paul Krugman’s substack blog predicts “ The end of North America”.
I’ve been saying for a while that markets were far too complacent about Trump’s threat to impose tariffs on Canada and Mexico, believing that he wouldn’t follow through because it’s such a stupid, self-destructive idea. As I wrote on Jan. 22,
[S]o far markets have shrugged Trump’s tariff threat off, apparently in the belief that he won’t follow through. But why not? Economists would, if he asked, tell him that high tariffs on neighboring nations closely integrated with the United States will do major damage; businesspeople would say the same thing. But if Trump wants your opinion, he’ll tell you what he wants it to be.
I believe that the only thing that might dissuade him from destructive policies would be a severely adverse market reaction — which means that the lack of such a reaction, based on the belief that he won’t really do it, greatly increases the probability that he really will.
And he really did. The New York Times reports,
President Trump plans to move forward with imposing stiff tariffs on Mexico, Canada and China on Saturday, in an attempt to further pressure America’s largest trading partners to accept deportees and stop the flow of migrants and drugs into the country.
In a news briefing on Friday, the White House press secretary, Karoline Leavitt, said the president would put in place a 25 percent tariff on goods from Mexico, a 25 percent tariff on goods from Canada and a 10 percent tariff on goods from China.
Ms. Leavitt said the president had chosen to impose tariffs because the three countries “have all enabled illegal drugs to pour into America.”
“The amount of fentanyl that has been seized at the southern border in the last few years alone has the potential to kill tens of millions of Americans,” she said. “And so the president is intent on doing this.”
The tariffs are likely to initiate the kind of disruptive trade wars seen in Mr. Trump’s first term, but at a much larger scale.
I think you have to see “fentanyl” in this context as the equivalent of “weapons of mass destruction in the runup to the invasion of Iraq. It’s not the real reason; Canada isn’t even a major source of fentanyl. It’s just a plausible-sounding reason for a president to do what he wanted to do for other reasons — George W. Bush wanted a splendid little war, Donald Trump just wants to impose tariffs and assert dominance.
Also, although I’m not sure such things matter anymore, what’s the legal basis for these tariffs? U.S. trade law gives the president huge discretion to impose tariffs, but only for a specific set of reasons: economic injury from import surges (Section 201), national security (Section 232), unfair foreign competition (Section 301), dumping — sales below costs. Drug smuggling, especially imaginary drug smuggling, isn’t on the list.
The president can impose tariffs much more broadly if he declares a national economic emergency. But has he done that? Does 2.6 percent inflation and 4.1 percent unemployment sound like an economic emergency to you? And even if Trump gets around to declaring an economic emergency, what does fentanyl have to do with it?
As far as I can tell, there’s a real possibility that Trump’s new tariffs will face a court challenge, and that he will lose. I’m not an expert on trade law, but I do know a bit, and this looks flatly illegal to me.
But even if these tariffs are blocked, or Trump finds some way to declare victory and call them off, the damage will be immense.
As I wrote the other day, in the three decades since NAFTA went into effect, North American manufacturing has evolved into a highly integrated system whose products — autos in particular, but manufactured goods more broadly — typically contain components from all three members of the pact, which may be shipped across the borders multiple times. Manufacturers developed this system not just because tariffs were low or zero, but because they thought they had a guarantee that tariffs would stay low.
One way of saying this is that until just the other day there was really no such thing as U.S. manufacturing, Canadian manufacturing or Mexican manufacturing, just North American manufacturing — a highly efficient, mutually beneficial system that sprawled across the three nations’ borders.
But now we have a U.S. president saying that a duly negotiated and signed trade pact isn’t worth the paper it was printed on — that he can impose high tariffs on the other signatories whenever he feels like it. And even if the tariffs go away, the private sector will know that they can always come back; the credibility of this trade agreement, or any future trade agreement, will be lost. So North American manufacturing will disintegrate — that is, dis-integrate — reverting to inefficient, fragmented national industries.
Hence my title, “The end of North America.”
And to think that many people imagined that Trump would be good for business. “
any bets on what Markets will do?

