Just a short, early end-of-the-week post today. I’m trying to make sense of the headlines coming out of Washington DC.
I think it’s safe to say that they are more nonsense than common sense. It’s no surprise that the market is in a bit of a free-fall today.
How do these make sense …. ?
I don’t follow this … If we’re getting $7T in new tariff revenue and $1T in DOGE savings, but only returning $1.5T in new tax cuts, why do we need a debt limit that is $5T higher?
Doesn’t make sense and markets are running scared (S&P -7.1% YTD). Congrats if you bought gold (+24% YTD).
Hopefully if you were planning on retiring this year, you followed my frequent advice to have 2-3 years of savings in cash to weather a financial storm. It looks like it is raining hard right now.
How much of a buffer do you keep out of the markets in case of a downturn? Where do you keep it?
Image: Pixabay; News Headlines
MrFireStation 
How do these make sense …. ? The posted news articles are clipped from CNN and NBC which are legacy media. They suffer from Trump Derangement Syndrome and spins everything as Orange Man Bad.
I stay away from legacy media because it lies. If you go to the DOGE.gov website which is directly reporting on what the team is finding, you will see they found several hundred billion in fraud, waste and abuse in the Social Security Administration alone. Some of the most telling findings the DOGE team are finding is in the area of technology consulting.
Here is a great example.
Good work by @DeptVetAffairs
VA was previously paying ~$380,000/month for minor website modifications. That contract has not been renewed and the same work is now being executed by 1 internal VA software engineer spending ~10 hours/week.
Legacy media is scaring people by spinning cutting government waste, fraud, and abuse into playing clips of lying Senator Cuck Schumer saying that Trump is going to cut your Social Security.
I saw a table today about the tariffs that the US is paying to other countries and the US is across the board still charging less than other countries are charging us. Legacy media is missing that on the fact that the China is killing more than two Vietnam War’s worth of young people every year. The tariffs will work out fine if we finally get matching Federal Tax cuts and China stops killing two Vietnam War’s worth of our young people every year.
Warren Buffett said, “Be fearful when others are greedy. Be greedy when others are fearful.”
Sir John Templeton said, “To be a successful investor you need to help people. When people desperately, really want to buy your stock, you need to help them by selling it to them. When people are panicking to sell you their stock, you need to help them by buying it from them.”
Answering your question, my initial retirement is funded by a Deferred Comp Plan that is invested in a short duration treasury fund that pays out over ten years and conservative dividend stocks. Right now the split of my retirement income is around 75% from short term treasury and 25% dividends.
Why no matching tax cuts now? I think Trump increased the debt ceiling as a safety net to allow time for the DOGE cuts to reduce spending and tariffs to increase revenue to kick in. Trump and his team are probably going to have to drag Congress kicking and screaming later this year towards giving us taxpayers back our money that we earned.
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I wish it was a case of simple media bias, Klaus – but these numbers are all sourced directly from Trump Admin/GOP spokespeople …
$1T DOGE savings: Elon Musk
$7T Tariffs: Peter Navarro
$1.5T Tax Cut: John Thune
$5T Debt Limit Increase: John Thune
I too, was hopeful that the “reciprocal tariff” plan could initiate a trade reset. Unfortunately, the numbers shared by Trump yesterday as “Tariffs Charged” by other countries were actually based on trade deficits. They are not related at all to actual tariffs.
The WSJ and other sources have debunked the dubious approach: https://shorturl.at/DJlNF
Trump had a great chance to promote free trade with this initiative, but his approach lacks credibility. I think this is why the stock market threw up on the news today (S&P 500 -4.8% today). Not a good day for anyone’s retirement account. Good that we all planned ahead for stormy weather.
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Good article. The blanket 10% to everyone including those who are not charging us doesn’t seem reasonable. Looks like they had mission creep from starting out to stop fentanyl trafficking into the US that is killing around 100,000 of our young people every year to trying to use it as a revenue source.
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My wife and I listened to Tucker Carlson’s long form interview of Scott Bessent yesterday evening to gain a better understanding of thinking behind the tariffs. My thoughts are that the Trump Administration is serious about cutting the government deficits through a combination of DOGE’s cutting of waste, fraud and abuse in the Federal Government, and raising revenue through tariffs.
The administration is also trying to bring manufacturing back to the US, to reverse the decimation of the American Middle Class that has been going on for decades. The interview also mentioned that the tariffs would also be used to offset taxes on tips, overtime and Social Security. Junk from China is not my household’s number one budget item. The Federal Government is and by a lot. US based manufacturing and supply chains are also very important for National Defense. The US couldn’t fight and win WW II if we had our current supply chain.
