Wait & See | Jack & Max on May Fed Meeting, Shipping Volumes, China Stimulus, and Tariff Newsflow
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The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough. Thank you. Let's close this door. We are here on another Federal Reserve Day. They talked about tariff. They talked about inflation, how the dual mandate may be challenged over the next coming meetings and months. I'm joined by my friend, business partner, and host of the Other People's Money podcast, Max Weethy. Max, how you doing, man?

I'm doing well. Always good to be here on Fed Day. Wasn't the most exciting Fed Day. They didn't change policy in any way. Obviously, when you don't have the summary of economic projections, the most look through you're going to get is from the press conference. So why don't we just skip ahead there? What did you think of the press conference today?

Max, you said it wasn't very exciting. I think from a conventional view, you're definitely right. I think the one argument you could make that it was exciting is to someone who they've listened to a lot of music, they'd hear all the notes. Their favorite notes are the silent ones that the people don't play. That is the way I think it was Powell's sort of meditating and basically repeating three words, wait and see, wait and see. The Federal Reserve did not cut interest rates and they

were quite demure on whether they were to cut the upcoming meetings. The market interpreted it as somewhat less likely to cut. So the market was pricing in a 30% chance of cutting at the June meeting. Now it's, as we record, quote unquote, only a 20% cut. The stock market was wavering and reacting not very excitedly in either direction, but it has so far turned up.

There are a lot of things about the data that I think we should get into. And first, Max, the...

The fact that as people on this program have been saying, the Federal Reserve faces a conundrum because tariffs, they are bad for real growth. So they either increase inflation more than the nominal growth will go up, or they decrease nominal growth more than inflation will go down. So inflation adjusted GDP is likely going to be challenged.

And if inflation is going to be high, the Federal Reserve should be hawkish and keep rates high. But if there's going to be a recession and growth is going to go down, they obviously should cut rates. So those two tensions are going to are

at play. And the dual mandate of the maximum employment and stable prices is going to be challenged because the Federal Reserve, the statement and then Fed Chair Powell repeated that they see an increased chance of higher inflation and higher unemployment. So which way do they go? That's the question.

Well, they said an increased chance as well. So that was one of the key things is that they're not seeing any of this in the data yet. They're astutely watching these things, but they haven't seen any of it in the data. Some people would argue, well, what data are you looking at? So it might be interesting to say, what is the data that the Fed is focused on that they're not seeing these things pop up in? And then what are maybe the

faster moving data sources. And then there's the soft data as well that they don't value as much. And that's something that Powell actually said. So hard data are things like investment, spending, unemployment, hiring, firing, things that you actually can point to and say, this happened by this amount, and that is going to impact our

things that people really drive an economy. Then there are real-time indicators such as shipping volumes that is real and is likely going to give an indication, but you can't really grab it and say, this is the data that we're going to

put into our machine and ultimately get some policy out of it. But then there's the soft data. So the soft data has been absolutely abysmal. I mean, any real survey, consumer survey, survey of producers, of factories reporting very negative levels, high inflation outlooks, at least in the short term, indications of letting people go, indications of lower spending and the like.

concern, just very, very negative things. But I think Fed Powell has been burned or I guess the economic community has been burned because in 2022, all of these very negative signs appeared and yet there was no recession. People at the time actually thought there was a recession because of two consecutive quarters of negative real GDP in Q1 and Q2. The Q2 negative print was actually revised away and the Q1 print in 2022 was negative because of a huge surge of imports.

And that is actually what happened in Q1 of this year. So that's a theme that we will return to. But the Federal Reserve doesn't have any real data that it, not that it considers credible, but that is actually reflective that it can rely on that is going to go into GDP. And it has a lot of soft data that's very negative, but Fed Chair Powell was quite clear that he's not going to act on that. And the Fed is not going to act on that now.

Let's say you're a critic of the Fed and you believe that they're being too slow to act to the risk of tariffs. What are the other points of data that you might be pointing to to say, how are you not looking at this? How are you not seeing this?

I think most soft data is extremely negative, as I said, and also the shipping data, which is real. I mean, a lot of soft data, I would characterize it as basically just asking people how they're feeling, which feelings do matter and perceptions do matter. Obviously, cycles, that's why economic cycles, negative economic cycles feed on themselves and positive economic cycles feed on themselves. That's very important in economic psychology.

But I think they are kind of surveys of psychology and intentions, whereas real time data of, OK, the head of the port of Los Angeles said that in the first week of May, shipping volumes are down over 30%.

That matters. But okay, what about the second week of May? If you look at week by week data, there's a tremendous amount of volatility that could have happened anyway. Now, I don't think it is a coincidence. I think it is connected with the tariffs. And I've got some later anecdotes on trade and analogies of trade to 2020. But it's quite unclear. That could just be a blip. And Powell said we're watching it, but it's not really going to factor into our analysis.