Following are excerpts from a current New York Times report:

Tariffs on goods from the United States’ three largest trading partners will go into effect on Saturday, a Trump spokeswoman confirmed Friday. Goods from Mexico and Canada will be subject to 25 percent tariffs and those from China will be hit by a 10 percent tariff. Those countries account for more than a third of the goods and services that are imported to or bought from the United States, supporting tens of millions of American jobs, and all three of their governments have promised to answer Mr. Trump’s levies with tariffs of their own on U.S. exports.
In a press briefing on Friday, the White House press secretary, Karoline Leavitt, said the president would put in place a 25 percent tariff on goods from Mexico, a 25 percent tariff on goods from Canada and a 10 percent tariff on goods from China.
Ms. Leavitt said the president had chosen to impose tariffs because the three countries “have all enabled illegal drugs to pour into America.”
“The amount of fentanyl that has been seized at the southern border in the last few years alone has the potential to kill tens of millions of Americans,” she said. “And so the president is intent on doing this.”
The tariffs are likely to initiate the kind of disruptive trade wars seen in Mr. Trump’s first term, but at a much larger scale.
Mexico, China and Canada account for more than a third of the goods and services imported to or bought from the United States, supporting tens of millions of American jobs.
All three governments have promised to answer Mr. Trump’s levies with tariffs of their own on U.S. exports, including Florida orange juice, Tennessee whiskey and Kentucky peanut butter.
The tariffs will immediately raise costs for the importers who bring products across the border. In the nearer term, that could disrupt supply chains and lead to product shortages, if importers choose not to pay the cost of the tariff. And in the longer run, companies may choose to pass the cost on to American consumers, raising prices and slowing the economy.
Mr. Trump’s desire to hit allies and competitors alike with tariffs over issues that have little to do with trade demonstrates the president’s willingness to use a powerful economic tool to fulfill his domestic policy agenda, particularly his focus on illegal immigration.

This is gonna be fun watching y'all for 4 years. Hope you weren't looking forward to a huge tax increase.

Never Mind …

Best post in another TDS thread.
Let me guess the next 4 years...same old stuff.
And now the Dems scream about inflation...mmm...where were you when inflation hit the ceiling?

Former White House ethics lawyer: Trump actions ‘pushing the limits’ common in dictatorships
https://thehill.com/homenews/administration/5108520-donald-trump-norm-eisen-watchdog-firings-birthright-citizenship/

Tom Bowley's latest video from pre-market on Tuesday -
He is pretty dour on the market and says be prepared for a 10% correction in SPX, down to 5500. I do not recall Tom being this downbeat about the market in the past couple of years.

What a difference a day makes. Of course, it would mean nothing to the peanut gallery.

My point for years is that future predictions is a fool errand.
I have never invested based on the future, only based on current markets and they can be illogical and longer than anyone can predict.

Never Mind …

Best post in another TDS thread.
Let me guess the next 4 years...same old stuff.
And now the Dems scream about inflation...mmm...where were you when inflation hit the ceiling?

Yes, these deportation flights have been ongoing for several years.
Deportation flight issues are usually handled by low level personnel
but Trump needed to thump his chest and decided to create a kerfuffle.
Also, the Biden administration was actually responsible for apprehending
the Columbians that Trump just deported.
Of course, Trump will take all the credit.
Humility is apparently not his strong suit!

If the below data is correct (and please advise if it is not), just an incredible performance by PRWCX today.
PRWCX had just under 40% in Tech as of 12/31/24, and yet somehow, today, when FBALX (the allocation fund we have long owned as PRWCX's companion) shed 1.32%, PRWCX only shed 0.34%.
Note of course that Giroux has dropped his his equity stake to under ~55% while FBALX is holding closer to their normal ranges at ~64% with ~32% in Tech.
Bottom Line: PRWCX was slightly outperforming FBALX YTD coming into today, but that lead has now widened to ~1.67%.
All in a year that Giroux per the above ^ chart predicts an S&P drop of 11.6%.
Well done, David! Well done!
-------------------------------
And as a follow up to my prior post about port changes this year, specifically adding Value, we bought two US LCV funds late last year, OAKMX and DAGVX.
DAGVX is UP 5.35% YTD and only shed 0.26% today.
OAKMX (a fund we held for years long ago) is UP 6.31% YTD, with a nice 0.95% gain today!
If you are looking for worthy domestic OEF diversifiers, you can do a lot worse than these two!

Following are edited excerpts from a current Washington Post report:

A government-wide hiring freeze has led the Federal Deposit Insurance Corp. to yank job offers to more than 200 new examiners, the front-line employees who closely monitor banks to ensure they operate safely and adhere to an extensive rule book.
The FDIC is already facing a staffing challenge, particularly with a lack of examiners, undermining its ability to reduce the risk of bank failures. A chronic shortage of examiners contributed to the failure of Signature Bank, one of three large banks to collapse in 2023, the agency has said.
Examiners are essentially charged with making sure a bank doesn’t fail, a critical function at the roughly 6,000-employee FDIC, of which roughly 2,300 are examiners. The agency oversees about 4,500 banks around the country, most of them small. It also insures trillions of bank deposits and winds down failing banks. Its work is funded through industry assessments.
Perhaps more significantly, the agency is already in need of additional examiners, with frequent turnover and staffing shortages contributing to major setbacks in recent years. Current and former regulators said they feared the situation could snowball if hiring cuts combine with an uptick in the departures of retirement-eligible employees.
A review of the March 2023 failure of Signature Bank found the supervisory group overseeing large financial institutions in the FDIC’s New York office had average vacancies of about 40 percent. For the six years before Signature’s collapse, the FDIC couldn’t adequately staff the team dedicated to the bank.

