저자: Kevin · 외국인
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관세 충격으로 S&P500이 2차대전 이후 9번째로 나쁜 주간을 기록했고, 2s10s 스프레드가 56bp로 경기침체 선행신호 구간에 진입했다. 바클레이즈는 미국·유로존 경기침체를 예상하고 EPS 10% 하락 및 밸류에이션 압축 가능성을 제시한다. CLO ETF 대량 매도와 하이일드 스프레드 확대는 신용경색 조짐으로 해석된다. 진행자는 관세가 영구적이라는 입장과 트럼프 행정부의 무역 전략 실패를 비판하며, 반등은 매도 대상이고 경기침체가 길어질 수 있다고 본다. 자신은 금융자문 펀드를 반환하고 하우스핵 사업에 집중한다고 밝혔다.
다듬은 글
It's official. We have just had the ninth worst week in the S&P 500 since World War II, only bested by weeks like those around Black Monday 1987, the dotcom bubble bursting, the great financial crisis, COVID, all really bad times. At the same time, the spread between the twos and the tens just hit 56.
Spoiler alert, that's an early recession indicator for you. when that spread between the two rises above 50 into that 50 to 90 range. It's the first time we have seen it since before CO. It's the first time we've hit that kind of spread. It's usually a sign of an imminent start to a recession. And I don't want to cause any alarm.
That's just statistically and historically what has been true. Maybe this time is different. At the same time, you have some reports that hedge funds are offloading quote all or most of their holdings in stocks as volatility is pushing them away from the US stock market. Now, some of that could be because hedge funds like using margin and then, you know, if they end up getting screwed being caught offside, well, then they lose lots of money and they lose their jobs or their companies.
But at the same time as this, China is conducting an 11 billion US dollar market stabilization activity in China to help stabilize their stock market because of the damage this trade war is causing. So you can see this is starting to really get intense where people are really making longerterm decisions based on the shorter term movements of well the tariff debuckle.
Now that said, Barclay's just released a piece suggesting that you should not catch a falling knife. And not only are we going to talk about this Barclay's falling knife piece, but we're also going to talk about some massive shifts in China. Because as you remember, when you come to this channel, I'm going to give you perspective you're not going to hear somewhere else.
A lot of people on the internet today are suggesting, "Oh, China is desperate to make a deal with us." In this video, you get a little bit of a different perspective and I'll give you some evidence as to why I have some thoughts regarding China as well as this Barclay's recession piece. But first, I want to make a quick little mention.
This morning in the course member live stream when the market opened up, I mentioned to everybody that I would be really cautious of the bounce that we're seeing in markets because I expect it's going to get faded. I don't think upside is good. I'll show you the clip in just a moment. that is I didn't think upside was good on the day today.
I actually thought that not only was there a greater chance that stocks would get faded today, but I actually advocated for selling call options because the volatility is so high. I have not seen the volatility this high in some stock option premiums in a while. I mean, you can make like 13 or 14% on some sold call options for 70 days.
That is phenomenal volatility. I'll show you the clip in just a moment, but look at this. If you go look at what happened to the Q's, we were up over 3% and we ended up fading all the way down to negative 1.8%. That's almost a 5% move in the NASDAQ 100 intraday. That is a shocking move. Now, let me go ahead and play the clip for you.
And just remember, you could be part of what thousands over 4,000 of you are watching on a daily basis in our private course member live streams. You can be part of it by joining the Meet Kevin membership. The price is going up on April 15th. If you lock in your price now, you will not have any price increase ever.
You lock that price increase in forever. And anybody who joins after you has to pay a higher price. It's the way it is. So, go check it out over at meetke.com. But here's the clip so you can get a glance. I don't want you to think like a retail investor right now. I want you to think like a money manager who doesn't want to get sued in the next crash.
I want you to think like an institution uh or a hedge fund. take the tactical rally and fade it. Because what has actually changed in tariffs? Nothing. What has psychologically changed? The words coming out of Bessant's mouth. Now in pre-market, we've moved up to our next line set 438. But I don't have anything for us past this.
So I think it's a I think it's a a hard lift to say, "Oh, yeah. Okay. Today we got to go calls on QQQ. Uh you know because a you're going into no man's land and b you're already extended up 36. So from a trading point of view this is a very undesirable call position now. What I could consider would be sold options right now.
