We made it through week one of Trump. What have we learned?
Tariffs are good in theory but hard in practice.
Trump wants to command interest rates to go lower.
The most pro-business administration—ever?
We haven’t started talking about taxes yet.
That’s what I’ve got so far.
The tariffs—the centerpiece of his economic policy—are going to be difficult to implement. Though some people tell me that the tariffs are not about collecting revenue at all—it’s just classic Art of the Deal negotiating. If that is true, then why go to the trouble of creating an External Revenue Service? Why go around telling people that you can fund the government with tariffs instead of taxes, like we used to do in the old days?
I think Trump fully intends to use tariffs as a source of revenue but perhaps did not expect the retaliation. The Canadians are very feisty these days. Who can blame them? Trump openly talked about annexing Canada, and I’m not sure he was joking. We wouldn’t want Canada, anyway—if it were a state, it would be the size of California, and it would vote like California.
As for the taxes, I am really excited to see what Trump comes up with. The first order of business is to make the TCJA cuts permanent, which should be pretty straightforward. But beyond that, this is an opportunity for Trump to completely reimagine revenue collection. A flat tax? A flattish tax? One so simple, without all the deductions and credits, that you could mail it in on a postcard, like conservatives have wanted to do for all these years?
I’m on board with that. Take the 80,000-odd pages of tax law and stick it in the shredder. Reagan did something similar in 1986—got rid of all the wacky loopholes—lowering marginal rates and collecting a lot more revenue. I will admit, I stand to benefit from this system. As a newsletter writer, I have no wacky loopholes to take advantage of—I pay the full marginal rate.
One note about taxes and tariffs: A couple people have mentioned to me that the tariffs are a backdoor, roundabout way of raising taxes on lower-income and middle-class people, who practically have no tax liability as it is. They will bear the burden, through higher prices of goods, and that tariff revenue collection will give us the opportunity to bring top marginal rates down. I wish I had thought of it myself.
Maybe Trump will abolish the income tax altogether and replace it with something else, like a consumption tax! I would tread carefully here. Unless you think you can repeal the 16th Amendment, unless you think you have the votes to do that, you should not introduce a consumption tax or anything else. If you simply get rid of the income tax, by dropping tax rates to zero, and introduce another tax, then at some point in the future when the Democrats take over, we will have two parallel tax systems, and nobody wants that. Then we will be Europe, with marginal rates in the 40s and VAT rates in the 20s, with the government taking 40% of GDP.
Let’s not be dumb here. I get that everyone is excited. Take a deep breath and think a few steps ahead.
Some people have been making light of the fact that Trump is commanding interest rates to go lower. There’s not much he can do in the short term except run his mouth, which might actually make rates go down a little bit.
But in 2026, when Jay Powell’s term expires, Trump can install someone with… views more aligned to his on monetary policy? Who would that be? Kevin Warsh is the obvious next pick for Fed Chair, but one would think Warsh has some backbone to stand up to Trump. Kevin Hassett already has a job. Judy Shelton? I can’t think of anyone else.
It will be interesting, for sure, because a Fed Chair more aligned with Trump’s views on monetary policy has the potential to turn this place into Turkey. Whenever I bring this up to people, they look at me like I have a cabbage for a head. There is a guy in charge of Turkey who thinks that raising interest rates causes inflation. Well, look at inflation in Turkey, and look at the Turkish lira.
This is only week two of Trump’s term. Wait and see.
You are probably not aware of this, but I have a secret weapon in my Street Freak and Strategic Portfolio newsletters. I have an analyst supporting me, and this analyst does a lot of the scut work in terms of sending out alerts and maintaining the portfolio, but he also does a lot of other things, like… coming up with trade ideas!
Sometimes he comes up with ideas that I like, and sometimes he comes up with ideas that I don’t like. Sometimes the ideas I don’t like would have been awesome trades. I am not infallible. But his area of expertise is fundamental analysis, and my area of expertise is technical analysis and sentiment, so we’re a good team.
The guy lives in Missouri, of all places. And not St. Louis or Kansas City. He lives in East Frogkick, Missouri. This budding stock market genius is sitting in front of his computer in Cowtown, which is just how I like it. After all, I am running my own operation out of South Carolina. New York doesn’t have a monopoly on good ideas. For all I know, he is headed down to Dollar General right now to get a pint of ice cream.
In all earnestness, Adam is a very serious guy, and we’re planning big things for him, since he’s been working in my shadow with no recognition for years. I wouldn’t be able to function without him. And soon, neither will you.
Jared Dillian, MFA
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