Thanks. I am familiar with direct indexing, and in fact have spoken with Fidelity about it. (New rep assigned to us; I figured I'd let him go through Fidelity's various wealth management product permutations with us.)
The Barron's piece you linked to requires a subscription to read (I read Barron's online through my library). However, here's another article that Allan Roth wrote that for ETF.com (via Yahoo), supporting what I might have also said:
- For limited purposes (such as tax loss harvesting, minor portfolio customizations) direct indexing may provide benefits that exceed their higher cost
- For general index investing, net long term benefits are slim to none
On the first point, direct indexing is oriented toward mechanical tax loss harvesting. Customization is limited (you can exclude a small number of stocks from your "index"). Of note is that Fidelity offers most of its direct indexing strategies only in taxable accounts (i.e. aside from the tax loss harvesting, these vehicles are not competitive).
https://digital.fidelity.com/prgw/digital/msw/overview/a
Adding more flexibility comes at much higher min asset levels and with higher fees. These more flexible (active) accounts are not targeted at investors in the 0% cap gains bracket.
More generally, Allan Roth wrote:

About Those Taxes ...
But is direct indexing better than ETFs? Generally they are not, in my view, at least not compared to the best ETFs.
...
Typically after a few years, the tax benefit is minimal, and all that is left are fees and complexities. The 1099 tax form on my little $5,000 direct indexing experiment is 86 pages!

 https://finance.yahoo.com/news/allan-roth-direct-indexing-better-160000280.html
I'm not one easily spooked by lengthy statements (especially when computers deal with most of this gibberish), but even I have my limits!
Here's M*'s take, which is similar (i.e. minor positive sentiment)
https://mp.morningstar.com/en-us/articles/blt5e360f590235f987/direct-indexing-vs-etfs-myth-busting

...
@bee, @stillers, @WABAC, @rforno, . . .
By how much are you reducing or have you reduced your equity allocation from the 2024 peak level?

We did our normal year end review allocation adjustments, and made slight changes to our deck chairs (holdings). We took our stock allocation down to the bottom of our normal range, given the very good performance of the last two years, but mainly due to the uncertainties of the new administration. That cash is parked in MMkts, to eventually be plowed back in, fully expecting a 10%-20% drop at some point this year or next. The biggest changes were to reductions in MAG7 and tech exposures, and increases in Value and SCs.
No change to our PRWCX allocation.

”If I want to get an opinion, I read it from one of the best in business, David R. Giroux, the guy who runs PRWCX, T. Rowe Price Group Chief Investment Officer, + more who publishes his thoughts a couple of times annually.”
“MFO monthly issue is also a good source for information and insight, and the site has meaningful data for investors.”

Agree with FD on both above points. However, saying a market is way overvalued and then watching it suddenly unravel are two different things. Froth can persist for a very long time - even for years. I note this because both Giroux and (even more so) the Observer have made reference to overvaluation for a considerable while.
I have a lot of trouble deciphering exactly how FD is positioned. Maybe my fault for not following his posts carefully enough. Consider, however, that excess money flowing into the hottest sectors might be creating some reasonable values in less popular sectors. With that in mind I did ramp up risk exposure a bit the past couple weeks. Still cautious at around 40% equity and 10% in other risk assets (metals, real estate, preferreds and infrastructure). I’m overweight non-U.S. assets - a hedge of sorts should the dollar weaken.
@Mark - Thanks. Great thread. Very timely. Marks’ expertise is in distressed debt. But his keen observations re risk / reward provide excellent perspective on the equity markets. He’s one of my favorites.

Latest from Bowly (stockcharts.com/articles/tradingplaces/2025/01/whats-the-secret-to-crushing-t-702.html).
Quote

"Don't bet against a secular bull market advance!" We're all trained, or brainwashed, if you will, to believe that the next major stock market top is at hand or just around the corner. It completely immobilizes us when it comes to having belief in the major advance at hand. Give us a bit of selling and we'll quickly point out the likely recession and swift stock market drop ahead. Two weeks ago, reigniting inflation was a major concern and the S&P 500 was 5% off its high. Today, we're in all-time high territory after the ACTUAL inflation data said that inflation is NOT a problem. Or we can just be blindfolded and keep tuning into the circus that is CNBC.
Drown out the noise and all the bearish rhetoric, and instead focus on one of my favorite charts. This is a 100-year monthly chart of the S&P 500:....
The next time you think, "is this the start of the next secular bear market?", I want you to remember one thing. There have been TWO starts to secular bear markets in my entire lifetime - the early 1970s and the turn of the century as the dot com bubble popped. That's it. Just stop trying to call the 3rd one. There have only been 14 cyclical bear markets since 1950, which means that, on average, we see only one of these lesser bear markets every 5-6 years. Since 2018, we've had 3 of them (2018, 2020, 2022). That's waaaaay more than our fair share. Let the bulls do their thing.
If you look back above to the 100-year chart, you'll see that the S&P 500's monthly PPO is accelerating to the upside, telling us that long-term bullish momentum just keeps building. Bear markets don't begin until that monthly PPO moves into negative territory.