Okay. Now, we had dueling press conferences somewhat. The president spoke from the Oval Office, was asked about whether he would lower tariffs to get China to the negotiating table, perhaps in a moment of brevity, which he is not known for, or in a moment of making sure he was not misquoted. He gave a one-word answer, no. And the market actually sold off on that comment. It was kind of

actually timed up perfectly with the release of the Fed report. So it's hard to tell, like, is it this statement from Trump that he's not going to lower tariffs? Or is it just when the Fed decision goes out, you just get volatility. Sometimes it's up, sometimes it's down. It usually whipsaws around quite a bit before we take a direction for the day.

Did you think there was any intentionality in having that press conference right at the same time? Was Trump trying to, as others have said, Trump Powell in taking control of the market narrative for the day?

I think President Trump definitely would be pleased at trumping Powell. I think if you asked him, do you want to trump Powell? He would probably say maybe or yes. I don't know if it was intentional, but I think once he was there, he was happy to say that and state what he believes, which is that he does not plan on lowering tariffs.

in order to have a meeting, that he wants to do a deal and the deal could involve lowering tariffs. And he has said that he will lower tariffs, but he's not going to preemptively lower tariffs. I will say that was at the swearing in of the ambassador to China, David Perdue, who interestingly enough, actually in his

private sector career before I believe he was a senator, he worked at several apparel companies in the mid-2000s, Reebok, and then a textile company, and then I think a pillow company. I have not done the supply chain analysis, but I would be shocked if in the mid-2000s, textiles and shoes and pillows had some

presence in China. So maybe that could, I've not familiarized myself with David Perdue's views, but really I think it is the president who is going to be leading on this. And I think that it's not a conflict, but it's struck a different note, President Trump's no, again, you can't misquote it. He said one word, no, that

that struck a different note than Treasury Secretary Scott Besant, who has announced plans that in Switzerland, he may brush up with the China trade delegation and have some

trade talks, not to reach a deal, but just to moderate some of the tension. So we continue to see somewhat different sounding notes from different parts of the White House. I don't think that they are pursuing different goals. I think they want what President Trump wants. But I think that there is a little bit of tension there for sure, although certainly less tension than we saw a month ago.

The other thing that he discussed was about who asked for the meeting in Geneva. And I think somebody said, you know, China says you asked for the meeting and Trump said, you know, they better check their notes on that because they asked for it. Which, you know, in the grand scheme of things is not particularly important if the talks happen, but it does speak to the idea of who is negotiating from a country.

a place of strength or a place of weakness in this case. And we just had no change in policy here in the US. Last night, we got a change in policy in China in a sort of stimulative measure. So perhaps China is the one asking for the deal and that the Trump administration does have a bit more strength than some critics might argue.

Yeah. So in the United States, the Federal Reserve, the central bank is independent from the fiscal. I mean, I think President Trump meets with Treasury Secretary either every Friday or every other Friday, but the Federal Reserve fulfills its own mission. In China, that is totally not the case. The People's Bank of China, not only is it junior to the Communist Party and the

the Politburo, but there are, I think, several other parts of the Chinese government that, you know, no one in America has really even heard of, except for specialists that are also senior to the PBOC. So it's like literally, you know,

close to the middle of the bottom, I'd say, in terms of reporting and power. But they do have a lot of power in the Chinese financial system. They are the Chinese central bank after all. So let's go through several things. So they lowered several different interest rates and they also lowered reserve requirements and they announced various special financing facilities.

So they lowered the reserve ratio by 50 basis points, which they said will inject approximately 1 trillion yuan of long-term liquidity. They also lowered the deposit reserve ratio for auto finance companies and financial leasing companies from 5% to 0%. I think that those are just smaller banks like auto financial companies. So a reserve requirement of 0%, meaning you have to have zero reserves against loans, that does sound quite stimulative.

I do think that the reserve requirement in China does matter somewhat. I know in the US, it literally doesn't matter at all because the constraints in the US for banks is bank equity capital and risk weightings from regulation. So that's when President Trump and Secretary Besant say that they're going to deregulate the banking system to the extent that they could lower capital requirements. If they could do that without having to fly to Switzerland, then that would be stimulative. But then they're lowering the policy interest rate so that

they're lowering uh interest rates to agricultural loans mortgage loans uh personal housing uh fund loans they're gonna lower that as well they're going to uh have a lending quota for scientific and technological uh uh

loans, and then various other policies. So they announced 10 different things, some of which I'm sure will have a small or limited or maybe even almost no effect. But I think as a cohesive force, definitely some significant

monetary stimulus from China, not fiscal stimulus, but monetary stimulus from China. Interesting to see actually that US markets were up and the Chinese stock market was down today. So you had positive, somewhat positive news for China. The Chinese stock market declined and you had somewhat negative news for the US and the US stock market went up. We have Powell saying, no, he's not going to lower tariffs. And then also, you know, there's somewhat hawkish federal reserve meeting.

