> my first thought is "my favorite store is having a sale."
This gets repeated a lot, but unless you already had most of your portfolio in cash it’s not actually a net win to see a drawdown like this.
The course of the global economy was just altered. The best case scenario would be if the proposed tariffs go away completely, but even then the markets will be cautious for the next 4 years at minimum.
The market is down because the future prospects for those businesses just got much worse. Yeah you can buy them at a cheaper price, but their corresponding future output remains down as well.
It’s like seeing a thing you wanted to buy go on sale, but upon closer inspection it’s on sale because it became damaged and you’re buying damaged goods.
The best case scenario is that the administration pulls the “just kidding” card, reverses course, and claims some sort of victory while returning to the previous status quo. If that happens, stocks were briefly on sale even though they’re not rebounding back right away. However, if the administration digs their heels in and tries to push forward then the market is going to continue downward.
This isn’t a normal drawdown. This is a crisis with the leadership of the United States.
> The market is down because the future prospects for those businesses just got much worse. Yeah you can buy them at a cheaper price, but their corresponding future output remains down as well.
It should be noted that these moronic "buy the dip" claims are happening when Dow Jones is in a freefall, so the poor people who bought the dip on Friday will today wake up with a portfolio loss of >5% without the market even reopening.
It's funny when these chants take place when prices start to plummet. It's like investors are screaming for unwitting people to buy the bag off their hands.
> will today wake up with a portfolio loss of >5% without the market even reopening.
That's pretty much irrelevant unless you opt out next reopening. If you have your portfolio down 15%, 20% or 30% it does not matter. That's the short term picture. If you're investing and looking at how those numbers fluctuate to make decisions and panic you will lose money for sure. No different like going to the casino. You're supposed to buy and hold forever, regardless the market crashes or rises. That's Bogle's advice and I believe is sound advice. So, there could be an opportunity to buy lower now if you are playing the long game.
> That's pretty much irrelevant unless you opt out next reopening.
Not really. If your goal as an investor is to maximize your returns. Obviously, buying a security when it's value is cratering is the worst time to buy simply due to the fact that, in a scenario of an unavoidable bounce back, waiting out while doing nothing is more profitable. Buying earlier in the crash simply means the profitability of your hypothetical scenario is lowered.
> If you have your portfolio down 15%, 20% or 30% it does not matter. That's the short term picture.
I don't think you fully grasp the implications. Even assuming a simplistic interpretation of an unavoidable bounce back, if you postpone buying after the price craters 30% then you're guaranteeing your investment will be more profitable. Remember, the trick is to buy low and sell high, not buy high and hope it will somehow get higher.
Problem is that no-one knows when that's going to happen and it can bounce back as fast as it went down, meaning in that situation you would be missing the opportunity too. The investor strategy as per Bogle is simple: buy regularly, regardless the market and hold it forever (until you retire). I don't want to speculate, because that is known to be a losers game. I read some time ago "The Little Book of Common Sense Investing" and to me that seems to be good enough advice to stick with. It's simple and as for what I read from other sources it works.
> Remember, the trick is to buy low and sell high, not buy high and hope it will somehow get higher.
If you take a look at the historical S&P500 (1926-2016) trend even taking into account market crashes the curve always goes up in the long term. That's why Bogle's strategy works.
We can fall a lot more, and people who are buying the dip on credit aren't necessarily taking a long term view of the market. Who is keeping a few hundred K in their bank account just in case the market crashes so they can take advantage of it?
Also, 2008 you needed 5 years to recover if you bought at peak (buying as it was lower of course means less time to recover). In 1930, you were looking at 20 years. You could also lose your job if the market really tanks, and buying the dip just means you are less liquid at a time when you need money for living expenses.
You're assuming something like all or nothing. As I mentioned I do investing regularly, just as if you were saving money after you paid your bills and you have spare money that otherwise would be sitting in your bank account. Even if I had the amount you mentioned it would be at least for me too risky to do that move. I would do it regularly. If people are taking credits to do that, well they are making an extremely risky move as well. Just because the market could go down doesn't mean that you have to make an all-in move.
I'm assuming worst case, which is what you have to prepare to survive through.
> As I mentioned I do investing regularly, just as if you were saving money after you paid your bills and you have spare money that otherwise would be sitting in your bank account.
You are supposed to have 3-6 months of living expenses in your savings account just in case you lose your job. Is that what you are talking about using to invest in a dip?
> Even if I had the amount you mentioned it would be at least for me too risky to do that move. I would do it regularly.
Yes, but you are also saving money for events where you need liquidity right?
If the tariffs go on for awhile and consumption becomes expensive, we can always just cut back on consumption and invest that money instead (Americans consume a lot anyways), that is what the Chinese have been doing all along at least (although they wished their consumers would start consuming more). We are basically going to swap places with the Chinese, the writing on the wall is clear.
