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. And on today's show, we will be discussing why $1.5 trillion of value left the stock market. You got some Trump stuff, got some China stuff, you got JPAL who was talking today. We'll talk about also what happened with Nvidia based on yesterday's news that was obviously not good for Nvidia. Kind of bled into the semiconductor space in the market, the overall technology space.
and it wasn't helped when Pal said some words that well let's just say the stock market was not a fan of lot to talk about. Let's get into it. All right, so let's get started with the main thing that happened today which is J Pal spoke. He was at the economic club of Chicago and well he had a bunch of things to say.
Now obviously this is really important because given all the volatility that we've been experiencing over the past couple of weeks Jalow who hasn't talked for the past couple weeks you know everyone's kind of curious what's going on with Mr. Jerome Pal. What does he have to say? how does he think about the current state of the markets?
And there were four things that he said that I think were really important. Number one, he said the economic impacts of tariffs are larger than expected. That is a shift from his uh previous tone about the economic impacts of tariffs being rather muted. Now he's saying, well, we think it's larger than expected.
He then went up to say the so far larger than expected tariffs which are not official yet but this you know 145% against China 10% across the board that is what is larger than the Fed expected means higher inflation and slower growth which is stagflation right when inflation is going up growth isn't going up that's stagflation so he didn't literally say it's stagflation but he said hey this is what it's implying he then said growth likely slowed in Q1 2025 from last year meaning that we probably had uh less growth there are some studies coming out saying that we had negative growth.
Two quarters of negative growth means we have a technical recession. But JPAL is saying, hey, in Q1, we likely had growth that is slowing year-over-year versus growing, which is, you know, never good in the context of the overall economy advancing and overall earnings growth being stronger. And then finally, he said tariff policies because they're still evolving, the effects of them remain uncertain, which also is not great for the markets because the markets want certainty.
And if the head of the Fed is saying, "Hey, we have a lot of uncertainty and we don't know what to do with it because the tariff policies are so violent in terms of their volatility, this is the new normal that we're going to have to be living in." Now, all of this stuff is like, yeah, it's like bearish.
It's not super bearish. It's not super bullish. It's kind of just like, all right, we kind of all know that the tariffs are volatile. We know we all know that the inflation from the tariffs also are volatile, but what's the real reason while he started talking that the market started tanking? He was asked a question and the question was uh and I'm happy they asked this question because it was it was just a very direct and specific question.
The question was is there a Fed put aka if the stock market really does take a mean downturn even probably worse than what we saw on April 8th when we read 4,800 on the S&P um do you step in? Do you turn on the money printer? Do you save the market? And JPA unequivocally said no. And the reason he said no and I can't blame him for saying no and that's you know I my net worth can blame him for saying no but he said no and his logic was the market is functioning the way the market is supposed to function which he's correct about when there is volatility he said the market is going to price in that volatility and is also going to be volatile.
Now the stock market's not broken it's just our stocks are not going up like they were in 2024 and the reason behind it is because of all this tariff volatility. So, he's not wrong when he says, "Why should I step in and save the day when he did nothing to cause the damage?" Now, you have some people saying, "Well, uh, the Fed should have been cutting a lot uh earlier." And, you know, they did cut a decent amount in 2024.
I don't think it like they've been that restrictive. I do think they should be cutting right now given headline CPI at 2.4. The um the uh the the the federal funds rates at 4.5, so more than double the current um inflation rate is probably too restrictive. But I also understand why the Fed doesn't want to cut because they think that tariff inflation is going to, as per today's comments from JPAL, last longer than expected, not be transitory.
Which means if you make progress on inflation and then you introduce these tariffs and then you cut rates to stimulate the economy, but then the tariffs create more inflation, we're in the same death spiral we were in in 2022 and there's no way to get out of it. So that is when the market really started tanking.
It's not like he said anything new, but it was one of those things where the market was like, "Okay, cool. We now have confirmation that JPAL is not going to save the day. And because JPAL's not going to have to not going to save the day, we have to learn how to deal with the volatility. The one silver lining out of all this, which is like good because it means there's not going to be some epic blow up in the uh overall markets based on my logic here, but obviously it's not the best thing for the stock market is that bond yields went down.