So you would characterize it as a hawkish meeting? Max, you pointed out before we recorded this that the market wore it up and therefore the market didn't interpret it as that hawkish. And I think you're right. And you got to go with the market in this one. I think I read the Fed number two, Christopher Waller's speech, and he seemed quite dovish to me. So I assumed that the

Powell would be a little bit more dovish. And again, he didn't say anything that were outright hawkish. To the extent that he was hawkish, it was what he didn't say. He didn't say, we stand ready to support financial markets. He didn't say that he's more concerned about a slowdown than inflation. He's definitely keeping all options open. So to me, it was

slightly hawkish and more hawkish than my expectation, but the stock market clearly said no. And that leads to a point I know you've been thinking about, Max, which is just the somewhat dissonance between the news flow and the price action in the stock market.

Well, I wouldn't say it's like dissonance. It's just the rapidity of it dissipating out. So you get Trump saying like, no, I'm not going to lower tariffs. The market seemed to sell off on that. And here we are right back. It just comes right back up. Maybe the market was hoping for a little bit of dovishness.

And if that was the case, didn't seem to matter. And we went right back up. I just feel like when these negative news bombs are coming out, the market reacts, it goes down a little bit, and then we just snap back so quickly. Whereas on the other side, when positive things come out, it tends to stick. And so

I don't know whether that means it's all behind us, it's all been priced in. I've been calling it sort of like a hope premium, like the market is trading at a hope premium, whether it's that monetary policy is going to be supportive, whether it's that

Trade policy is going to be moderated. Or the third thing, which is that it's all going to work out. Maybe trade policy won't be moderated, but it's not going to harm the economy nearly as much as people say of those options. And that's why, much like if you're expecting a move from the Federal Reserve, it's going to have to show up in the data. I think that's true of market moving options.

of market moving data too. You're going to really need to see hard data come in that says, this is hurting companies before the market starts to sell off because it doesn't seem to care.

I couldn't agree more, Max. I feel like a significantly negative news item will drag the market down about 80 basis points in the pre-market, but the stock market will end up green. So I think the vast majority of days over the past three weeks have been positive news.

positive days. Even if they started out the market decline, it just really seems like the market wants to go up. And I have been paying attention to that on a technical level. I'm not a technical analyst at all, but I feel like if you're paying attention to this market, you can't help but observe that the market kind of wants to go up. And so that is something that's definitely at attention with my fundamental thesis. I've been

quite vocal on my show and when you and I do these shows and so have you, that I'm quite pessimistic on markets and the economy if these tariffs remain at these levels. But I have to be paying attention and be humble and say the stock market is somewhat telling me a different point of view. But if viewers are wondering if I've let go of all of my puts, the answer is no. But I am eating my

more than one slice of humble pie because the stock market has absolutely just ripped in the face of the bears and in the face of me over the past month. I think the low was April 8th or April 9th, and the market has absolutely just been ripping from there. And to me, it is ripping more than it quote unquote deserves, but I think that you've got to listen to what the market's telling you.

Some of those negative bombs were coming from somebody we're not hearing from. You know a name we haven't heard in a couple of weeks? Howard Lutnick. Haven't heard that name at all. Some of those negative news soundbites that were driving the market down lower are not coming out. I don't know if he's been muzzled or he's changed his views or what, but

There certainly haven't been as many negative sort of news bombs also. To me, my view is that every day that goes by where these tariffs on China are very high, that is further going to disturb global trade. And the consequences of that are not...

in the short term, not going to be all negative. For example, it could cause imports to collapse, which actually could cause GDP to go up in the same way that we saw as GDP to go down because there was so much tariff front running in Q1. We'll get to that in a second. But no, yeah. So I'd say, I just want to acknowledge that the market has been moving against my fundamental view. I haven't been fully convinced that I'm wrong yet though. And I

But yeah, I just want to acknowledge that definitely, yeah, this is not what I expected for sure. And if it's appropriate to victory lap when you're right, which maybe it isn't, but if that's what I did, then I definitely got to take my lumps and publicly acknowledge when I'm wrong. So yeah. Jack, you talked about how you think every day

trade is going to be affected. Let's get into that. So I know you took a look at some of the shipping data in preparation for this as well. We talked a little bit about how imports were affecting GDP. You can pick which one you want to start with.