To be honest, “buy the dip” is generally cope that people tell themselves.
The average investor isn’t sitting on a pile of cash just waiting to move it into the market. People investing periodically over decades have far more in the market than out. The “buy the dip” stuff ends up being a little bit here or there so they can convince themselves not to worry, not an appreciable swing in their portfolio.
> "Buy the dip" is just code for "stay invested." Obviously most people aren't sitting on piles of cash.
Not really. It's literally a call to action to counter what the market is doing, in hopes that it can prevent and recover trends. They are literally telling others to buy when everyone around them is selling.
My two favorite trading terms: “catching a falling knife” and “dead cat bounce”. You don’t want to buy until you’re sure it’s reached bottom. So you look for signs of rebound, but you can be fooled by a dead cat bounce. Because if dropped from high enough, even a dead cat will bounce before coming to rest.
Being able to do the opposite of what others do is a useful quality to have as an investor.
I don't tell random people to "buy the dip" because I don't want to be responsible for the myriad dumb ways people interpret that advice, but it's not at all an unreasonable thing to say to someone who knows what they're doing.
> To be honest, “buy the dip” is generally cope that people tell themselves.
I don't think so. "Buy the dip" is a call to action to third parties to irrationally invest their resources in a way that benefits you personally. It's a call to not believe what they are seeing, and that doing the opposite of what would be prudent or reasonable is somehow something that is in their best interests.
You already hear fantastic claims like "buying the dip is what rich people do to get rich". Yeah, buy low-sell high is good business. But that only works when you actually buy low. If you buy in when the freefall starts, aren't you buying high? How is that good business?
To buy the dip you need liquid cash sitting around earning very little, hoping the market goes down.
Reallocate portfolios if that makes sense, but much of the “buy the dip” stuff implies good market timing: To do it in meaningful amounts you’d have to pick the right times to not invest, accumulating cash at a lower rate, then you’d have to know precisely when to invest it again, switching it back into the stock market.
Yes. This is one of the reasons 80 stocks / 20 bonds is a common strategy. The rebalancing "forces" you to buy low and sell high.
When stocks dip, your portfolio might become unbalanced at 70/30, so you reallocate funds to buy stock bringing you back to 80/20. Conversely, if stock market soars, you might get to 90/10, and selling stocks would bring you back to 80/20. Performing this balancing is, in effect, "buying the dip"
This opinion is even worse ^; Literally nobody can predict what the bottom is (except magically the group with strong political opinions /s), but what amazes me is people are willing to give out bad advice in an attempt to create a realization of the ideology.
>This isn’t a normal drawdown. This is a crisis with the leadership of the United States.
The same thing happened just 4 short years ago when covid hit. Mass panic and then intervention kicked in. The intervention could have been taken away at any time but the market went extremely risk-on anyway and you would have gotten left behind if you sold out.
>but even then the markets will be cautious for the next 4 years at minimum.
You are overestimating the cautiousness of the market. Unless there are better returns offered in some other investment, the capital is going to pile back in if something like tariff deals start getting announced.
>>This isn’t a normal drawdown. This is a crisis with the leadership of the United States.
>The same thing happened just 4 short years ago when covid hit.
If by "same thing" you mean the market crashing, then yes, it's similar. But the cause of this isn't the "same thing" at all. For the next 4 years, the USA will have a president who wants to annex Greenland and Canada, who hates most (all?) US traditional allies and trading partners, who doesn't believe in free trade. The effects on the world economy are going to be slower to take effect compared to COVID, but they're going to be much deeper and long lasting.
The effects of covid were literally being talked about as the entire world economy grinding to a halt overnight. It was mass panic beyond high tariffs for a foreseeable future.
The market was in straight free-fall until all of the major govts stepped in to print trillions. It was like a light switch made the “end of capitalism” disappear in a day.
> The same thing happened just 4 short years ago when covid hit.
COVID was a natural disaster. Leadership responded to it.
This is the opposite. Markets were going well. Leadership intervened to crash them.
Do you see the difference? It’s not the same.
> You are overestimating the cautiousness of the market.
You are underestimating the impacts of risk premia.
This administration just showed that they don’t know what they’re doing, but they’re willing to go all-in on disastrous economic policy. They’ve already waffled on previous policy and then came back and doubled down. They’re still talking about more tariffs.
This isn’t a little “oopsie” any more. It’s a pattern. It’s going to be a long 4 years until we can get back to stability.
> Unless there are better returns offered in some other investment
You are so close. It’s not just returns, it’s risk. Trump just made the market hyper risky.
Yeah, I think it’s worth emphasizing: we are in Month 4 and there’s already been an enormous amount of chaos.
We haven’t even seen the effects of the agencies getting cut. Sure they’re running for now, but burnout can set in quick for the remaining employees and some YC investor-clown’s delusional dream of an “AI” workforce isn’t going to save us.