When people buy bonds, yields come down, which is a good thing. If people are afraid of stocks, they should be buying bonds. Yields should be coming down. Last week was really weird because people were selling stocks. Stocks were going down and they were selling bonds and yields were going up, which is not a good thing.
That can blow up the entire credit market. That's what happened in 2020. That's when JPL had to come in and save the day by money printing and buying up a ton of treasuries. Today, bond yields came down. Why is that a good thing? Well, people are leaving stocks and going into bonds. They're not afraid of US debt, which is good, right?
Well, yeah, but why are they running into US debt? It's because of what JPAL said, which is that he feels he's only going to cut if there is a growth slowdown. And a growth slowdown would imply a recession. Which means people are essentially saying, "Hey, let me lock in my yield today. Get my four and a half% 4.2%.
I think it came down today, 4.28. Uh, and lock that in, guarantee it for myself. The only way it fails is if the US defaults on their debt. And uh, let me do that now because eventually JPAL's going to cut. Not for a bullish reason, but for a bearish reason." And the bearish reason being that growth is going to slow down.
And if growth slows down, then we're going to have way too restrictive of a monetary policy, which means that bond yield will look pretty juicy if the bond yield comes down to like three and a half% in the next couple months. Obviously, that doesn't mean we're entering some massive bare market. But what it does mean is that it looks likely that bond yields came down today because people finally believe JPAL on this concept of cutting when growth slows down, potentially being late to cut or potentially cutting into a recession.
But they also believe that he would not save the market and cut just because market value comes down, stocks go down. He is more concerned about tariff inflation as he should be. And as a result, you got stocks that fell today, at least bond yields fell as well. And you've got JPL who made it very clear that essentially this is not his problem.
This is Trump's problem. Okay, next up quick update on Palunteer. So Alex Karp, CEO of Paler made the time 100 most influential people of 2025 list. Now, why is this important? Well, not only did uh Pounder get a massive NATO contract two days ago, which was very important for Pounder. It's been a long time coming.
We've been waiting for them to get this deal. They finally got it. But uh if you remember last time that Time released the list like this, it wasn't top 100 most influential people, but it was top 100 most influential people in AI. Alex Karp was left off the list in 2024, which I thought made no sense because he's Alex's freaking Karp.
Elon was also left off that list. uh an Indian Bollywood actor and Marquez Brownley were which is a YouTuber were on that list. So yeah, I was a little confused last year but I'm happy that Karp's getting the recognition that he deserves. Time wrote as Palanteer the data analytics giant that works closely with the US armed forces and intelligence agencies has grown in value on the stock market.
Its chief chief executive Alexarp has become the embodiment of a new kind of Silicon Valley billionaire and unashamed techno nationalist who evangelizes western power. Meanwhile, business is booming. In the same shareholder letter that Karp released last quarter, he also announced that Pounder's revenue in 2024's final quarter had increased 36% over the corresponding period in 2023.
I'm just happy that Karp's getting the recognition that he deserves because um yeah, he's obviously one of the most hundred, influential people, not only in AI, but on the planet. And in my opinion, he's a top five CEO in the United States of America. All right, next update is on Tesla. Tesla's California vehicle registration dropped 15.1% in Q1 compared to a year ago with its EV market share falling to 43.9% from 55.5% in the state of California.
Now, why is this a big deal? It's because it's California. California is supposed to be the place where you imagine everyone buys an EV or is at least more open to buying an EV. Well, not based on the registration data that we got today in the context of Tesla. Now, is this bearish Tesla? kind of but also kind of not.
And let me give the nuance right here. Tesla's California vehicle registration is dropping 15% year-over-year uh is bad because we are seeing even higher declines to the to the tune of 40 or 50% across Denmark, Spain, Sweden, Germany, etc. So in Europe, we're seeing the registrations fall year-over-year.
And this is just like the objective data. And it's not good. And what do people point to? Although they point to the brand damage that is being caused by Elon being so political that people are choosing just not to buy Teslas. This is the first time in the United States, in particular the state where Tesla manufactures their cars and the state where that has always been friendly to22 Tesla.
I think New Jersey and Texas are the other two states outside of California that have the most Teslas in their population. But to see California vehicle registrations drop 15% and then the um the EV market share falling from 55 to 43 down 12%. That was a bit surprising. Now, a lot of the Tesla bulls will say, "Well, the only reason that's happening is due to the Model Y refresh and the supply chain bottlenecks that have to do with that." And as a result, registrations dropped because a lot of people are not only waiting for the Model Y Juniper um uh version to be released, but also uh due to the supply chain bottlenecks that stop the production of all those Model Y's actually getting into the region, which is why the registrations came down.