So I actually haven't been looking at hard shipping data so far. I think you'd have to be a paying member of an expensive service to get current data. There's quotes. I mean, CNN is quoting the head of the Port of Los Angeles who said that shipping volumes are down

over 30% for the first week of May. But I don't have access to that data, to be quite honest. What I do have access to is the data of 2020. And I was just going over that data in some detail, to be honest, last night. And I think that a fundamental narrative that was in my mind, I actually no longer have. I have...

had believed, and I'd heard from investors who are famous and better investors that I'll ever be, that their base case and my base case was that this was going to be a mirror image of COVID, of trade is going to collapse and go down quite significantly. But actually, Max, I looked at the data and trade volumes between

Asia and the United States really rebounded extremely, extremely quickly. So for example, I think I had the sense that in 2020, there was a huge collapse in 2020 in global trade, and it didn't recover until 2021, and then it went up. But even by the second quarter, it was rip-roaring, I guess still somewhat down year over year. But in Q3, the trajectory was clear, and you were into...

bigger and better trade or not better. That's a judgmental word, but, but more significant trade, um, than, than ever in Q3 and, and in Q3, you know, domestically, the economy was, was still quite weak. Um, but you know, in terms of global trade, the goods trade you had, I just,

review the data, it's quite significant. The US Customs Department actually has some data. I was just looking at that every month from China to the US, Japan to the US, and South Korea to the US, Vietnam to the US. And by Q3, it was clearly on a clear trajectory. And I was looking at some shipping companies. And

There was even earlier signs. So for example, Madsen, one of the few companies that's headquartered in Hawaii, the other one is Bank of Hawaii. But Madsen, it's a shipping company headquartered of Hawaii. They do Guam, they do Alaska, obviously they do Hawaii, and they do China to the port of Los Angeles, China to the west coast of the US. And in...

their Q1 China flows, China container volumes were actually somewhat down, but in the second quarter of 2020, their volumes were up 68% year over year. So there already was a tremendous amount of

shipping from China to the United States, people were at home and they were just ordering a lot of stuff on Amazon. That is not going to happen now. I mean, I don't know what's going to happen with tariffs. They could stay at 145%. They could go to zero. They could go to 65%, 30%, 245%. I've got no idea. But here's what I do know, that if the tariffs remain

this high or even close to this high, that you're not going to have a frenetic spending in the United States of buying stuff from China and shipping volumes are going to go to the moon like they did in Q2 and then 2020 and later in 2021. So I think this is a fundamentally different story than COVID. And I think that COVID kind of cured itself as the economy rebounded and there was a reopening. But I think with this, you know,

artificially imposed tariff level, the only thing that's going to cause that to rebound is a severe reduction in tariffs. Now, I guess you could say that the lockdowns were mandated and caused, and that is true. But I think those lockdowns

And actually, sorry, no, but even in Q2 with those lockdowns, people were still ordering a bunch of stuff from home. Part of that, Jack, might have to do with the stimulus that came. We all got a check in the mail and as well, the market recovered. So you've got the, you know, the.

the top 10% whose spending is driven by the wealth effect. So they recovered very, very quickly. And then you had the bottom half who were driven by the increased unemployment and the other stimulus.

Now, I don't have any timeline on this or how realistic any of it is, but you do have the Trump tax cuts, which could be seen as a similar thing. So, you know, this is their numbers. Obviously, they want to make this policy seem as good as they possibly can, but, you know...

Eight days ago, the White House said that the Trump tax cuts that they're looking to do, real wages will go up as much as $3,300 a year and take-home pay for medium-income households will increase by as much as $5,000 per year. That would be even more than not unemployment maybe for some people who are unemployed, but if you just take the direct stimulus from COVID and you say that went into spending, that

That would be even more. So, you know, it still has to pass. Those numbers still have to be accurate. But there could be some stimulus that comes from that that helps to, you know, buffer the effect of higher prices from tariffs.

I think that's true. I'm not going to argue. I mean, tax cuts are stimulative to the economy, but I think there's a difference between a tax cut and sending people money and sending people thousands of dollars, some of whom still have a job and they can't go out. They're literally, it's illegal basically to go out to the store and buy things.

Like it's almost a guarantee that you're going to buy a lot of stuff from Amazon and then it's going to be shipped over from China. So I think receiving a check in the mail, as so many people did in 2020, is a little bit different than a tax cut. Psychologically, even if in looking at the payments, it kind of is...

similar. Okay. But Max, so let's, so that was Madsen. All right. Now let's talk about, and by the way, Max, when I talk about Madsen, I'm not just talking about the price was up 68%. Volumes were up, you know, tonnage was up 68%. Okay. So now let's look at, um,

It's a company, tickers EXPD, Expeditors out of Washington. Now let's go back to the present day. Just a few days ago, they had a call, an earnings call, and here's the guidance. We were seeing subsequent to March 31st, 2025. So they're not talking about the first quarter after that.