I’m just one fish in the sea of retail investors but I won’t be in any rush to convert cash savings into investments with this current trajectory.
Besides, cash is infinitely more useful for my mortgage payments — especially if layoffs in the private sector start.
The covid crisis was an actual event in physical reality not caused by admin policies.
This crisis is the admin taking a sledgehammer to international capitalism. No obvious intervention other than "stop doing that".
I'm sure at some point the fed would have some kind of response but inflation of tariffs is a huge risk and that limits what the fed can do unless they have co-ordination with the admin.
> The covid crisis was an actual event in physical reality not caused by admin policies.
Sortof yeah, but also sortof not. Basically any non-Trump president would have been briefed about Covid in January 2020, and most of the previous ones invested a bunch of resources into making sure that the disease was contained far away from US shores.
Even Bush II would have done that (and did, I believe for SARS).
It's a possibility. SARS II was much harder to contain though. The first SARS actually made it to North American hospitals, but was contained. It didn't spread in the populace.
Once SARS II made it out of China, only globally coordinated net 0 case policies could have stopped it. I think it would have been worth trying for but there was no appetite for it.
> It's a possibility. SARS II was much harder to contain though. The first SARS actually made it to North American hospitals, but was contained. It didn't spread in the populace.
Totally fair, but as I recall he didn't even try to keep it away from US soil (which had always been the CDC approach).
Let's remember that it was much worse than it had to be, because the same President actively causing this current catastrophe thought he could just ignore the problem and it would go away.
> (...) the capital is going to pile back in if something like tariff deals start getting announced.
What leads you to believe that scenario is realistic?
I mean, the list of US trading partners is dominated by less than a dozen trading blocks: EU, Mexico, Canada, ASEAN, China. That's it. Trade with India is as significant as trade with Italy alone, and a massive deal with them would barely move the needle in this trade war.
Unless the US somehow makes it's own trade war go away with the likes of Canada and the EU, there is no bright outlook for the market and economy. Trump's administration is repeatedly threatening both with annexation.
To make matters worse, do you really believe any trading block will move back to preserve economic ties with the US after this mess? Not a chance in hell.
The EU, which thanks to the Trump administration is already scrambling to prepare for a war with Russia, is excluding the US from supplying them arms. This is the extent to which these trading blocks are going to shed ties with the US.
Do you think things will just go back to how things were 6 months ago? The Trump administration ensured this is impossible.
> the list of US trading partners is dominated by less than a dozen trading blocks: EU, Mexico, Canada, ASEAN, China. That's it.
ASEAN countries are eager to make a deal. The USMCA deal is still in tact with Mexico and Canada.
> The EU, which thanks to the Trump administration is already scrambling to prepare for a war with Russia, is excluding the US from supplying them arms. This is the extent to which these trading blocks are going to shed ties with the US.
Germany is in an energy crisis and a few other members are close to a sovereign debt crisis. Domestic production of weapons will be tough and expensive. The EU’s plan to sell bonds to pursue war with Russia looks horrid. They’re in no position to be in a trade war. In a few months time when this reality sinks in, they will have to make a trade deal and remove US tariffs.
> Germany is in an energy crisis and a few other members are close to a sovereign debt crisis. Domestic production of weapons will be tough and expensive. The EU’s plan to sell bonds to pursue war with Russia looks horrid. They’re in no position to be in a trade war. In a few months time when this reality sinks in, they will have to make a trade deal and remove US tariffs.
This really, really depends on how things evolve this week. Like, the EU will 100% tarriff the US (and probably China to prevent dumping) this week.
The big question is whether or not they use the Anti-Coercion Instrument, and hit US tech and financial services. Selfishly, I hope they don't (as I work for a US fintech while I am based in the EU), but this will probably happen if Trump retaliates to this week's sanctions (which he probably will).
This is gonna get a lot worse before it gets better, unless there's a unilateral pullback on the part of the US (which seems very unlikely).
> Indeed. That's especially true on the NATO side. This is a historical event on the scale of the breakup of the USSR.
Exaggeration isn't helpful. Whatever "this" is, you can't possibly make an assessment of that kind until years after the fact.
In March 2020, people were convincing themselves that the global economy was flying straight into the ground, but people who didn't lose their minds made a lot of money, quickly.
IMO, there was a better case for that panic, given the context (they were partly right! the lockdown stuff was incredibly costly!), than there is that this particular spasm is meaningful. Only time will tell.
> Exaggeration isn't helpful. Whatever "this" is, you can't possibly make an assessment of that kind until years after the fact.
I don't think you fully grasp the gravity of Trump's actions.
