Dear Reader,
Happy Tuesday.
The markets have rallied back basically to where they were before Trump’s “Liberation Day” tariffs were announced.
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A lot of people think, “this is great!” My friends are asking me, “aren’t you bullish again?”
Here’s my answer:
No, not really.
Let me explain…
I’m happy the market’s back, obviously. But if I’m being really honest, I wish it would’ve gone lower so we could’ve bought more things on sale.
Diary readers who followed my META recommendation and got in at $485 are thrilled, obviously - it crossed $600 yesterday.
But the big crash hasn’t happened yet.
The thing that concerns me now is we have a split-screen between big and small businesses in this country.
General Motors said they’re going to lose $5 billion in profits from tariffs.
GM can weather a $5 billion profit haircut.
Apple CEO Tim Cook reportedly called the White House, and all of a sudden, boom - tariffs are reduced on iPhones.
Big businesses will be fine - let’s be honest.
But when you split-screen that with small business, it’s a totally different experience.
This weekend I was reading a report from Ryan Peterson, CEO of Flexport, which is a company we’ve been involved in a bit and that Peter Thiel is invested in, Shopify owns a piece of, etc…
It’s a logistics company, plugged into small business.
If you go to Shopify, eBay, Etsy, whatever, and order something…
A welcome mat you bought from a small business in Kansas that’s made in China…
You may not realize the welcome mat you bought from this little Kansas seller is made in China.
So, how does the welcome mat get from China to your house?
Flexport is a basic logistics company that moves these products around.
They have their finger on the pulse of small businesses around the country.
So Flexport’s CEO is basically saying (and he’s right), that this is going to be catastrophic for American small business.
You may or may not know this, but 99.9% of businesses in the U.S. are small businesses.
Small businesses employ nearly half of America’s workforce…
And 44% of U.S. GDP comes from small businesses.
We are a nation of entrepreneurs. I own a small business as you know, and many of you do as well.
And Peterson warns, “if they don’t change the tariffs, it’s gonna be an extinction-level, asteroid-wiping-out-the-dinosaurs kind of event.”
“Only,” he goes on to say, “these aren’t dinosaurs. These are dynamic, healthy businesses.”
He’s basically saying if the tariffs on Chinese goods continue at this rate, thousands of American companies are going to fail…
Millions of employees are going to lose their jobs.
This may sound hyperbolic - especially for a logistics person. You don’t normally get hyperbole from those types - they’re more engineer types.
It’s a pretty serious thing to say.
But this could be a deadly serious thing for small businesses that import from China.
Countless sellers on eBay, Shopify, Etsy, Amazon - all these platforms people use to sell, and use those earnings to pay their mortgages, send their kids to school, make car payments.
Who’s representing these people?
They don’t have a direct line to the White House - they can’t just call up the President and ask for a break like Tim Cook can.
Again, we have this split-screen where we saw great first quarter earnings, pushing stocks back up.
And I am happy - you don’t want to be a perma bear - that’s stupid. In the long run it’s a losing proposition to bet against America.
But I have to say my piece, which is that the ramifications of these tariffs are yet to be felt in the economy.
I can’t come to you and sing, “happy days are here again.”
Wouldn’t that be nice?
But no - we are in the second or third inning of this game.
Caution remains the watchword.
I am being very careful in my operations, and taking care to bring a sober view to my investment recommendations for you.
Again, of course I’m happy the market’s up…
I would rather be able to pick up better bargains at great prices, but we’ll continue to play the ball where it is - not where we want it to be.
We’re not out of the woods yet.
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