Basically, after Liberation Day, too. We were seeing early signs that China to US ocean volumes are declining significantly, while some of those volumes are shifting to other lanes as customers look to mitigate their exposure to China-specific tariffs. It's too early to know what the overall decline in volumes might be. Madsen, which I referenced earlier, also in their call said, looking forward, lowering our 2025 outlook due to significant uncertainty regarding tariffs and global trade regulatory measures and the trajectory of the US economy and other geopolitical factors.

So shipping companies are definitely lowering guidance and warning of a very sharp decline in global trade. But again, I would put that in some sort of soft data. That's just a CEO saying things. It's different than I've got the data in hand and in Excel and I can send that to the Fed chairman and that actually has happened. For all we know, the fear from these shipping CEOs might not happen. I think it probably will if tariffs stay this high, but it might not happen.

I know you took a look at, you know, Visa credit card data, you know, the, the consumer, how strong is the consumer right now? Yeah. So, uh, Powell referenced that the consumer is still spending, uh,

I haven't looked at any, honestly, any like hardcore macro data. I don't think a lot of it is out yet, but I like when companies reveal data that actually is, you know, earlier than the macro data that's reported by the government. So Visa in their earnings report, they talked about the first quarter. So January 1st to March 31st, but they also gave a,

little window into the spending from April 1st to April 21st, which obviously includes the post-liberation day spending, which was on April 2nd. And actually, the spending over that period was up 8% on credit cards and debit cards within the US relative to April 1st to April 21st of the previous year. So there's only two wrinkles. So that would indicate that the consumer is strong. No one cares. There's two wrinkles. Number one, I think it

a lot of it could be front running of people reading on the news that these tariffs are going, you're going to pay so much more. And then they say, okay, I'm going to buy a car today. I'm going to buy this lamp today. I've been meaning to get another iPhone. Boom, let's get it right now. That I think is probably happening. Another thing just in the data is that Easter this year was April 20th, whereas in

the previous year, it was on March 29th. So you're comparing a period of time, April 1st to April 21st with a previous period that doesn't have Easter and spending in Easter is somewhat elevated. I don't know how much, but yeah, I mean, that's a piece of hard data that's preceding any macro data that indicates that there's a lot of spending. But I think that a lot of that is front running.

There was a big market moving event that happened earlier in the day, which if you weren't paying attention, you might have missed. And it moved the stock of Google and a little bit moved the stock of Apple, which given their massive weights in the index can move the entire market. So Apple came out and they announced that they are...

looking at putting in an AI search directly into their browser instead of sending people through to Google. I know Apple searches are a huge amount of Google searches and the market did not like that. I think Google sold off about 7% where it ended the day. I can't really say, but on that piece of news, it moved. Jack, can you speak to me a little bit about what

how big a deal that would be for Apple to enter the search game via AI. I am an investor in Google, full disclosure, so not a great day for that. But I'm not terribly concerned. I think in that article from Bloomberg, Google said that, excuse me, the person from Apple said that they still thought Google would be among the big

browsers, it just wouldn't be the default browser that they're paying for. But no real view of fundamental analysis, just reading that one article. Just to give people the data though, from about 1030 to 1115, the S&P, which was up...

you know, at 1030 declined about 56 basis points. So half a percent and not big deal. But I saw that on my screen. I've said, what did President Trump say? What news was there out of China? Because there's things happening all the time. And then it took me, you know, a few minutes to realize that nothing macro had happened. It just was this this thing. But just to give folks the numbers, I

I think that Google, which it has GOOG and GOOGL combined, those are 3.64% of the S&P, and it declined roughly 7% from, again, from that period. So I'd say...

that's attributable to a 24 basis point decline in S&P is from Google. And then 16 basis points of that decline in the 56 basis point decline can you attribute to Apple? Because Apple is 6.27% of the S&P and it had a roughly 2.5% decline. So I'm a podcaster, I don't have access to all this data and I just did it in a few minutes. So that data I can assure you is imprecise and wrong, but it is

roughly accurate. And someone actually messaged me that you have to factor into account the other 498 stocks in the S&P, how they impact move, there's correlation impacts. But basically, the point that I made in the tweet and that I'm saying now, I think it's true, which is you had a move in the S&P that was primarily driven by this non-macro news item that affected these two stocks, which just happened to be a huge percentage of the S&P.

Yeah, and it's just rare to have that. So when people talk about how impactful these large stocks can be in the index, it's just so rare to have them moving idiosyncratically. I mean, even sometimes on earnings, they'll move together. So for it to be a non-earnings event being the idiosyncratic thing and for it to not really spill over

too much into other large cap tech names, just sort of a rare event. So fun thing to look, like a solar eclipse almost. You go out, you look at it, you study it, you go, oh, that was fun. And then you move on. But Jack, I guess, look, it feels kind of like the tone of our conversation matches the tone of Powell's conversation in that I don't think we've really changed too much of our views, but we do have to wait and see.