For the first time in its history, NATO is excluding the US from arms purchase programs. This takes place at a time where the EU is scrambling to prepare for a war with Russia, which is also caused by Trump's action of abandoning it's allies,
The Trump administration is also heavily invested in annexation rhetoric targeting multiple NATO members.
Then there's the whole tarrif absurdity.
These sequence of moronic steps individually represent world-changing events. They all took place in a couple of months into the Trump administration's takeover.
This goes well beyond the suspicion that Trump is a Russian stooge. This changes the way the world was structured after WW2. The fall of the soviet union might even have a smaller impact in world history.
> I don't think you fully grasp the gravity of Trump's actions.
I "grasp the gravity", to the extent that anyone is actually able to do so at this time. I am unwilling to engage in hyperbole in order to create the illusion of a nearby black hole.
This is a non-partisan reaction. I am opposed to tariffs; I am also opposed to panic and exaggeration.
> This goes well beyond the suspicion that Trump is a Russian stooge.
Your choice of neutral, unbiased language is compelling.
The first man on the moon, the breakup of the Soviet Union, September 11 - these were all things that people predicted would be monumental world-changing events at that point in history, and also proved to be after the fact. Maybe history will prove us wrong, but this feels like one of those moments to me.
I mean we correctly estimated that the breakup of the USSR was a big deal without hindsight.
People who didn't panic during the covid crash made money not because they understood the situation but rather because the money supply went into the stratosphere.
The closest modern analogy might be Liz Truss’ short tenure in the U.K. Her actions paled in comparison to this absurd tariff situation but the only way to resolve it and restore confidence was for her to resign.
The problem in the US is that the tariff situations is bonkers insane, was clearly not thought out at all, and the person controlling the strings is talking about ways to run for a 3rd term instead of considering resignation.
This is a political crisis. The best we can hope for is that the Senate pushes forward with attempts to reign in the president’s tariff powers and the House actually goes along, which is unlikely right now.
I think we’re going to start seeing Republicans test the waters with breaking rank with Trump soon though.
Yeah really, Truss really is the most salient yardstick, with the complication that any analogous action in the mechanisms of american politics feels slightly unfathomable. And I was shocked enough at Truss' ouster.
It's all so divisive, but it frustrates me to no end that likely the biggest end that people trying to defend this, without any admission this is a crisis of confidence waiting to happen if it's not already there.
The amount of political capital immolated for the sake of this course of action is flatly embarrassing.
It doesn't really matter what they want or how long they think it's going to take to get it, the damage is already done.
> I think we’re going to start seeing Republicans test the waters with breaking rank with Trump soon though.
This is already happening. The snag is, until the break adds up to a 2/3 majority in both House and Senate, a presidential veto of a bill reversing the tariffs cannot be overridden. And to get to 2/3, a lot more pain is going to have to be felt in Trumpland.
If people start turning against Trump, Congress will follow. Look what happened after the 2022 terms. Dems over performed and everyone immediately tried to make Ron Desantis a thing.
Sharks will always be in the water around Trump waiting for him to slip. The question is, will Independents(maybe even some of the base) shift hard away when they start feeling the pain of the tariffs.
Loss of trust and finding other sources for the things they used to buy from the US, perhaps even producing those things themselves and becoming a new competitor the US didn't have before.
If it's reversed faster than alternatives are in place, then it won't matter too much if the trust is there because what alternative is there? The logistics and stuff take time to change. If it persists long enough, then the trust piece will be more of a factor.
Mone of that really has to do with the tariffs. Consumers will continue to buy what they can afford. This won't reduce that much, probably by about 5% is my guess based on multiple factors. Most healthy companies will continue to operate just fine. Market confidence is down, but it's been fragile due to it's overvalued state for a while. Aside from tariffs, policy outlook is very business friendly.
This mostly a market overreaction or correction from being overvalued if we look at the past. This Chinese trade war has been going on since Trumps first term (at least). The rates on the top import/exports have been around or over 25% for a while. It's also interesting how much China is hurting itself with pork. The Chinese own Smithfield and are a huge importer of pork from the US, yet they slapped an 80% tarriff on it?
It will affect if people buy a Honda they don't 100% need right now, or keep emergency money in case things go worse. Which on larger scale will still affect prices of everything.
Every time this happens people say it’s different. See: COVID pandemic. And we know the V shaped recovery that came after that. Of course that shouldn’t be interpreted as a predictor of what’s to come next (because it’s not), my only point is to say that the same rhetoric pops up frequently during downtowns since forever.
This is different. It was entirely avoidable. Entirely predictable. Entirely preventable.
Hell, it’s mostly reversible if the administration would own their mistake. But they won’t.
That’s the problem: This is not a natural disaster or even a reaction to a market-created crash. It was orchestrated by the people who were supposed to be doing the opposite.
I don’t believe claims that the United States is doomed or other hyperbole. I do believe that this is firmly different than anything we’ve seen in our lifetimes though.
