This Week in Barrons: 4.6.2025

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• Will it work? … is often the wrong question.  Will it work, and Are we there yet - are 2 questions that headline my: Wrong Questions to Ask list.  For decades others push us to provide a high degree of ‘completion certainty’ along with our decisions.  That has made FAILING horrific, and NOT TRYing the preferred path.  The real question we should be asking is: Is it worth trying?  That unlocks all sorts of innovative possibilities because trying is the only way that we truly learn.

• The U.S. Senate recently removed the $5 max. cap on overdraft fees … that banks can charge consumers.  This estimated windfall for big banks / additional expense to consumers will be between $5 to $7B per year.  I can’t figure out how committee chair Sen. Tim Scott believes that: “Overturning the overdraft fee is good for consumers.”    His committee-mate Josh Hawley (who cast the only dissenting vote) said: “The $5 cap saves the average working-class household $265 per year.”  Chalk it up to: “You can try to take the Stupid out of Congress, but you’ll never stop Congress from being Stupid.”

• We Reap what we Sow …  said Ben Stine on CBS.  “This all started when Madeleine O'Hare complained about prayer in our schools – and we said OK.  Then someone objected to reading the Bible and saying ‘The Pledge of Allegiance’ in school – and we said OK.  Dr. Spock then said we shouldn't spank our children when they misbehave, because we may damage their self-esteem – and we said OK.  We're now asking ourselves why people have no conscience, don't know right from wrong, and why it doesn't bother them to kill strangers, friends, and even themselves.  If we think long and hard about this, I think it has a great deal to do with: 'We Reap what we Sow’.”

• Reciprocal tariffs may help to level the playing field … but they’re more of a negotiating ploy.  The good news for the U.S. is that we control the ‘consumer / end-user’.  The U.S. is the consumption engine for everything on the planet.  So, no matter how efficient you are a making stuff / mining stuff / designing stuff - if you can’t SELL IT - you’re SOL.  And, that’s a problem for everyone – even China.  The reduced U.S. sales effect on other countries will take longer than we expect to set-in, but you can make a lot of mis-steps – when you control the last mile = the consumer / end-user

• “Markets are a ballot box, and then a scale” … Warren Buffett.  Rather than judge an economic policy based on a few hours of stock market (voting) performance, wait to weigh its efficacy over 6 to 12 months.  It’s the weight on the scale that ultimately matters.  Stock prices will revert to the mean, after the tariff dust settles.

• Our FED may have been thrown-a-bone … Previously, cutting rates while inflation expectations are rising, would have undermined our FED’s credibility and threatened long-term price stability.  But, if energy and oil continue their collapse, that should be deflationary enough to allow our FED to lower rates sooner – rather than later.

• Recession in 2025?  Goldman sees a 35% chance, while JPMorgan believes recession odds == 60%. Kalshi and other event contract platforms … give the U.S. a 52% chance of recession – up from 18% in January.  The Atlanta FED’s economic growth projections show a Q1 GDP contraction of a minus -3.7% – worse than its previous minus -2.8% estimate.

• OpenAI's ChatGPT has 20m paid subscribers … coming on the heels of GPT 4o’s image generator release.  Monthly revenue has surged 30% in 3 months, and the user base has grown even faster to 500m weekly users.

• Musk merges X with xAI … giving xAI direct access to a ton of excellent AI training material along with the instant ability to reach large numbers of users.

• Apple’s new iOS 19.4 will come with a new Health App … and AI Health Coach that will offer personalized recommendations.  It will also work with outside sleep, nutrition (food tracking), and mental health experts.

• Amazon unveiled an AI agent … that can control a web browser and perform simple tasks – and a tool kit for developers to build personalized Alexa agents.

• Rocket Mortgage is buying the Mr. Cooper Group (a competitor) … an all-stock deal valued at $9.4B, coming only 3 weeks after Rocket bought Redfin.

• The Trump administration will freeze $510m in grants … to Brown Univ. over concerns about antisemitism on campus.  This follows similar actions against Columbia U., Princeton, and Harvard for $9B in federal funding.  

• OpenAI closed its $40B funding round … at a $300B valuation, led by SoftBank.  It was the largest tech funding round in history.

• Tesla plunged 36% in Q1 ’25 … and Wells added TSLA to their under-weight / under-perform list.

• AUM (Assets Under Management) in Gold ETFs is surging … and retail investors remain (for the most part) on the sidelines – but that is changing rapidly.