Look just because that was exactly what ended up happening does not mean I'm always right. And I want you to know my goal is to share perspective with you and with as much factual information as possible. I do want to mention that sometimes this pisses people off. For example, here is a tweet that I made on July 25th where I said, "Sorry, Tom Lee.
Rotating into small caps just as recession as recession risks rise is fully rword, you know, with some censorship here." Now, micro to macro says the only thing that is the rword is actually meet Kevin. basically saying the Russell 2000 is doing just fine. Well, since these tweets, the Russell 2000 is down over 22%.
Fundst strat in his fund, in other words, Tom's fund, has lost over 20% in his fund for his clients that he charges a large management fee for since just the election. It's not even a year-over-year performance. It's since the election. Now, it's not my fault. Some people don't position for protecting themselves when there's evidence of a recession coming.
Ultimately, that is everybody's own desiraability and their own moves. Everybody has to take responsibility for their own decisions. But I want you as an investor to consider what Barclays is telling you in their global macro thoughts. Don't catch a falling knife because I understand how desirable it is to be bullish and to buy the dip.
In fact, I want you to remember that the whole goal of Wall Street is to get you to put money in with their fund. That's Wall Street's goal. Wall Street does not want you to sell. Wall Street makes money off of you, whether the market's going up or down. And the more bullish you are, the more people invest with you.
So remember, that is a risk factor. Now, what is Barclays telling you? Barlays interestingly has a research piece out suggesting that we now expect recessions in both the US and Euro era area. This by the way comes just as JP Morgan is convinced we are going to have a recession this year and JP Morgan says the Russell 2000 small cap index is showing indications with a 79% certainty that we are going into recession.
So in other words small caps say 79% chance of recession. JP Morgan says yes recession. And now Barclays is joining the yes recession camp. Goldman Sachs is at about a 65% chance of recession. But I want you to look at some of the commentary they give because I do think they give some really good insight here.
They suggest that they do not expect a really quick walk back on tariffs and that the president has emphasized tariffs will be permanent. He feels that if companies see tariffs as temporary, they will not move production back to America. Okay, there's a lot to unpackage here. And a lot of what there is to unpackage actually goes into why I made the claim this morning that we were probably going to fade.
A lot of folks sometimes they hear me say these things and they're like, "Wait a minute, Kevin." Like, "Did you just guess that the market was going to fade this morning?" Like, why would you say in your course member live stream the market's going to fade? And then crap, it literally faded by 5% on the cues.
Huge move, by the way. Why would you make that decision? The reason I had that opinion was because what happened yesterday was a rebranding. Donald Trump is a salesman. He knows how to market. The problem with this is what they found is they've changed the messaging on tariffs to try to reduce some of the damage of tariffs, but not the actual intentions.
This is a big mistake in my opinion. See, what's happening is Howard Lutnik from the Commerce Department, which many people are now calling Nutlick because he's a yes man or Slutnik because he never says no. These are very inappropriate. You should not say these things. Lutnik has actually been replaced by Treasury Secretary Besson.
See, Political has a piece which appears to be accurate that Besset flew to Florida to lobby Trump on tariffs. And basically the article talks about how Besson is trying to smooth over the tone of how they're describing tariffs to the American people and how they're trying to sell tariffs to Americans.
The problem with this is Steve Besson himself says that he expects tariffs to be a melting ice cube. In other words, it's going to take a while, but eventually we're going to use tariffs to negotiate better trade deals with other countries and bring jobs back to America. Besson is convinced that fired federal workers, imagine this, like imagine DMV workers doing this.
Okay, just as an example, but fired federal workers will end up taking jobs in American factories, right? Because we see that happening. No, we don't see that happening. But the point is Bessant's messaging is, hey, we're going to negotiate to get that manufacturing done in America. That sounds positive.
Lutnik's messaging is, "We're not negotiating with anyone. We want our tariffs." That sounds blunt and harsh. All they've done is remarketed, rebranded how they're talking about the tariffs. They have not actually changed the fundamental basis of tariffs. And so, when I was in the course member live stream this morning with thousands of you, I said, "Listen, I am of the mindset that this rebranding will end up getting seen.
People will read it like a book and go, wait, nothing's actually changed. We haven't made a deal with Vietnam. We haven't made a deal with Taiwan. We've had talks. We've had concepts of talk with these countries, but we don't actually have deals. If anything, things are worsening in China. Don't even get me started on China.