After the initial COVID phases nothing major really changed long term as far as the world balance goes though. Everyone got affected, everyone started recovering. Things may have been uneven, but not like now, right?
Up until WWII happened I doubt many people would have believed that sort of death and destruction was right around the corner. They'd just had WWI and weren't expecting that settling the unsettled business from that would be around 3x worse, break the European colonialists and ... I don't know how wiped out Jews in Europe were, but it was a painful experience although I assume some survived. The property damage was also extensive.
High tariffs isn't going to be the end of the world & this particular stage of crisis doesn't look very important. But the overall geopolitical crisis we're in as everyone realigns certainly could end the world as we know it. Both in the literal and worst case senses. Few went in to WWII chuckling and saying that they were going to break their own power permanently, but that is what a lot of participants ended up doing.
Just a comment, every catastrophe has victims, survivors, and lasting consequences. I didn't mean to trivialize that in my response. Regardless, life goes on.
A disease did that. Nobody knew the details, there was fear it wouldn't stop. The markets groaned and creaked under the weight of the fear and uncertainty. But with the vaccine and the reduced lethality of new strains, a disease becomes a nothing. Recovery began because nothing was in the way, the bad thing was gone.
The people in charge of the government did this. The people who will still be in charge of the government. The bad thing is not gone. The bad thing has no end in sight. And the bad thing is doubling down.
The bad thing is saying it’s no problem to stick around for a third term and beyond, and that it wants to go to war to annex territories from the closest trading partners who might be able to mitigate the impact of the trade war.
The cause really was not the disease and even loss of life from it. It was actual real world disruptions shutting down normal operations. Lockdowns, quarantines and so on. Goods stopped moving. So it is obvious that trade would slow down and thus profits would be hit, directly leading to stock prices correcting.
At the time, there was trust that the government wanted to assist the recovery. They have lost the benefit of the doubt. This actually feels malicious.
With Covid, recovery came as Covid was removed. With Trump, recovery can come with…
Did anybody actually “trust” other countries to start with? I’m reminded of the cynical yet accurate quote that nations don’t have friends, they have interests. I expect the American feds to pursue the best interests of Americans (though these policies aren’t in those best interests, it seems admin doesn’t know?) and foreign nations to do the same.
This point is especially hollow because it is true that many countries have maintained asymmetric tariffs on us. Trade deficit aside, we shouldn’t let others collect a larger % of their imports from America than we collect of our imports from them. I’d take their cries of “lost trust” more seriously if they hadn’t shown with their actions they will pursue their own advantage too.
US has been very successfully exporting its debt (quite literally, almost no other country can run such high deficits for so long) and services.
What do you think happens with all that money if Americans can’t buy those cheap imported goods anymore?
Also other countries like China or Japan won’t be able to continue buying US bonds. Basically Americans are getting free stuff funded by debt they are never going to pay back and still you have people whinning…
> larger %
US decided to charge e.g. 15 times higher tariffs on the EU than the EU does. You believe that’s even remotely reasonable?
Or do you actually trust Donald’s table that they made to confuse clueless idiots?
Successfully? We blew 3.1% of our GDP on debt service alone in 2024. This is insane, irresponsible, and unnecessary. We are mortgaging our children and grandchildren’s futures. Just like young folks like me correctly complain that old people are leeches sucking America dry - social security, medicare, housing price subsidies, decade after decade, despite a what, $1.7mm average net worth - my generation shows no signs of doing anything differently. “Screw them kids. Boomers got theirs, I’ll get mine.” If our interest burden keeps growing from 20% of federal revenues we could end up spiraling into more and more debt. Or worse we could get to a place where the fed can’t feasibly raise rates to level out the economy and moderate inflation because that would balloon interest payments to a ridiculous degree.
Where Trump is fundamentally correct is that a trade imbalance means selling pieces of your country off to compensate. Equities, bonds, land. All a claim against future money that sucks those returns out to go to foreigners. America has been lucky in the past, in that the huge market for dollars helped us avoid some of this, but that’s not a limitless solution.
Obviously the answer is not that we must make Nikes here. It’s also not that we must have zero trade deficit with any single nation. But we probably should focus on exporting more advanced goods and more services to bring our overall trade deficit down, focusing on a net zero or overall trade surplus outcome.
> We blew 3.1% of our GDP on debt service alone in 2024
As long as GDP growth outpaces (or is even) the increase in debt it’s not a big issue. Some spending cuts and mild tax increases (maybe not so mild for the higher brackets) would solve that.
> focusing on a net zero or overall trade surplus outcome.
If you looked at the countries pursuing such policies like Germany or Japan they haven’t been doing that well at all over the past 20 years. Basically no real growth and they are permanently stuck in the early 2000s. US on the other hand has been doing extremely well (lack of redistribution is another issue).
