Dear Reader,
Today I want to tell you why I believe stocks and the dollar have gotten hammered at the same time.
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In my friend group, there have been a lot of questions among diehard Trump supporters and non-supporters.
I have friends on all sides.
The question I keep getting about tariffs is, “why did President Trump so quickly remove all the tariffs he slapped on all these other countries?”
We’re starting to see news leak about a split in the Trump administration between Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick on one side, and Steve Miller and Peter Navarro on the other side.
And I want to tell you what’s happening from Wall Steet’s view, behind the scenes…
What professional investors understand but non-professional spectators don’t.
Trump slapped tariffs on all these countries to try to correct a trillion-dollar-a-year trade deficit in goods.
Importantly, it’s not a services deficit.
We’re not calculating services.
For example, when Microsoft sells Europe cloud software, that’s not included in Trump’s trade deficit.
He’s just talking about goods – like things you get from China or another country…
Wine, cars, pens, televisions, clothes – mostly “dumb” products. Stuff you see at Walmart and Target.
We have a goods trade deficit of about a trillion a year. Along with a budget deficit of about $2 trillion a year.
Now, when President Trump canceled the universal tariffs he put on everyone, he said a very interesting word.
He said the debt markets are getting a little “yippy.”
The yips are a sports metaphor.
If a pitcher gets the yips, he can’t find the strike zone.
He gets too nervous to even throw strikes. He gets in his own head.
Trump was probably told, behind closed doors by the Treasury Secretary and Lutnick, both Wall Street guys, something I’m about to tell you…
Here it is:
“The trade deficit is one thing, but we also have a very big budget deficit, okay?
“We have a budget deficit bigger than our trade deficit.
“Our trade deficit, again, is about $1 trillion in goods.
“And our budget deficit is $2 trillion, meaning we spend $2 trillion more per year than we take in in tax revenue.
“How do we finance that?
“Who pays for that?
“How do we pay for that?
“Who’s our credit card company, in other words?
“Guess what –
“It’s the rest of the world.”
Every week we sell debt.
The United States Government Treasury Department goes into the debt market and says, we need to borrow $120 billion this week, $40 billion that week, $80 billion this week…
They go to our debt buyers…
Europe, Japan, South Korea, France, Canada, Mexico – all the usual suspects.
One thing that’s concerned me, is you have Mark Carney, Canada’s new Prime Minister running for reelection after taking over in the Liberal Party from Justin Trudeau.
Mark Carney was Governor of the Bank of Canada for years, the Canadian equivalent of the U.S.’s head of the Federal Reserve.
He did such a good job there, the Bank of England recruited him to come to Europe and become the Governor of the Bank of England, which he did from about 2013 to 2020.
So you have a guy who’s very shrewd in financial matters, and the first thing he did when Trump slapped tariffs on Canada was fly to Europe.
It’s not impossible to imagine what he said in private meetings with the prime ministers in Europe.
It may have gone something like this:
“Guys, there’s no reason to have a public fight with America’s President Trump.
“All you have to do is stop buying their bonds.
“Every week, when Goldman Sachs and all these banks call you up saying, the treasury has a hundred billion dollars of bonds to sell this week to finance that $2 trillion deficit, don’t lend it to them.
“We don’t have to have this public fight where nobody wins. Just don’t lend them money.”
What happened is, for only the sixth time in American history, bond prices went down, which sent yields up, and the stock market went down at the same time.
The dollar fell, and the stock market fell.
Think of COVID…
Think of The Great Recession…
Think of the dot-com crash…
Usually when the stock market gets hammered, people rush to buy safe-haven assets like U.S. Treasuries.
But this time they didn’t.
They sold their stocks and pulled their money out of America.
Which sent treasuries down. They sold treasuries, too, which send the dollar down.
Again, only six times in history have these two things happened at the same time.
Usually risk assets – equities… and safe assets – the dollar and treasuries, move in opposite directions.
What this tells us is international investors are pulling money from the United States, sending interest rates higher.
There’s an inverse relationship between the price of bonds and their yields.
When people sell bonds down, yields go up.
This is why the 10-year yield has gone higher. And this is why the market has been hammered.
I wanted to explain to you why we’ve seen this historic event of stock prices and bonds/the dollar get hammered at the same time.
Now, I don’t want to beat a dead horse, but there is a playbook for this market.
I’ve been communicating with Takeover Targets members every week about the specific actions to take, my buy list of stocks and exactly when and at what prices to get into each.
[FREE REPORT: “Our #1 Takeover Target for April]
When you play a market crash smartly you can take $10,000 into a crash, and turn it into $100,000…
Take that $100,000 into the next crash, and turn it into $1 million.
Take that $1 million and turn it into $5 million and so on.
This is how I’ve made most of my wealth.
Here’s the playbook.
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