"Liberation Day," or the Week Trump Began Destroying the World Economy

The carnage has already begun. A few days early, Trump announced…well, we still don’t know the details. But he gave indications, at least, that he’s basically going to melt down the world economy.

Hi, by the way, welcome back old friends, welcome new ones, and that’s little Snowy giving you a tiny hug to get you through it all.

So what’s going to happen? Again, we don’t know exactly. But what is happening is that markets are struggling, tumbling here and there, because it looks like Trump is going to hit…most of the world…with sky high tariffs.

Now, I want you to bear with me. Be calm. Sit with all this. Think clearly. Don’t panic, just listen to the message in that panic, which is that this is not going to end well. Then follow your instincts to change. 

Right now, most of you have a job that goes like this, and I've discussed this with some of you in sessions: you need to stop the bleeding. The effects of what’s going right now aren’t going to stop. 

Is there going to be a crash? Maybe. Nobody can predict that, but I’d say right now we can't rule it out. Markets are hanging on in the hope, it appears, that maybe Trump won’t go nuclear. But if they’re wrong? That’s how crashes happen. False optimism, suddenly dashed.

So the risk of that is building up, for sure, and so right now, the first step is to stop the bleeding, meaning, that you’re losing a few percentage points every day, week, certainly month, and if you let that go on, at the end of the year, you’re going to have a lost a lot. 

Everyone’s portfolio, but especially those structured by your typical Vanguard Fidelity etc guys, is bleeding out right now. That is because they have bet the farm, a lot of Americans’ in particular, on none of this ever happening, but it is happening, so those portfolios, the old world 60/40 stocks bonds but mostly Big American Capitalism kind of stuff, are now bleeding out. 

So probably your first goal is stopping the bleeding, then the next one is getting the hell out of the way of this catastrophe, which is going to manifest as a series of curves, crashes, crises.

OK? So bear that in mind as you read this. We’re not talking about Mad Max here. But we are talking about change. So that you’re ahead of this curve. Remember lines and curves? How we just discussed that? Go back and read that post if you need to.

What Happens Next, or a Guide to the Next Two Weeks

What I think is going to happen next is something like this.

America’s going to get hammered. Will it be 1987 style? 1929 style? A proper crash? Wall St’s hoping not, it’s even betting not. But I wouldn’t put it out of the range of possibilities. That range is something like hammered, crushed, slaughtered. We can’t rule it out, if we study history at all, because this is Smoot-Hawley level stuff, and so we’re easily back in that sort of territory, too.

Which will it be? Just an average correction? 1987? 1929? Nothing much? When will it happen? Tomorrow? Next week? The week after that? Only Trump knows. But, and it’s a big but. 

Wall St is slow to understand all this stuff. It thought any of this would never happen. It’s still in disbelief. That’s why you see these slow, constant falls. It’s. still cognitively “processing” this new reality, and it can’t quite handle it, and Wall St is just people. 

People who are not much like us. They don’t really like to read history, they don’t fully understand words like autocracy, and they don’t grasp, even, what causes depressions. They just look at stocks and bonds and hit buy and sell when things rise and fall. You will get in a lot of trouble if you’re thinking at that level these days.

Understand that difference. Right now, you understand more, much more, than Wall St does. It doesn’t grasp, at all, that if America stops functioning as a democracy and modern society…then what is its economy worth? 

So all of this means a deep probably, in the value of US assets, as this Macro Risk gets “priced in,” or as people in “the markets” begin to fully understand, in horror, just how bad the situation really is. Then we get to crashes. Wall St’s cognitive processing is slow, and that’s what a crash is, reality setting in. That fall might be sudden—a "crash"—or slow slides, over months, or a combination of both, each punctuating the other.

Now. Europe will also get hammered. And so will the globe. When I say Trump is blowing up the world economy, I’m not kidding.

That means that markets there will also fall. But in different ways. On and off, European stock markets are falling, too. But overall, they’re holding up better. Steep tariffs will hit them hard, too. But my guess is that they will balance in a better place, probably a much more stable and confident one, than American ones, over the longer run. That’s because Europe isn’t going to end up in the same kind of trouble America is. Instead of laying off millions from government, it’s investing. It’s not starting these trade wars. It doesn’t have a cockamamie plan to make enemies of the world. It’s not trying to sink its own stock market.

You must grasp that difference, because it matters. What kind of places do countries want to be? It makes all the difference in the end to what kinds of investment they attract. 

Some will become Havens. What will America become?

What it means at the end of the day, and this won’t necessarily happen over the next two weeks, but maybe over longer periods, is that the value of different economies must emerge in different places. How much would you bet on America right now? That’s how much you are betting.