We do have to wait and see. Max, how are those HYG puts? How are they looking to you right now? I know you sold all of them and quite a good timing, but are you looking to reenter that trade? Because this high yield ETF, I'm looking, it's basically where it was pre-liberation day, and so is the stock market.

Yeah, I'm not doing that. I've actually been buying more stuff. You and I have both kind of been on like an insurance kick. I love Progressive. I think it's like one of the highest chart ratio stocks ever, just like...

goes up, it often has green days on days when the market is red, like a true super red day. Nothing is immune, but if you're down 50 basis points in the S&P, it's not unusual to see progressive going up. So that's just one stock that's large enough that I would talk about. So that's really what I have been doing. I think when we...

First, had one of these after Liberation Day and I said, "I really don't have a view on equities. I kind of just think the bond move is overdone." That for me, for my inverse victory lap, that has not worked. So I took some pain there, but overall, just having traded the Liberation Day well enough,

it made the year essentially for my portfolio. So I'm in the like, don't do anything stupid phase of just had a very good year and wait for your pitch. And I'm not a professional investor, professional investors who have the mandate to stay invested, they're not getting paid fees if they're sitting in cash, their investors don't want to see them sitting in cash.

People often talk about what are the advantages that a retail investor might have over a professional investor. And the ability to do nothing is perhaps, I think, the biggest and most valuable advantage that you have. So I'm very much in the do nothing stage and looking at most insurance companies.

companies are not really going to be affected by tariffs. It's a service, so it's not to say that they're tariff-proof or there won't be things that come through, but even if it's inflationary and the cost of, let's say you're an auto insurer and the cost of auto parts goes up or there are disruptions to the auto parts supply chain, that all gets passed on to the consumer or to the person who's buying the insurance eventually. It takes time and it can be lumpy, but it's

These companies are oftentimes like hundreds of years old. Like they figured these things out. Probably some of the only companies have been around since the, uh, since some of the first tariffs that we had. Um, so I don't, I don't, uh,

necessarily have a view on hyg or like any particular place that i'd be looking to hedge exposure but i'm definitely not somebody who's like piling back into like the market leaders like the palantirs um nvidia's applovin um bitcoin i mean bitcoin has been very strong um

but I'm not chasing that. I'm looking for names that I think could do well through CHOP because I'm also not calling for a big second leg down. I just think there's a lot of uncertainty. There's going to be a lot of different headlines that come out. I think you're going to get trade deals that materialize, that underwhelm. It is a deal, and on its face, they'll be able to put out the headline that a deal has been reached with China, but

Do we really think that they're going to give up all of the things that we want from them right away and that tariffs are going to go to 10% on China or something like that? I don't think so. So I think I'm looking for stuff that I can stay invested and have some exposure, but not necessarily be taking a strong view on the market. What about you?

Well, almost all of my short positioning is via puts or as in early April, late March in calls on the VIX. And those are the types of things when they work, the position gets bigger. And when it doesn't work, the position gets smaller. Unlike if you're actually outright short, when it doesn't work and you're wrong, it gets bigger. And when you're right, it gets smaller and smaller. So those puts have obviously been declining in value. Like you, I did have some

some nice monetization of those hedges in, I think the Monday and Tuesday after Liberation Day before the Wednesday, one of the biggest moves ever. But I definitely owned some puts that had been marginally buying some more puts, but just as they've been declining in value, yeah, I've also been buying some stocks which currently to me appear like they will be unaffected by tariffs. But while you're talking again, and I

should have 100% be listening to you while you're listening, but I couldn't help the thought appeared in my mind of, I'm going to say, "Oh, well, actually the stocks that I own, they're not going to be affected by tariffs at all." But then I realize that's extremely radically overconfident thing to say, because if tariffs happen and cause a recession, oh yeah, this stock that just because it's not selling shoes from China, it's

it could still be affected in a drastic way and many things are affected. So Max, based on what you're saying, I think I am more bearish than you. Very much aware that the market just goes up Monday, Tuesday, Wednesday, Thursday, Friday, and that is a sign of a bull market. That is not a sign of a bear market. But I need to see

more evidence of trade deals before I get less bearish. But I'll also say I am a buyer of stocks. And with the Berkshire Hathaway meeting, that kind of has reinvigorated in something that I've been

a feeling for like over the past few weeks, which is just own very high quality companies. And you know, you have know way more about the insurance business than I, as well as people close to you, like way more. But so I'm just on an insurance kick literally over the past three or four days. But yeah, I agree that insurance companies are unlike in a unlikely to be affected in a fundamental way by tariffs. Although yeah, if inflation goes up, I guess

temporarily like losses uh what you know um combined loss ratio could go up but then ultimately they're going to reprice that so ultimately insurance companies are not hurt and may even benefit from inflation but in the short term um it it may uh uh hurt but yeah i mean i think i don't know i gotta i gotta look at some of these uh

I also, Max, I'll say, I've also had a big year, not only because of the monetization of hedges that worked out in early April, but also of being very long China. Max, I think you and I are both in a position of strength.

