the hell out of their sandbox. We’ll talk next week of some alternatives to sticking your money in a mattress. There are some.
That’s all for today.