Look for the Havens. Over the long term. The next two weeks will be chaos, everywhere, most likely.

Understanding the Next Two Years

“Liberation Day” is better thought of as the week Trump destroyed the global economy. Now you’re beginning to see what I mean a little bit. Don’t worry, I’m going to come to what to do. But first you must understand. I need to teach you to keep you safe.

This difference that will end up happening between America and the rest of the world is more of a maybe two to five yearrebalancing. What does America look like in five years, when Trump’s plunged it into something like a REALLY GREAT!!! Depression (that’s the next post by the way, go ahead and chuckle.)

In the short term, and let’s come back to that, we are just trying to minimize our degrees of risk. Nobody much is notgoing to lose money right now. Anyone that tells you that they can magically not lose you money is lying to you, a fool, or both. The point is to structure your assets in such a way now that they’re exposed to way, way less risk down the line.

Now. Who’s going to get hit hardest by the tariffs? Of course Europe and Asia will be hit hard. They’re major exporters toAmerica. But it’s America that’ll be hit hardest, most likely, for the most obvious reason of all. Americans pay the tariffs. I don’t know why people still don’t grasp that, enough of them, in America, but they don’t.

So yes, Europe and Asia will be hit too. 

There are no winners in trade wars. Please take a moment to really understand this principle. Everyone’s portfolio bleeding out? That is what it means in real life.

Ever, none, period. All they do, especially ones of this magnitude, is cause contractions, in this case, most likely a depression. But at the end of the day, America will be hit hardest, because Americans have to pay for all this the most.

Make sense? This process will take a couple of years, most likely, to play out. This is a divergence. Some countries will become Havens, and America will become the opposite, a place that capital run away from, in fear for its safety and existence. And maybe people do, too.

Trump’s Narcissistic Delusional Fantasy World

Trump has this fantasy that if he beats the entire world with tariffs, they’ll fall into line, and do what he asks. But…what is that? Nobody knows, because nobody has any real idea. Even he, I think, doesn’t know.

He might think that he wants companies and countries to “invest more in America.” If he really wanted, there’s a much simpler way to go about it, and this is going to make you laugh, he could just join the EU, and bang, hey presto, a massive wave of investment would roll in like a tidal wave.

Of course, the point of that example is that these guys have no clue what they’re doing. If you want more investment, this is exactly the wrong way to go about it. Would you invest more in a crashed economy? Where people already battered by inflation now face immensely higher prices because of tariffs? You wouldn’t, because of course, who can afford anything much more to begin with?

What to Do Now, or, Getting Ahead of the Curve

What you must be doing right now is understanding all this. Really grasping it. Sitting with it. You can disagree with me if you want, that’s not the point, the point is that you must have a perspective and vision of your own, and it can’t just be, “hey, my guy over there said everything will be fine!” By the time they figure it out, it’s going to be way, way too late, like I just explained.

The next two weeks are going to be chaos. There won't be any winners. Not one. Less sophisticated minds will jump to the conclusion that, for example, because American markets might have fallen 0.05% less than European ones, or vice versa, that that’s the winner. Wrong.

Remember the first lesson: nobody wins in trade wars. Now really understand what it means. The next two weeks will be chaos, and everyone will lose. There won’t be any winners. 

The question is you minimizing your risk over the long-term, while you can.

And doing that well is about following your instincts. There are some obvious short term things you can do, like probably 

—Have less in the stock markets overall, and I’ve discussed that with some of you in sessions
—Have a better balance towards bonds, currencies, even precious metals if you like
—If your instincts are shouting at you to just go for last-ditch safe havens, like precious metals, you can do that, too

This is about listening to your gut. You see, nobody can tell you the level of risk we’re at precisely except Donald Trump. 

If he wants to make the entire world economy uninvestable, he can.

I’ll discuss this more in another post, but let’s take the example of gold. It’s soaring, currently around $3K. Is gold the ultimate safe haven? Maybe, but even then, Hitler and Mussolini outlawed. And do you think that if it hits, let’s say, $5K, Trump isn’t going to want a cut of that, too?

So there’s no such as thing as absolute safety right now, and anyone who tells you there is is just being foolish. My suggestion is follow your instincts, they’ve led many of you well so far. Don’t ignore them. Don’t take even my word as gospel, don’t take anyone’s, listen to your gut, and come reality check it with me if you want, but put it first.

Understand. The question before us is: how much of the world economy is Trump going to blow up? He can blow it allup, right now, if he wants. That’s what your instincts are trying to protect you from, but you must verbalize that question consciously to be led well by it. You must really ask yourself and then really hear the answer your gut is telling you.