Let's play a game. The only way I declare Marks a winner is if 2 things happen in 2025. The SP500 must lose more than 20% + it's down for the year.
If we are in a bubble, it should be an easy test.

Look at who are predicting 6500 - 4 of 5 largest market participating banks. That is 6.5% from here. Probably easier to make that much with reasonably comfortable bond funds.
David Giroux’s 5300 is a 14% drop from here. So many members of this forum are invested heavily with David.
Thanks @bee and @stillers.
@bee, @stillers, @WABAC, @rforno, . . .
By how much are you reducing or have you reduced your equity allocation from the 2024 peak level?

I can't give you hard numbers, but somewhere around 75% equity/25% cash to begin with in the IRA.
I am now down to around 42% equity, 47% bonds, and 10% short-term (per Fido's dashboard) out of which cash is about 3%. I couldn't tell you how Fido makes that determination. They do show an M* style box that says I'm 84% short. For some reason USFR doesn't fit into the style box, and isn't qualified as cash, or other, so ¯\_(ツ)_/¯ .
The current allocation has to do with the ongoing process of "simplifying" my IRA and not finding much to buy in the equity market these days.
If there are buying opportunities in the next couple of years I wouldn't mind going to 50 to 60% equity. Who knows? Maybe Mr Market will carry me there on his back.
The taxable is sui generis, so I won't go into it here.

I wouldn't touch Wells with a ten foot pole, given their history, though I appreciate the kind gesture, the way @Edmond was cluing us in. Sadly, politics is ordinarily all FUBAR. But lately, it has also become threatening. I wonder how much of the Rule of Law will survive the next four years. Politics touches everything. Politics is the arena where decisions are made which affect us all. 14th Amendment, much? I have come across something that seems legitimate: "...subject to the jurisdiction thereof..." Would that include children born here to foreign diplomats, for example? I wonder if anyone might shed some light.
Now back to Wells: No. Just, no. But thank you, Edmond.

A very quick look shows that
VIX(SP500 SD) < 15
MOVE(treasury SD)=87=low
SP500 is in an uptrend.
I don't need to check beyond that.
My big picture = "normal" market = I'm invested at 99+% for several months now.

but you're invested 99+% in bonds, not the SP500, and in "special" bonds that don't move the way most bond funds move, so your so-called big picture has no real relevancy, as per usual, to your own personal big picture, more or less, give or take.

I have been saying the following over 15 years in all the sites I post.
All my posts are generic, without any connection to what and how I invest, unless I specially discuss my system.
The big picture is another generic comment.
I make comments on CEFs and never owned them more than short term.
I posted for years about retirement, LTC, when to take SS when I was younger.
Is your view that you can only have an opinion based on what you own or do?
So, what would I do specifically with my portfolio? I would be invested at 99% regardless if I have stocks or bonds. I have used stocks for decades.
You can disregard all my opinions but why trash it based on no real data.

@BaluBalu, but due to weekly reset feature to 3m T-Bills, FRN duration is 1 week (not 2 years). Buying FRNs at auction at Schwab would be commission-free, so 15 bps in ER for USFR would be saved. The other thing is the (small) spread that is fixed at auction - I haven't been tracking those.

Thanks. FRNs are available on the secondary market, but I wish to buy them at auction for better pricing. In addition, there are added fees when purchased through an agent. Buying at auction does not incur transaction fees. Small investors can construct T bills ladder out to several years to meet their income needs.

We have been buying treasury bills through our brokerages at auction. The expected yields are posted prior to the auction dates. Sometime one may get a slightly higher yield at auction. Over the past several years, it was advantageous to buy short term T bills and getting higher yield than those from money market. Today, the yield curve has normalized from the inverted yield curve. and we wish to extend the treasury duration beyond one year.
My question is that I do not see treasury floating rate notes (FRN) posted in auction at Fidelity and Vanguard brokerages. According to the auction schedule from TreasuryDirect is posted below, the FRN should be available at brokerages. I have no interest to buy from TreasuryDirect.
https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf
Please advise. Thank you.