We still have to get through the Barclays recession piece here. But don't even get me started with China because that's that's going to be a big one here in just a moment. But a lot of this relates like this sounds very Trumpian what I'm about to show you. There is a transcript about a discussion between Gary Cohen and Donald Trump.
Now, I don't know if it's accurate or if it's true, but let me just put it this way. It sounds like Donald Trump. Let me read it to you because I think it's going to give you a little bit more color into the mind of Donald Trump. It says, Gary Cohen, Mr. President, can I show you this? Cohen fanned out the pages of data in front of the president.
See, the biggest levers of jobs, people leaving voluntarily, was from manufacturing. In other words, where were people leaving workforces in America? They were leaving out of manufacturing. They didn't want manufacturing jobs. Donald Trump says, "I don't get it." Cohen tried to explain. I could sit in the nice office with air conditioning and a desk, or I could stand on my feet for 8 hours a day.
Which one do you do for the same pay? People don't want to stand in front of a 2,000 degree blast furnace. People don't want to go into coal mines and get a black lung for the same dollar or the equivalent dollar. They choose to do something else. Customer service, IP work, legal work, accounting work, artificial intelligence, development, doesn't matter.
Trump wasn't buying it. Several times, Conan asked, "Hey, Mr. President, why do you have these views?" Trump replied, "I just do. I've had these views for 30 years. Gary replies, that doesn't mean they're right. I had the view for 15 years I could play professional football. It doesn't mean I was right.
Now, this is really interesting coming uh from Gary Con. What you find is the stubbornness of Donald Trump is probably exactly what's happening in the White House today. Now, people say, "Oh, come on. You know, he's a reasonable man. He's not going to be stubborn. Really, I don't know about that because even Elon Musk failed.
And Elon Musk is pretty damn convincing. He's got a pocketbook. Look at this. Musk made direct appeals to Trump to reverse sweeping new tariffs and failed. This, by the way, was before Liberation Day. I'm not going to bore you with the entire story. It's obvious there was a failure. This is why Starlink and Tesla are begging for exemptions uh from tariffs on critical parts.
For example, Starlink wants is begging for exemptions on Chinese machines so they can continue to manufacture the Starlink parts or the satellite parts that they critically need in their business. You have to think about it this way. SpaceX or you know the Starlink division, they might pay a million dollars for a machine, let's just say, but with that machine that they spend a million dollars on in China, they might be able to do $10 million of business in the United States.
What's their trade deficit? That company, what is in that example, what is their trade deficit with China? They bought a billion dollars of machines in China and then sold $10 million worth of products in America. Well, technically their trade deficit with China is $1 million because China didn't buy any of those star-like units, but China enabled the selling of $10 million of revenue or maybe even a lot more in America through that quote unquote trade deficit.
But Donald Trump doesn't understand that logic. See, Donald Trump is of the mindset that a trade surplus or trade deficit is like a profit and loss statement. He said it himself. He said that, hey, what a trade surplus is is basically like a P&L and I want to treat it like a P&L. In other words, I want it to be positive.
This is what he told us yesterday in his press conference. The problem with that, Mr. President, is it's not logical. It doesn't make sense because when you consider the example I just gave, you could actually import from China and do a lot more for the economy or global growth and have a technical trade deficit, but still be promoting the economy in a massive manner.
See, Donald Trump sees a trade deficit as a loss. The reality is it's not a loss. And as a result of his opinion that there's a loss, he's refusing to negotiate with countries unless they give him even more than 000. China, the European Union, and other countries were all offering trade deals well before Donald Trump suggested liberation day, but he rejected all of those in favor of well liberation day.
And so well, here we are. And so this is where we go into this Barclay's piece and we look and we see Donald Trump feels that if companies see these tariffs as temporary, they will not move production back. That's where we left off on the Barclays piece. And that's exactly what's happening. Donald Trump is convinced through a misconceived notion that we must have a trade surplus with every country and we're going to sell them something whether they like it or not.
This is being considered the reordering of global trade. And even countries that have no tariffs against us, like Singapore, are still getting blanket tariffs because Donald Trump wants more than zero zero. See, we had these positive suggestions over the last 48 hours that Vietnam would be a leader in global trade deals.
But White House officials subsequently cautioned that did not mean the US would drop tariffs on Vietnam. That there might still be permanent tariffs against other countries that do strike deals with us and deals will actually look like we're still going to tariff you, but we want us to do more for you.