Debt growth is massively outpacing growth in GDP. You're right that it's less of an issue if we grow quickly and effectively keep leverage the same but that's not what's happening.
Germany and Japan haven't focused super heavily on achieving a trade deficit. As you said, Germany has huge problems with her welfare state and Japan has huge demographic issues. I'm not saying we should achieve a trade balance by tariffing everything to death; I am saying we should focus on faster growth to get there and reduce our insane level of consumerism. I don't have an issue with a temporary trade deficit for growth-oriented reasons, but I have little save contempt for people ordering packages of chinesium temu crap.
The “reciprocal” tariffs are nothing close to reciprocal. I hope you know by now that the numbers Trump presented were not actual tariff numbers that other countries put on us.
The trust issue is domestic, too. Businesses just got slapped with the largest tax increase in history at home. Pointing fingers at other countries is a distraction. It’s ridiculous to think that this will encourage companies to start building factories here when even the raw materials are now heavily taxed on their way in to the country. Any sane company is going to pause US factory investment until there is some clarity and predictability.
I think I miscommunicated my support for some trade policy change as support for Trump’s “liberation day” tariffs. Here are things I think we should fix:
- America and Hypotheticalstan each export $1T to each other with a bunch of tariffs on various things. America raises $50B in tariff revenue on Hypotheticalstan’s imports while Hypotheticalstan raises $100B on American imports.
- America doesn’t make enough defense-critical stuff: steel, solar panels, chips, aluminum, rare earths, etc.
- America has a ~$918B trade deficit.
Things I do not care about:
- Vietnam makes our Nikes.
- We have a trade deficit with specifically Vietnam.
> Why should you care how much another country charges its residents to import stuff from the US?
Because tariffs hurt trade — if you charge someone an extra $4 on a $20 bottle of French wine, they _may_ still buy it, or they may buy different wine.
Or they could go, everything's gotten so expensive these days, I'll buy wine less often altogether.
> Because tariffs hurt trade — if you charge someone an extra $4 on a $20 bottle of French wine, they _may_ still buy it, or they may buy different wine.
Sometimes it's hard to tell if the US public is even aware of this. I mean, what is the point of tarrifs other than raising the prices in the domestic market of imported goods and services? That's all they do.
The rationale from the perspective of the central government is that this will finally make foreign goods and services uncompetitive with regards to domestic alternatives, and thus will finally render them viable. But that childish assumption is based on so many absurd notions that are plainly unrealistic. The only thing that's real is the direct impact of tarrifs: increase the price of goods and services in the domestic market.
I think the problem is that because of the huge disparity between the cost of imported and domestic goods which has developed over decades, the choice that people face is not 'oh, now imported goods are a little more expensive, I will instead buy American', it's 'now I can't afford to buy anything at all.'
You have to get more money into the hands of the consumers in order to be able to implement something like this.
Wine is a good example because it’s not fungible: one bottle of red wine is not like any others. If you have a domestic wine industry, it likely can’t compete on quality with French wine.
So if France can export wine at a price that’s reasonable enough, your domestic wine industry will fail, undercut completely by cheap French imports.
Tariffs in and of themselves are not all dreadful. They help level the playing field and support domestic industry.
But you can’t go from decades of offshoring manufacturing to suddenly charging punitive tariffs without making imported goods (which were the only ones your citizens could afford) much more expensive, and therefore, yes, folks might buy wine less often altogether.
IMHO it’s pretty fungible at least outside the high-end stuff. Most people would hardly notice where the wine comes from (aside from specific types of grapes and such)
Because tariffs aren’t actually a good thing. If you hurt my producers by $1, I should hurt yours by $1 to maintain some level of credibility in our repeated game. If I don’t punish foreigners for tariffing my guys they have no incentive to reduce or remove those tariffs.
I don’t actually care about t-shirts being made in china. That’s not an industry that matters at all. I do care about china closing her entire market to American tech, for instance.
If you start looking for justice in the world economy, you've already lost the game. The only thing that matters is money. You can stick tariffs on left, right and centre, and all you'll end up doing is pushing goods out of the hands of your consumers.
You can try to 'hurt' another country's producers, but they're likely to just go and find another market for their goods.
I'm not really looking for "justice", I'm looking to uphold our interests. I don't particularly care if we raise more revenue than some other country does from our imports. I don't think tariffs are the best or only weapon to fix our problems. I do think they have a place, that selling off more and more of our country via trade deficit is unsustainable, and that our priorities as a nation are beyond screwed up.
> I expect the American feds to pursue the best interests of Americans (though these policies aren’t in those best interests
I think that's the thing — you plan in business for people to operate in _their own_ best interests. If people stop doing that & their behaviour is volatile, then you're going to put your own mid-term plans on pause until you know what's what.