Reframing Your Thinking, or Stopping the Bleeding

Now. you must not interpret the next two weeks as anything other than they are and will be. The beginning of a period for the global economy in which we enter the very serious possibility of a depression. We’re back to 1940s tariff levels. In other words, we’re one step away from what started the Great Depression, and I’ll talk more about that next time.

In that context, the real question is: what keeps you safest over the long term?Over the long term, we will all need to think about which economies are safe. Only in those can stocks and bonds and currencies be safe, right? Like I said, Trump can happily come for your gold, in the end, too, and if it spikes high enough, let’s not imagine that he won’t. We’re in a different world now, in this sense.

So that is the correct way to think about this question, which is also the right question: what keeps you safest over the long term now? Do you really trust Trump not to do this…over and over again? Do you think this plan, the Mar a Lago Plan, has a hope in hell of working? You need to ask yourself those questions, and have a perspective on them. It’s not the old way of thinking anymore. The world is now about Macro Risk. 

My suggestion is this. Don’t overexpose yourself now. Think in these big picture and long term ways. Not in a simplistic way, but in a sophisticated one.

Follow your gut. Listen to it. It is warning you for a reason. It sees what’s coming before your mind does. Think in terms of risk and exposure. Do I really want to be exposed to the risk of Trump’s tariffs hitting America hardest? What exposure to risk do I take if I move my money here, there, over here? How exposed do I want to be to this whole cockamamie five step Mar-a-Lago plan, of which this is all only just the beginning?

That is a better way to think. And as you do, remember: you’re trying to stop the bleeding. .

So over the next two weeks, don’t panic, don’t freak out, understand that we are all going to go through this, in the biggest way possible, you, me, us, the world’s largest institutions, every single holder of every kind of US asset in the world, which, at the end of the day, is everyone. That’s how big this is, and in that sense, we’re all at the mercy of these lunatics. Who keep telling us exactly what they want to do.

But are we listening?

Don’t overexpose yourself to all that. And that can mean less exposure to stocks, for now, overall, almost certainly less exposure for sure to the usual suspects in the stock markets, especially the hyped-up ones in American markets, perhaps less to dollars, probably less stocks overall, and definitely not holding anything even sort of medium level risky to begin with. This is how you stop the bleeding, and you continue by listening to your gut, and if you like, reality checking it with me.

There Are No Winners. But You Don’t Have to Be as Much of a Loser as They Want You to Be

And as you do that, remember: there are no winners here. You are just trying to take less of a hit than you otherwise would have. That is what all this means in practical terms. That is what Trump doesn’t understand. 

And you do that by trying to stop the bleeding. Which is done by limiting your exposure to what is causing it. Like I said, typical portfolios are bleeding out, and while there are no winners, there’s also the issue of who loses most, more, and who loses a tolerable amount. That’s what “risk” means in this context, too, and your goal is just to not lose the most, because along the way, a whole lot of Americans appear poised to lose a very large chunk of their life savings.

You have to decide how much exposure you want, in the end, to all of this, the whole plan, the whole crackpot scheme, the Mar-a-Lago Plan, over the next longish term time horizon. That is what you must really ask yourself. I’m here to help you brainstorm with or to help you think, if you want, of course, but the point is this.

All of that’s “restructuring.” Not just stuff, but your mind. 

And to do it well, you must really understand it, not make the mistakes I’ve taught you about, which are imagining anybody wins, misunderstanding who will take the hardest hit, or thinking in too short a term. 

In that chaos, you must find clarity. I have shared all this with you to try and help you in that regard. Don’t fixate on the noise. Take a walk, clear your mind, think it through calmly. Only then will you be able to take decisions firmly and confidently.

Make sense? 

Sessions, You, Me, and All of Us

Now. The next two weeks will be very, very difficult. Unless Trump magically walks it all back. That’s what Wall St’s hoping, and while it might happen, I wouldn’t bet the farm on it.

I care about you guys, I value our community. I’ve tried to advise you as best I can here. And I’m trying to spend one-to-one time with as many of you as I can as fast as I can (which has been amazing, by the way.)

But right now, even the advice I give you, and I’m the guy who predicted all of this, has to change on a month to month, sometimes even week to week basis. Has to. Not because I want it to, but because we’re all at the complete mercy of lunatics, who like to utterly destroy things, and do so in the most harmful possible way, which is the most possible damage at the last possible second, and that is a form of abuse.

So I know the schedule’s booked up, and I’m super slow at the moment with emails (until I find a new assistant, don't kill met yet, I don't wanna die,) if you need help, reach out, and I’ll see what I can do or how to fit you in.

Lots of love from me and Snowy!! 

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