Well, what we're really doing here is rebuilding the entire existing global trade system. And it's no surprise that Barclays is now suggesting that the president is basically toying with a recession. In fact, if you just go to the bottom over here for a moment, you can see Barclays tells you the following.
Barclay says, "We expect the United States to be in a recession between Q4 2024 and Q4 2025 all year. They expect the Euro zone will be in a recession during that time and they expect China's growth will not be 5% but rather it will be 3%. They think global growth is likely to be near recessionary levels in the coming quarters.
They also suggest that they like bonds as an investment. Uh and they tell us that they think the earnings per share impact of tariffs and retalatory measures are likely to be around 10%. Now, what's interesting is if you just consider 10% and you take a stock that's trading for 20 times, 20 times, let's say $10 of EPS is $200.
That's the stock value. Okay, very simple, the stock valuation 101. But the problem is it's not just EPS that gets hit. It's the valuation multiple. So instead of a 20x, we might be at a 16x. So now you take EPS down and you take the multiple down another four points, right? So, if EPS instead of $10 is actually, let's say, $9 and we're multiplying at $160, that stock is now $144 instead of $200, which is a 28% drop.
And that's potentially just the beginning of the story because you could have compression much more than that. And EPS declines could be much more sizable in a recession. Something else to keep in mind is that the labor market is holding up and is being cheered by Donald Trump. But this is yet another mistake because as we know and I've beaten this into everyone who watches my channel's mind, the labor market is the most lagging indicator of recession ever.
Barclays actually does a great job here. They indicate that in 2009, let me see if I can find it. In 2009, the labor market here has peaked at the end of 2009 at 10%. But the joblessness rate in September of 2008, right around the time of the Lehman Brothers collapse, was just 6.1%. In other words, the shock element that occurs in an economy doesn't necessarily align with when you get bad unemployment numbers.
You usually get bad unemployment numbers after the shock event. And now that the 102 spread is over 50, we are ready and primed for a shock. And that's what's really scary is we think the tariff event was a shock. The tariff event just lit the fire of the filled spilled fuel of the problems that our economy had going into this.
Right? Donald Trump didn't solely create the conditions for a rough economy. You know, we didn't know we were going to have crazy tariffs like this last July. We were looking at a weakening labor market and the fact that this economy is not going to be resilient in the face of a bad shock. And so it's no surprise that now all of a sudden you're seeing high yield spreads moving 93 basis points which has only ever happened during major crises.
I mean look at the spike over here. We're still not at some of the peaks of some of the other credit events but credit spreads are finally expanding. The largest credit spread expansion in 17 months and this trend is just beginning. We are just at the beginning of this credit event. Don't even look at what's happening in like the CLO market right now.
the CLLO market, the the collateralized loan obligation. Uh this is different from credit default swap CDOS. The CLLO market uh is is seeing massive outflows because people don't want exposure to the loans of corporations that you know could be small caps at risk of bankruptcy. I mean, this makes logical sense, but the problem is when the valuations of CLOS's go down, the ability for companies to get financing goes down because companies rely on being able to get debt, access to debt from banks, capital from banks, but banks want to sell that debt.
Let me let me clear this up. Okay, so see this cup right here? This is a pile of trash. See this wrapper? This is a loan from a crappy small cap company that's too overleveraged. Mind you, by the way, at House Hack, there's a reason why we have zero bank debt because we are very conservative because we think the biggest money is made during recessionary times.
And that's why I think a lot of people are investing with us right now. You can go check us out over at househack.com because we're probably a really good counteryclical play and I have control over the business and I'm really optimistic about it. But anyway, so here is a pile of crap or a bundle of crap.
We could call them tanches of craps. Boy, doesn't that sound familiar? Here is a crappy loan that is declining in value because the market is selling these CLLO CLLLOs's off like crazy. So, a new business comes along and says, "Hey, I want a loan." The bank goes, "Smells like crap. Looks like crap. We'll just put it in the bundle of crap and hope it sells.
If nobody buys it, the bank is there like this. Oh, We're holding all the crap. Please, somebody buy the crap. And the more the banks are holding crap that pops up out of nowhere, the more the banks are like, "Yeah, sorry, other business. We don't want to give you another loan because we're not going to be able to sell your crap loan because we're still trying to sell the other crap loans." And that's when you truly get to a real credit event where all of a sudden leverage and credit standards freeze up and banks aren't lending anymore.