But doesn't that matter? We don't need to save our excellent performance so that if we're flat, we're still up 30% over the year. If there's an opportunity to be long HYG puts that you think is good, then you should do that. You should pursue the profit. It sounds like you don't think there's an opportunity, and that's a valid argument. But I would push back against this thing of like, oh, I've had a good year.

Yeah, but we just like you pay taxes that way you like we think that way like that's the scorecard and I, you know, you talk to professionals and you talk to amateurs too and the psychology of trading like affects your decisions. And

and the ability to be like zen and happy with your year and not do stupid things like it that's a valuable place like it's very rare like it's so hard to beat the market like you're kind of always like scratching and clawing and trying to get ahead and like so sometimes in the in the rare instances where you've just like absolutely like

trounced it and you have a time to take... I just went to the beach. I didn't think about my portfolio. This is the first time you and I are working together. You're my boss, I'm your boss. I didn't have my boss texting me or emailing me or anything like that. Wasn't worried about what was happening in my portfolio. It's kind of nice. So I do think as much as like, yes, that is true, but on a lifestyle perspective, I'm

I tend to disagree. That totally makes sense. You know, I, I'm, I think I've been pretty, pretty, you know, deep in the market and following the news flow. And like, you don't to not have an edge on people. But if you're following the news flow constantly, like you don't have to be smart, you're just constantly following it. So you'll know when something happens. And then, you know, most people will get a ping about it 20 minutes later, or even several hours later, and you will, you know, be a first responder. Now, obviously, I don't think that that's a, um,

a big edge in the age of algorithms or stuff. But I think as someone who's on Twitter and stuff, I haven't been paying attention to the markets quite closely. And it is exhausting. So I do hear you on the lifestyle point. I don't own any HYG puts now, but it could be interesting. And also just talk about positioning. I

I was very long China. And I was an owner of Alibaba, actually Alibaba calls, those that worked out well. I happened to sell it at a good time, but actually I also own other China stuff. So I was like, shoot, I'm so long China, I've got a hedge. So actually there was a time where I was short Alibaba over April and I'd lost money on that, but that's fine. But yeah, I think...

overall like you do i do think you have to have a long-term um perspective you um and that is how to compound capital i think it's it's fun to trade and when you trade and are right and you you sized it well and position it well it can be uh very very good but they're rating i think exhilarating but i think that they are two different things and the disaster is when you

invest, but then it turns into a trade or you trade and then it turns to invest. You've got to know what you're doing and kind of psychologically separate those two things. So yeah, just to summarize, not to talk too much about myself, but yeah, I still short-term am bearish, but I think if

If there's substantial deals and if my outlook has changed based on my fundamental analysis, I would be happy to get into the S&P at 6,000, even though I was bearish on it at 5,000. That's something Stan Druckenmiller has talked about, about how you have to be able to get into stocks that you sold at a higher level. I think that is actually something that I definitely was not able to do for a

many, many years, not many years, but a few years. And I think I do do it now. And also, if you're not able to do that, there's literally no value other than psychological in being able to get out. Because if you get out and then the stocks crash, ultimately it will go higher unless it's a single stock that's going to go to zero. And then if you can't get it back in, it has no value. So I think if you're not able to get back in at a higher value or get back in at all, that's why I think it's bad to try and time markets, even if you're right.

I would tend to agree. But also, you know, you and I have talked about this, that like there's sort of, you know, whether we're in the media or we're journalists or whatever, there's kind of two. Like when we both came in, like we worked with some journalists who were like, oh, I don't trade at all because it's part of my like journalistic integrity that I shouldn't know or whatever.

or I shouldn't have a position in the things that I'm covering. And there is some truth to that, especially if you're covering corporate M&A. I can certainly see a case to be made. But also for us, I'm interviewing fund managers and you're interviewing people who are coming on, giving a view on markets. Is it right if you're a journalist and you've never seen

$2,000 evaporate into dust in a second because a piece of news comes out and you're option. And then you bring on some guy who's going to talk about a trade and he's like, yeah, I like these weekly calls or whatever. And if you're a journalist and you've never felt that, you've never seen that happen to yourself, then how can you have a legitimate conversation with that person about whether that is a

is the right move or who it's right for. And so I do think that, you know, specifically for us, because of the the

topics that we cover and that we talk about, like, I almost feel obligated to do some degree of trading to have some skin in the game and talk about this. Because if we're gonna bring on traders and our audience are going to be trading and we don't have any frame of reference for what we're talking about, I don't think it's really, I don't think that is fair.