•  It’s a Triple Rotation:

  o In the U.S. == Investors are moving from Stocks to Bonds,

  o Outside the U.S. == Investors are moving from Bonds to Stocks, and

  o Globally == Investors are moving from U.S. to non-U.S. stocks.

• The EU is planning to fine X more than $1B … and require changes to its product that would prevent it from presenting illicit content and disinformation.

• Intel will form a strategic partnership with rival TSMC … that will give TSMC the authority to run Intel’s struggling semiconductor manufacturing facilities.

• “You can’t tariff Bitcoin.”

• Eric and Donald Trump Jr.’s American Data Centers … will take a 20% stake in American Bitcoin, a mining operation majority-owned by Hut 8 – the publicly traded crypto-infrastructure company.  They aim to create the world’s largest bitcoin miner, with designs on building their own Bitcoin Reserve.

• Circle files for IPO as public markets open to crypto.

• Trump wants to pay-off our debt using Bitcoin Bonds … and plans to introduce ‘BitBonds’ as an obvious $14T refinancing alternative.

• Tether quietly bought another $735M of Bitcoin … and became more-of-a-whale than actual whales by now holding +100,000 BTC.

• Monday:  Stock-market volatility increased as February’s core inflation continued to rise more than was forecast.  All the while, consumer sentiment trended lower in March amid worries that tariffs will increase inflation.

• Wednesday:  Today is the day.  A major announcement that’s been teased for weeks and that will have dramatic implications for the lifestyles and consumer habits of millions of people around the world == will finally be detailed.  The Nintendo Switch 2 will finally be unveiled.  [Sarcasm] On one hand, the risk isn’t necessarily an aggressive tariff policy, but rather the hurry-up-and-wait limbo that keeps capital on the sidelines and businesses reluctant to spend or hire. 

• Thursday: President Trump’s Liberation Day headlines:

  - 1) U.S. sets baseline tariff rate of 10% for all countries, and saying that our ‘reciprocal rate’ (half of their tariff rate) won’t be ‘full reciprocal’ … yet.

  - 2) U.S. imposes a 25% tariff on all foreign-made automobiles.

  - 3) Some country-specific tariffs: China = 34%, Taiwan = 32%, Switz. = 31%, India = 26%, S. Korea = 25%, Japan = 24%, EU = 20%, and UK = 10%.

  - 4) Trump called on all countries to drop all tariffs and trade barriers.

  - Adding insult to injury, “The Federal Government announced a total of 275,240 Federal job cuts in March – 216,670 from DOGE actions directly.”

• Friday: the tariff retaliation against the U.S. began. China announced additional 34% tariffs on US goods, added 11 U.S. companies to the unreliable list, and placed export controls on rare earth metals.  Traders pushed the 10-year T-Bill to 16-month lows, and the U.S. dollar and bitcoin == higher.

• Made-in-America … It’s a little weird how other countries are allowed to have huge tariffs on American goods, but we’re not to have any tariffs of our own?  Maybe we should just accept that nothing will ever be Made-in-America again.  After all, Seattle residents have raised their local minimum wage over and over again – only to find residents still overwhelmingly buy domestic goods and clothing from China / made in sweatshops.  Yes, it’s an ‘out-of-sight / out-of-mind’ condition.  I did just purchase a Made-in-America coat the other day, and when I put my hand in the pocket – it slipped right through.  It’s comforting to know that the coat factory paid someone $35 per hour and allowed them to leave work at 5pm, but my coat was sold to me without pockets.  I’m guessing that our Made-in-America employees did not have a 10,000-point checklist to satisfy, or the Fear-of-God put into them on a daily basis.  But every time I put my hand into that pocket-less hole for my wallet, I’m reminded that: ‘No one makes quality coats … quite like a sweatshop.’

• More ‘market-crashing’ facts:

  - We get our smartphones, solar panels and laptops … ONLY from the highest tariffed countries.

  - Elon Musk is calling it quits at DOGE … But that wasn’t enough to keep TSLA stock from falling.

  - Tariffs are not stopping corporations from buying bitcoin.

  - The S&P500 erased more market value ($9T) in days … than it did during the 18-month global financial crisis.

  - The world’s rich have gotten poorer since Trump took office … except for Warren Buffett.

  - Nintendo pauses Switch 2 pre-orders … as the new console will probably get hit by tariffs.

  - Friday was Microsoft’s 50^th Anniversary … and its stock fell 3.6%.