Other takeaways are that the S&P 500 which is market cap weighted and heavy driven by AI was already tanking because of China’s more announcement that they had a more efficient AI algorithm. During the last Trump Administration, they found that a small portion of the 20% tariffs on China actually reached the consumer. They estimate that the USD will appreciate as we get our budget balanced, and the producers will eat some of the tariffs. The best way to avoid tariffs is to manufacture in the USA, which will increase tax revenue more than the tariff that is lost. Finally, the Federal Government is ripe for modernization to reduce their cost while improving their quality of service.
https://x.com/TuckerCarlson/status/1908204378613248067
Here is an abridged version.
https://www.theepochtimes.com/us/tariffs-may-raise-prices-slightly-but-will-deliver-tax-relief-for-bottom-50-percent-bessent-says-5836931?utm_source=ref_share&utm_campaign=copy
Here is another timely article from the Mises Institute.
https://mises.org/mises-wire/markets-need-more-rate-cuts-recover
Ludwig von Mises is a favorite of Libertarians who want less government spending and balanced budgets. His economic thoughts were a major influence on Argentina’s President Javier Milei.
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Yes – I listened to that interview, too! I know some people don’t care for Tucker Carlson, but I thought he did a good job hosting Bessent and I liked hearing his thoughts directly.
A couple thoughts I had: 1) He didn’t make a great case for the logic behind the tariffs. Just focused on Trump’s 4-decade fascination with them. I don’t like Vance’s logic either, but he puts it a lot more eloquently than Bessent. 2) I’m not sure what the fascination with manufacturing jobs is. We still have a lot of them, but I don’t hear a lot of parents say they really want their kids to grow up and work in factories. We can do better. 3) I was surprised to hear him say how ugly the economic profile of China was right now. He described their situation as a “severe recession, or even depression”. Clearly Bessent & Trump see this as a chance to kick our rival while they are down. 4) He didn’t offer a clear view of how Trump was going to get his tax cut bills through Congress. I thought he’d speak a bit more positively on that. 5) He’s right that the tech stocks / Magnificent 7 were fading prior to last week, but after two days of big drops (interview was recorded only after the first day), it’s a pretty broad-based bear market. The equally weighted S&P 500 was down -13.5% since Inauguration Day by the close of Friday). Lastly, 6) Tucker didn’t put him on the spot at all on how these tariffs were haphazardly created. It’s simply sloppy to use trade deficits as proxies for tariffs. If I buy Macallan, BMW, or LEGO – I get the product, they get my money. I don’t see any ‘deficit”.
Yes, I do follow and read stuff from Mises.org. I like them, Reason.com, and FEE (Foundation for Economic Education).
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Hey Mr. Firestation, I’m currently at about 3.25 years expenses and I’m using money market and a short term bond index fund. What are your thoughts on dividends? Yes, I know they can and will be cut in a bear market. But, surely they don’t go immediately to 0 and stay at 0. This should also help extend the life of an emergency fund. Lastly, home equity is another area that might help extend the emergency fund. Fingers-crossed, none of this is necessary, and things quickly turn around. Thanks
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I invest in dividends and from my observations well financed dividend companies do not cut their dividends during bear markets. There are companies that made it through 2000, 2008 and 2020 without cutting their dividend and even grew their dividend slightly.
Dividend growth companies will suffer a market price decline during bear markets. If you are reinvesting dividends, bear markets are a time to put your money to work for you at a higher current yield.
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Yeah – I’m increasingly liking the idea of high-yielding dividend stocks. Klaus Wentzel, who comments on here a lot has me sold on his approach. We’re selling a townhouse and I think I’m going to put a big chunk of the proceeds into one of those funds.
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Gordan Chang is someone to follow regarding China’s bad economic conditions. According to him, they have been in trouble for a long time. Because of all their currency and interest rate manipulation, the Chinese people do not trust their currency so gold is and apartments were been seen as a store of value. They are having trouble putting all their young people to work.
Here is article that lays out the case for China’s economic weakness. The craziest takeaway from the article is that China has built 3 billion apartment units as an economic stimulus, which exceeds their 1.4 billion population at a time when their population is crashing because of the one child per couple policy.
https://www.pacificresearch.org/wp-content/uploads/2024/10/ChangReport_N4_F.pdf
Mr. Chang has been a proponent of the US sticking their foot on China’s economic neck, similar to Reagan’s Defense Spending taking down the Soviet Union. Central planning works great until it doesn’t.
Mr. Chang is a Fellow at the Hoover Institution.
https://www.hoover.org/profiles/gordon-g-chang
Moderate high yield dividends combined with a high growth rate will give you good returns. Figure on making the sum of the current yield and growth rate with a capital gain kicker as the stocks that are currently unloved become loved again.
Here is a link that references Ned Davis’ research on dividend policy versus long term stock market returns. Dividend Growers and Initiators outperformed all dividend policies and the S&P 500.
https://washingtoncrossingadvisors.com/wp-content/uploads/2024/10/WCA-Case-For-Rising-Dividends-2024.pdf
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Interesting … I have not heard of Gordon Chang before. I’m familiar with the Hoover Institute, but will now give him a follow. It looks like he is known to stir up some controversy. Not a bad thing.
I read the Peter Ziehan book, “The Beginning of the End”. He also is pessimistic on China and stirs up controversy. He sees challenging winds for China based on their demographics.
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