I completely agree. I think that there are some things you should know. For example, if you say on January 1st, this stock sucks, and then three years later, the stock is lower where it is, you could say, I was right. But that doesn't mean you could make money from it. I have several examples of stocks that I've shorted or bought puts on where most of them are lower two or three years later, but it's not easy to

to make money. I mean, if you're short, you're, you know, if it's a crappy stock, odds are people know it's a crappy stock and everyone wants to borrow it and short it. So the borrow fee is high. And then if it's also a crappy stock, it's probably very volatile. So the puts are very expensive. So yeah, I've, I've definitely merged a lot of put premia on, on,

buying on puts on companies that my fundamental view was right. I just didn't trade it wrong. And also I've had a fundamental view that was wrong, but I traded it well or just got lucky. And the latter is definitely more likely. So I think you do have to have that understanding. You don't have to have it, but it makes it for a better interview. And I think some guests, excuse me, some audience members do respond to that based on what I've seen in the comments. So I feel fortunate that we have a great audience who appreciates what you just said, Max.

So what else is coming up for the audience on Monetary Matters? Max, we've got a lot of content that is really, really good. So people, if you're watching this and you haven't subscribed to the YouTube channel, number one, what are you doing? I mean, you got to do it. And by the way, leave a rating and review on Apple Podcasts and Spotify. It really helps the show. Okay. Now we got that out of the way.

I was serious, by the way, that it's really good content. Tons of China content. I talked to a scholar of the Chinese economy, an economist, George Magnus. I think he used to be the chief economist for the UBS. That should be coming out quite quickly, Max. So people should stay tuned to that. I also talked to Ken Rogoff, a Harvard professor known for his views on debt, but so many different topics. And he was the former chief economist for the IMF,

during 2001 and 2003. And Max, the imbalances that President Trump is attempting to address really were built up in that early 2000 period. And Rogoff was talking to officials and was an official at the highest level. I mean, there are stories, for example, that he wrote in his book

about how he was talking to the head of China and he was able to bring his son and his daughter in. And, you know, his son and daughter were in a meeting with him in China when, when Rogoff was talking to the head of China about all of these macroeconomic imbalances about the trade deficit, about the capital surplus and the like that now is affecting what's going on in markets over 20 years later. And his children actually fell asleep in the meeting in front of the head of China. So, uh,

It's a very, very special interview. And so that should be going out this weekend. And a lot of other stuff up my sleeve, something on private credit that I'm really excited about that I don't feel I'll be able to reveal my cards, but that will come out later in May. What about you, Max?

We did just do an episode last week where we went through hedge fund returns over Q1 and looked at April a little bit. We got decent reviews on that. So that was the first time we really did that sort of this style of conversation, but more of the other people's money conversation.

angle towards it. So for those of you who haven't listened to it, give it a listen. If you liked it and you did listen to it, just know that we are going to try and do that on a quarterly basis. Maybe we'll do monthly, but if there's a big piece of news out there or markets are moving fast, but it's just kind of hard to get a hold of the narratives at anything really more than the quarterly level. And that's generally what people are reporting their quarterly letters on.

So we are going to bring that one back. Jack, before we let everybody go, what else is on your mind? You have any closing thoughts?

Yeah, just we've hinted at it earlier, but just the huge front running of tariffs, not of just people going to store and buying things, but of those stores importing from the rest of the world that had a very negative impact on GDP. So, you know, the negative 0.3% GDP that came out for the first quarter as an estimate, the Republican and the President Trump, people who say that number was distorted. I have to say, I think that's completely right. The

Net exports is a part of GDP. So when the country imports a ton, it actually drags from GDP. So I think that that was an artificially low reading in GDP. And I think you might have some artificially high readings in GDP once imports go down. President Trump in the third quarter might say, hey,

Tariffs are working. Look how high GDP is or look how much better GDP is because of tariffs. But that also will be an artificially high reading. And then the final thing is that private domestic final purchases, the PDFP that Powell referenced, that excludes a lot of things that Powell thinks are not super indicative. But I think it does include private investments and the large amounts of investments that

that is going on in the United States or have been announced from the Trump administration and from private companies at the behest of the Trump administration because of tariffs. President Trump has said it's in the several trillions of $7 trillion, $8 trillion. Do I think that the actual number ultimately will be that high? No, but I think it is significant. I think it will take a while, but that also could boost on PDFP. So that will be something to watch.

But Max, we will leave it there. Thanks for joining us. Thanks, everyone, for watching. Remember to like, subscribe, and leave a rating. Until next time. Thanks, Jack. Thank you. Just close this door.