That's when you have a true collapse. We're not there yet. We're just starting to see the conditions of these things propping up. And these are things that most people don't pay attention to. I mean, if you look at uh uh at at the CLLO market, Bloomberg just today, uh CLO, ETF, Bloomberg had a big piece on this.
Cracks are forming. There it is. Now, you can look this one up. I think it's a good one. Cracks are forming uh in the CLLO market. Okay. Long and short, it's going to be harder for businesses and banks to actually lend crappy, you know, to crappy businesses because nobody's going to provide liquidity through the ETFs anymore.
Cracks are forming in CLO market as ETFs are on a record selling spree. These are the conditions for a recession. The the fuel has been spilled. The fuel was spilled before Trump came along. Donald Trump just spilled even more fuel and lit the fire. Now we're waiting for it to hit the fuel tank. It's bad.
We got to put this fire out. And maybe the thought is we could put this fire out with our negotiations with China. But let's put it this way. It ain't looking good so far. Now people have this impression that China is panicking and that they're going to fold on, you know, Donald Trump's demands. I don't see that as much as other people do.
Now, it's possible that I'm wrong. I'm I'm wrong. Like I said, I, you know, everybody can be wrong. But I want you to have my perspective on this because I'm very concerned about what's happening with China. China, first of all, is sounding more capitalist than I've ever heard them sound in my career.
Which is weird because I think of China as well, frankly, the Chinese Communist Party because golly, that's what they are. Why are they sounding more capitalist than us? As Donald Trump is trying to negotiate a trade deal with China, China is going to the European Union and promising close partnerships.
They're not negotiating with us. They're negotiating with all of our allies. Japan, South Korea, Europe, everybody but us. Why? Because China prepared for this. they started diversifying their trade to other countries. Out of all of the countries and blocks, because the couple of these are blocks like the EU and the Azian countries.
Uh out of these blocks, the United States has the largest decline in trade in 2023, uh you know, compared to 2022. Now, obviously, there were, you know, other fluctuations going on in terms of deflation in China and also a slowdown in the Euro zone that had an effect on this. The United States was in a bit of a slowdown in 22 but started recovering in 23, which should actually mean the United States growth is even more positive.
But it's not. China is diversifying their exports to other countries. Why are they doing that? Because they don't solely want to be reliant on the United States. So, we've got the European Union here, which has more trade than the United States does, and they're partnering with China. The European Union obviously led by countries like Germany.
These are massive economies. Now then you have Azian over here which would be like Indonesia, Indonesia, Malaysia, the Philippines, Singapore, right? Singapore is like people call Singapore Singapore Inc. because it's considered so capitalistic. And what's remarkable is you have countries that are more than happy to do deals with China because it's cheap to do business with China.
China has faced deflation in manufacturing which makes it more inexpensive to produce your product in China than ever before and you get a better quality product than ever before. Fortune estimates that if the iPhone, the way Carolyn Levit described it, wants the iPhone to be manufactured in the United States, if the iPhone were manufactured in the United States, it would cost $30,000 to upwards of $100,000 if we even had the capability of doing it.
So, China relies on us less than ever before. But what you should also pay attention to is China's letter. China just put together a letter and suggest that US tariffs interrupt global supply order, disrupt trade negotiations, that the United States has benefited from international trade, yet now they are selfishly weaponizing tariffs.
that Donald Trump is conducting economic bullying, and that he is lying about fairness and reciprocity in order to pursue an America first agenda, that the Chinese people value sincerity and good faith, and they do not provoke trouble, but they are also not intimidated by it, that US China economic relations should be mutually beneficial and win-win, and protectionism is dead and there are no winners in a trade war.
That's not some opinion of an American. It's literally the article that China wrote. You could read it. Chinese government's position on opposing US abuse of tariffs. April 5th. They also tagged Trump at real Trump on X. So, mind you, China is pissed. And this is why they're vowing to fight Donald Trump because they see Donald Trump is making the mistake here.
Mind you, yeah, China had tariffs on the United States beforehand, but trade weighted, they were 2.2%. 2%. Donald Trump just raised the tariffs to 104%. That's insane. Now, part of that is because China came back with a 34% tariff, raising that 2.2 to to 36. But you could see the magnitude of Trump initially, you know, 30xing the tariffs China has and now roughly 3xing the tariffs China has.