> Trade deficit aside, we shouldn’t let others collect a larger % of their imports from America than we collect of our imports from them.
Is that happening, trade deficit aside, & when you factor in services as well as goods?
You could start making stuff we're willing to buy. I'll give you a qick rundown of what Europeans might want:
* no junk food, no weird GMO garbage.
* road-legal automobiles, no EPA-workaround trucks with shoulder-high hoods.
* advanced tech hardware gadgets.
* entertainment
* no, we're not particularly interested in guns.
Tell me what exactly what aren't we already buying from the US, when it's competitive: quality food we have our own, sorry; cars, well you've gone down a crazy path since I can remember; hardware, well we do, except you chose to offshore manufacturing; entertainment, we do... a lot; guns, be honest, you know you have a problem, not us.
To be fair, the US exports a lot of services to the EU. For some reason these weren't included in the calculations shrug. As an aside, it's hilarious to see loads of Europeans saying that they never use any US products on a bunch of US owned products.
I’ve had to shut my mouth hard the past week. I went heavily short right before the “liberation day” announcement and doubled my port. My buddies in finance, or my buddies who work elsewhere but whose accounts look rough, don’t want to here me enthuse about the nutty multiple expansion finally reversing so I can take my cash and buy at sale prices.
"Be greedy when everyone else is fearful" isn't just a recipe for profit; it also acts to reduce the size of market crashes and thereby make people get hurt less. Give in to your lizard brain!
The caveat being if you have even a coarse-grained sense of market timing, this works strongly against your own pnl. The optimal strategy is to long the bubble, short the correction, then long the recovery. It’s not possible to do perfectly but you can often sell for part of the way down and skip some of your losses before buying back in. This generally would increase vol but is personally advantageous if you can do it.
It is incredibly to “follow your lizard brain” and destroy your returns. Selloff? “Time to be greedy!” Whoops, caught that falling knife with your hand. Maybe it’s a V-shaped recovery a la corona. Maybe it’s a decade plus like the Nasdaq post-dot-com. Rally? “Time to be fearful!” Wait, it keeps going up? Do you get more fearful? Do you sit in cash for years amidst inflation and high returns?
Where does the cash come from if you’re invested? Are you just keeping huge piles of cash around in low interest accounts in the hopes that a black swan event comes along?
If you had a balanced portfolio a week ago, you're almost certainly overweight bonds today. Rebalance to your target weights and you'll be buying equities.
Wow! Even with the crash, wouldn't you have been better off getting the last five years of gains, especially given interest rates didn't match inflation?
I was curious, so checked - $500,000 in VOO 5 years ago would have been 1.18 million today - already accounting for the crash so far. The market would need to crash an additional 60% starting with the next open to get you back to your $500,000 break even. Maybe this will happen, but that's quite a fall.
You of course sold all your stocks beginning of November because you knew a deep crash was coming and wanted to be ready to buy into it. And now you have a lot of cash.
Makes me really think what is being sold. A significant discount in stock that continues paying dividends would be actually be reasonable. More return for same money.
But many stocks are more so collectibles... Value going up for sake of it...
The market can keep falling until Trump pulls the lever back or enough of his pet legislators are willing to override him. As a long-term investor, I'm not selling. But we have no idea where the bottom is.
The market is still pricing in the optimistic scenario of tariffs being repealed, either by supreme court (e.g. on the non-delegation doctrine), by congress veto (13 more Republican defectors), by impeachment, or by Trump changing his mind.
If none of these four scenarios come to pass, the market will keep dropping as these possibilities get priced out and the remaining scenarios (escalation or maintenance of the tariffs) become more likely.
> The market is still pricing in the optimistic scenario of tariffs being repealed
"The market" has no idea what the impact of the proposed changes are. Setting aside the obvious questions about whether or not this stuff will even happen, it's just not possible for something this complex to be evaluated so quickly.
This is panic. People are wildly guessing about the "worst case scenario", without any detailed understanding (or even data) on what might happen [1,2]. It's all speculation, but lots and lots of people love to write horror stories for clicks and points.
[1] Just for example: what does it even mean for an "X% tarrif on all products from country Y" to be imposed? The Harmonized Tariff Schedule is hundreds of thousands of line items, each with a different rate. Are they all being replaced with a single number? Is that line item number being multiplied by a factor? Something else? I guarantee that almost nobody knows the answer to that question right now. I'm not even sure an answer exists.
Working through that changeset is a non-trivial operation, and then, working through the impact on something as detailed as a supply chain for any non-trivial product is immensely complicated. Now do it for every product.
> "The market" has no idea what the impact of the proposed changes are. Setting aside the obvious questions about whether or not this stuff will even happen, it's just not possible for something this complex to be evaluated so quickly.
This is just false. Countless people were busy running scenarios based on the expected range of tariffs. It wasn’t a surprise that tariffs were coming. It was a shock that they were so insanely high and that the people putting them forward were so clueless about it.