• Factually:

  -  Last week’s 3-sigma move to the downside in the S&Ps and other market indicators – point to a long-term, technical trend change (bear market).

  - Friday’s total downside correlation and other short-term sentiment & technical indicators – are pointing toward a short-term rebound.

  - We are forming a bottom.  Valuations have come down, but are far from cheap.

  - Recession risks are rising, and our FED will be slow to step in.

  - Energy & Financials are moving lower, allowing interest rates to move similarly.

  - Global funds flow is now moving from the U.S. and into Int’l markets.

• Chart Technicals:  

     On the downside:

  - The 50-day moving average (50dma) is moving lower and getting close to a death cross (the 50dma dips below the 200dma) – indicating a primary trend change. 

  - The 200-day moving average appears to have peaked and is moving lower.

  - We’ve blown through 3 key support levels (~5600, 5400, ~5200), and breadth is declining.

     On the upside:

  - 50dma breadth is getting oversold, and the 5,000 is strong support if tested.

  - There have never been more than 2 days in a row of declines exceeding -4%, and rebounds of 5 to10% gains the next day are not uncommon.

  - We got the rare +40 reading on Friday’s VIX, and historically that has acted as a short-term buying signal.

• Earnings Season:

  - U.S. earnings have previously been propped up by strong, Mag-7 tech earnings – with non-tech earnings being non-spectacular.

  - If we get trade war retaliation on big tech, remember that the Mag-7 get ~50% of their sales offshore.  This makes them a highly vulnerable target. 

• Risks of a Recession are Rising:  Polymarket and Kalshi have the probability of a recession sitting above half-way, and the latest manufacturing reports are showing a sudden slump in new orders and a spike in inventories.  It sure seems plausible that: fiscal contraction + tariffs + policy uncertainty + market volatility == a bear market.  Recessions make market downturns deeper and more drawn out.

• Energy and Financials … are both crashing and both deflationary. 

• ONLY Tip … I’m looking for a rip-your-face-off rally next week.  My advice is:

  (a) SELL any stocks you do NOT want to hold through another leg down, and

  (b) SELL Covered Calls on the stocks that you are holding.

  (c) BUY PUTs on the stocks that you’re holding & on the S&Ps … because another down-leg is coming.

• The S&P (SPX = $5074) Expected Move (EM):

  - Last Week’s EM = $109 … but we moved lower by over 300 points (3 standard deviations).  We have not seen a move this large ‘n fast since COVID.

  - Next Week’s EM = +/- $346.  Therefore, the S&Ps are predicted to remain between: 5420 and 4728.  WOW – now this is: two-sided trading.

• Bitcoin (IBIT = ~$47.7) Expected Move (EM):

  - Next Week’s EM = +/- $3.7 … an ~8% EM – double WOW.

• It would make sense that we rally next week … and make new lows later in the quarter. The technical and sentiment conditions are ripe for a rebound, but the fundamentals, macro and value factors still look early in a bear market process.  It would take an extremely powerful catalyst to turn this sinking market around.  Therefore, rally-chasers can try their luck, but investors need to exercise patience and caution in searching for the next generational buying opportunity … aka = NOT YET.

• HODL’s: (Hold-On for Dear Life)

  - (+) PUBLIC.com Bond Portfolio (6.9% yield) / TLT (10-year T-Bills)

  - (+) IBIT – Blackrock’s Spot Bitcoin ETF ($47.7 / in at $24)

  - (+) Physical Commodities = Gold @ $3056/oz. & Silver @ $29.5/oz.

  - Bitcoin (BTC = $82,850 / in at $4,310)

  - Ethereum (ETH = 1,800 / in at $310)

  - (+) GLD – Gold ETF ($280 / in at $212)

• Options for Income:  The act of De-Risking a Portfolio… (using IBIT for example)

  - BUY-n-HOLD the IBIT ETF

  - BUY PUTs: 1 Std. Dev. Lower, Expiring = 3-weeks away, OTM (out-of-the-money) for protection.

  - SELL Covered CALLs: 0.75 to 1 Std. Dev. Higher, Expiring = 2-weeks away, OTM for income and to finance the PUTs.

• ‘De-Gen’ Economy:

  - Singapore (SE = $107 / in at $107)

  - CME Exchange (CME = $254 / in at $238)

  - CBOE Exchange (CBOE = $214 / in at $197)

• Watching:

  - CPER: U.S. Copper Index Fund, and

  - MAGS: the Mag-7 (tech stocks) ETF.

   

  Please be safe out there!

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