I don't know if Trump is going to win against China here. And this is not being anti-American. I'm just concerned that we are overplaying our hand. And when we overplay our hand, we risk an extended trade war and we risk losing. And I don't like losing. I'd rather have really good cards but not be forced to play them.
Now, the good news is we're starting to see some incredible sales events. You know, car car dealers are reporting massive boosts of sales in March. Uh Tarp Tent, an outdoor gear company, has a coupon code literally called tariffs suck. and their sales surged 25%. Most of their product comes from China.
Apple reportedly shipped in five plane phones uh planes uh full of iPhones today to try to you know extend how long they can basically go without having to pay tariffs. Some people are apparently loading up on deodorant and toothpaste like it was co Best Buy saw an 8% jump in sales last month. The best jump since COVID.
Apple stores are super busy as people think about getting a new phone. All of these things are happening. in anticipation the tariffs might actually last for quite a while. Now the US trade representative, the office of the US trade representative argues that there are differences between China and others who are trying to negotiate and that's because China indicates that they may not want to work towards reciprocity.
That's because they don't believe in Trump's reciprocity. And when they don't trust somebody they're negotiating with, well, you end up with problems. You end up with no deal. You have to be able to trust your counterparty. otherwise it becomes really hard to negotiate and I don't think we've exactly given China a reason to trust us.
So when I say as I said this morning in the course member liveream I think markets are going to fade today and there's a greater chance of us going down than there is up today. Puts are more desirable. Well then all of a sudden we look at the facts and we go well it makes sense Kevin why you had that opinion.
You looked at the facts you presented those facts to course members. you present it just like I present the facts on my videos uh broadly here except you know we do our course member live stream at market open so it's a little bit more tradable and then you know we can put together broad research and thoughts and more organized videos uh like this which remember if you want to be part of that meet Kevin membership go to meet kevin.com price goes up April 15th but what I want you to know is we are in a position where things aren't getting better with tariffs there's the argument that things are getting better, but so far we're not seeing things get better.
People are arguing that China is freaking out. I don't think they are. People are arguing that the Fed is going to bail us out. I don't think they are anytime soon. Got to see the labor market crap cracking first. Just like Barkley says, hey, uh, you know, the labor market is super lagging. Well, that means the Fed's probably going to lag and that means Donald Trump, while he's cheering good labor numbers, is probably going to miss the boat and end up causing a deeper, darker recession than previously thought possible.
Now, people are under this impression that we're just going to have a mild recession. Even Barclay suggests mild recession. My concern is that this mild recession is actually going to be a much longer recession. See, you have country or companies like Shopify now arguing that hey, you know, we need to consider using AI uh before we hire anyone.
Okay. Well, this is actually slightly problematic. Not for the company Shopify. It's smart for them, but it's problematic for the economy in recovering out of a recession. See, look at this. Before asking for more headcounted resources, teams must demonstrate why they cannot get what they want done using AI.
What would this area look like if autonomous AI agents were already part of the team? This question can lead to really fun discussions and projects. In other words, Shopify is like, "We're not hiring anyone until you tell us why you can't already use AI to cover this." Well, this all comes at the same time as Elon Musk through well, in part Kimble Musk appears to be freaking out a little bit over the drama that we're seeing with Peter Navaro.
Now, I find this really interesting because see Elon Musk being part of the Trump admin essentially can't really bluntly call out Donald Trump. He's tried to talk Donald Trump down on the tariff ledge and has failed. And so now what's happening is you're actually seeing Kimble Musk come out and try to defend Elon Musk and go anti-tariffs on behalf of Elon Musk.
Now I wonder how much of that is sort of being conveyed by Elon uh but then you know to to Kimble and then all of a sudden Kimble is is sort of running with the story, right? I wouldn't be surprised by that. China is run by very smart people. This is not a game that should be played by C minus students like Peter Navaro.
A lot of this slamming of Peter Navaro, by the way, including Elon Musk calling him the Rword today, is happening because Peter Navaro suggests that Elon Musk is a car assembler, not a car manufacturer, and that Elon Musk should get his parts from the United States. Peter is only partially right here because Teslas are the most Americanmade vehicle that exists.
Uh even Kelly Blue Book reiterates that. The problem is Peter Navaro does have a slight point in that 35% to 45% of components in Teslas are made in foreign countries. You know, copper wiring, wire harnesses, lithium ion faz phosphate batteries come from China. Okay, those batteries today are now twice as expensive.