> [1] Just for example: what does it even mean for an "X% tarrif on all products from country Y" to be imposed? The Harmonized Tariff Schedule is hundreds of thousands of line items, each with a different rate. Are they all being replaced with a single number? Is that line item number being multiplied by a factor? Something else? I guarantee that almost nobody knows the answer to that question right now. I'm not even sure an answer exists.
You’re projecting your own lack of understanding on to everybody else. The changes have been out already and any company that does business has already read through the documents.
Just because you don’t know or understand doesn’t mean that nobody does.
> This is just false. Countless people were busy running scenarios based on the expected range of tariffs.
Appeal to authority ("the experts did the math!"), but OK...
> It wasn’t a surprise that tariffs were coming. It was a shock that they were so insanely high and that the people putting them forward were so clueless about it.
Right. So...they didn't do these scenarios. Which means (repeat after me): everyone is guessing.
Even if I accept your appeal to authority, and even if I assume that their "models" are sufficiently good to predict the future in a chaotic unfolding scenario involving dramatic changes to a complex global trade system [1], I basically guarantee that the average market player is "vibe trading" right now, not working from these models.
I'm not saying that it's impossible to work out the answer. I'm saying that takes time.
Also, no one seems to be taking into account that most countries are in active negotiations to reduce or eliminate the tariffs. So the US may end up getting something else in exchange for them being partially or wholly lifted on countries where a deal can be made.
I'm don't understand the disagreement because it's not like I'm saying that markets perfectly price all available information.
Even if securities are not priced perfectly accurately, it's still a fact that investors know that Trump might change his mind. It's still a fact that investors know that the Supreme Court might strike down the tariffs. These optimistic possibilities reduce the amount of panic and reduce the magnitude of the drop.
If the Supreme Court ruled against the lawsuit brought by New Civil Liberties Alliance tomorrow then the market would drop even more than it otherwise would, because it makes it even more likely that the tariffs will remain.
> I'm struggling to understand the disagreement because it's not like I'm saying that markets perfectly price all available information.
You're being sanguine about the power of markets to react to short-term change. Basically, "all available information" consists, at this time, of what I posted above. Be honest: what can you infer from it regarding the "correct" level of price change in the S&P500? But that's too ambitious: what's the correct level of price changes in, say, machine screws?
You can't know the answer. Nobody can. The best any particular expert analyst might be able to do, right now, is to speculate about the impacts of the top-line tariff rates on a given company's product prices. But they cannot:
* know if those prices are correct
* know how the pricing of other products (which they don't analyze) will materially affect those pricing models.
* know what compensating strategies the company might employ
* know the costs of those compensating strategies
* know the impacts of the price change on the market demand for the product(s)
* know the impact of the price and demand changes on margin
...and so on. There are so many unknowns here. Even the most informed analysts are just wildly guessing based on headlines and vibes. I have 0% faith the "market" is currently providing a useful estimate of the impact of these changes, and I have 100% certainty that the people confidently asserting things (like a market projection) are fools, or simply talking their book.
Keep track of where it has been; you don't need to buy at the absolute lowest point, if it creeps back up you can slowly buy in again.
Have a look at trackers like the S&P 500 after previous crashes, it takes 3-6 years for the market to return to its previous highest value. Or six months in the case of the panny-D crash.
> As for people getting hurt, yeah, that sucks.. but you should never invest what you can’t miss..
You do understand that pension funds are financed through these investments, don't you? This means that the people who will be hurt the most are those who didn't invested. It's not the billions that Bezos and Musk lost that's painful. It's the old mom or pop who worked their whole life and now can't retire because their pension doesn't allow to survive.
And you do realise these are long-term investments by pension funds and governments right?
You aren’t actually getting paid with the actual money invested, they usually already calculate with 108-110% coverage, and already assume life-long coverage with an average far exceeded average lifespan, precisely to take this into account
This gets repeated a lot, but unless you already had most of your portfolio in cash it’s not actually a net win to see a drawdown like this.
The course of the global economy was just altered. The best case scenario would be if the proposed tariffs go away completely, but even then the markets will be cautious for the next 4 years at minimum.
The market is down because the future prospects for those businesses just got much worse. Yeah you can buy them at a cheaper price, but their corresponding future output remains down as well.
It’s like seeing a thing you wanted to buy go on sale, but upon closer inspection it’s on sale because it became damaged and you’re buying damaged goods.
The best case scenario is that the administration pulls the “just kidding” card, reverses course, and claims some sort of victory while returning to the previous status quo. If that happens, stocks were briefly on sale even though they’re not rebounding back right away. However, if the administration digs their heels in and tries to push forward then the market is going to continue downward.
This isn’t a normal drawdown. This is a crisis with the leadership of the United States.