Think about that. If Tesla needs to put a $6,000 battery in a car, that battery now costs $12,000 to import. Well, you may as well put 4680s in. Oh, but can we scale 4680s to all the vehicles we're doing right now? No. Okay. Well, that's going to take a while then. And it's more expensive to use 4680 structural batteries.
So, there goes your margin. The tariffs hurt your margin directly. So, that's problematic. So, now, I mean, think about it. If a uh $35,000 car that Tesla sells has an 18% margin with vehicle tax credits, guess what 18% margin on a $35,000 car is? Take a look at this right here. Uh see that right there?
66,300 bucks. Okay. Well, if a $6,000 battery now cost twice as much, all your margin's gone. This is what's problematic. And it's like, oh, well then do 4680s. Okay, well those cost twice as much. Oh, great. You also have no margin. So, it's a problem. And unfortunately, it's taking a lot longer to get through this tariff negotiation because Trump is digging in his heels.
He wants $350 billion from the European Union. European Union says, "Let's go to 0." He says, "No, we want $350 billion of energy imports so we can offset this trade surplus," which is phony math anyway. Well, what the heck? If it's all based on phony math and phony logic, why would the European Union do it if they could buy cheaper energy somewhere else?
So, unfortunately, what I think you have are very undesirable uh a very undesirable investing environment uh because there's a lot of risk. There's a risk of true deep dirty recession and we are getting more and more signals than ever before. Now, I already thought we were primed for recession before all of this, but there was hope that we could prevent it, right?
The slowdown in jobs, the 27 weeks unemployed, the jolts ratio, the quid ratio, the yield curve steepening, all of these factors were things we were looking at going, okay, might want to start thinking about a recession being in the cards. Okay, Donald Trump has added to those uncertainties. When we thought that he would remove from those uncertainties, we thought tax credits, more more deregulation, more growth in America, we got the opposite.
We got more problems layered on at an at an already sensitive time. So this idea that oh well Kevin you know your bearish thesis is only playing out because of Trump's dariffs or whatever you know like very few people mention that because most people who watch me have more brain power than than that simplicity.
But the reality is the opposite. The conditions were already there. Donald Trump has just accelerated those conditions rather than make them worse. Things aren't binary in life. They're not sort of like light switch on or off. There's a lot more to it. And so this is where I I am personally concerned.
Now I'm also grateful because in February we gave $40 million in a financial advisory fund back to investors and said we are going into a bad time. Take this money and be careful. Don't buy the top of the market. Be careful. Now one of the reasons I did that is because I really wanted to focus and triple down on house hack.
I don't do personalized financial advice for folks. Uh I don't do fund management. I've I've experienced Wall Street. I've experienced broker deals and everything. And what we're doing is we're taking all of the knowledge and all of the experience that we have in Wall Street and we're applying it to make House Hack the best Berkshire Hathaway style company that's starting with real estate that can be created over the next hopefully 60 years.
That's my dream. That's my goal. That's my baby. That's why I'm just basically shutting everything and focusing only on house hack because that I think is the best play going into this insane uh recessionary environment. Now maybe that makes me biased, you know, may maybe I'd be more interested in so consider that maybe I'd be more interested in buying the dip today in stocks if I didn't have this opportunity in house hack.
See, I think I can 100x house hack. I mean, obviously not a guarantee, but I think I can 100x that. I have control over it and I have hope in it. A company like Tesla, I have hope but I don't have any control. So that mismatch makes me very very optimistic about what I could do with house hack. And that's why I'm focusing so many of my energies just on that which I'm really excited about especially as we go into this cycle where we're going to be able to deploy cash in opportune times because of what we think is going to be probably an extended and dirty recession.
We'll see. I hope not. Hopefully, we can undo some of this drama that's going on with the tariffs because it's making things worse and not better and this this new spike in the 210. It's worth remembering this also. This is just another topic I know people are going to ask about. A lot of people are like, "Hey, Kevin, you know, why is why is TLT falling?
Isn't it supposed to be a hedge?" TLT is a hedge for recession. Markets today are pricing in inflation from tariffs that are staying longer. But what happens after you stagnate and go through stagflation? Recession. So, it'll come. Yields will plummet. But what will happen first is the 2-year yield will plummet.
That's when we get our credit shock. When we get our credit shock, we fall into a deep recession. That's when the 10ear comes rapidly down. And it usually happens a lot faster than we can even react to it. Anyway, those are my thoughts. video. .
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