That's a fair argument, and I'm not saying that's a bad argument. My takeaway, this is why I said it's kind of bearish, kind of bullish, or at least not bullish, but like neutral is Q2 will tell us. I mean, at this point, the you if you're super bullish on Tesla from the perspective of this is not brand damage, this all has to do with logistics and supply chains, then Q2 will let us know.
Q1, you can get away with that argument and miss deliveries worse than they've missed in the past couple years. But if Q2 they miss deliveries again and not just like a small miss but an aggressive miss like they had in Q1 because if you miss by like two three% it's whatever but these guys miss by like 15% this time then yeah that's going to be in my opinion enough evidence to say hey the brand is severely starting to be damaged.
People are not buying Teslas even in the state of California where they should be buying Teslas. Granted California is also very liberal so you would understand why people don't want to support Elon. and then Europe registrations falling year-over-year. If that data is consistent with what we saw in Q1 and Q2 and it doesn't have to do with supply chain bottlenecks, that's an issue for Tesla.
Having said that, if you're buying Tesla at these multiples or if you buy Tesla if it tanks under 200 going into earnings, uh which I think could happen, but I also think it doesn't have to happen. I think it could stay flat around 220ish, then uh you're buying it not for the car business. You're buying it for robotics in my opinion and and you're buying it for FSD.
And for me, the real thesis is robotics. So, uh, yeah, like it's not super bullish. It doesn't have to be super bearish, but I think Q2 is going to be pretty much what we need to know to figure out is this just a supply chain issue or legitimately two quarters in a row, is there brand damage that is stopping people from wanting to buy Tesla?
All right, next update is AMD. So, Nvidia got hit with that chip export ban yesterday, which caused um not only the stock to fall, but also $5.5 billion in charge offs for Q1 is what they disclosed yesterday to the SEC. Today, AMD said in a new SEC filing that that same export control that Nvidia had to deal with, we have to deal with as well.
The restrictions specifically target AMD's MI308 AI chips, which are subject to the latest round of trade limitations. AMD said it plans to apply for licenses to continue exports but warned there's no guarantee that they will be granted which is the same thing for Nvidia. Uh they will apply for a license to give them the ability to get rid of this ban.
But as of now it's an indefinite ban. And in my opinion Nvidia is kind of being used as a pawn in the broader trade war between China and the United States that we'll talk about in a second. What is the corresponding result of paying? 800 million. So about a billion bucks. Nvidia was about 5.5 billion, but still not the best thing for AMD or Nvidia.
This is bearish semis. I'm in Nvidia. I bought more of the dip today. I bought it at 101. Um, this is not good for the semiconductor space, though. All the semis, whether it's Lamb Research, SMCI, um, Dell, well, you know, Micron, whatever your pick is, all of them stem from this argument around demand from GPUs.
I don't think any of them are independently getting that much more demand if Nvidia doesn't get that much more demand, which means all of those companies will be affected because Nvidia can't sell $5.5 billion worth of goods to China or AMD can't sell $800 million worth of goods to China. That's not good for the semis.
It's a tough space to be in right now. If you believe in it, you DCA and you you hold through the thesis. I think Nvidia is the best quality pick there, but obviously not the best for all those names. All right, transitioning from AMD to Nvidia. Today, the US House Select Committee on the CCP, Chinese Communist Party, initiated its first congressional investigation into Nvidia.
The probe focuses on the company's sale of advanced AI chips to Chinese firms, particularly scrutinizing how approximately 60,000 Nvidia chips were acquired by DeepSeek, a Chinese AI company that uh created some pretty strong innovations in the context of reasoning models. But the House Committee on the CCP is wondering, how did they get the chips in the first place?
So, what are the implications of this on Nvidia? Well, the stock already fell 10% today. Uh, well, at one point it was down 10%, it fell 7% by the end of the day, so it recovered about 3%. I think the implications right here are that, and as an Nvidia shareholder who decided to pick this as one of my main Mac 7s this year, I think as of now, and anything can change in an instant because Trump could tweet something and things could I I I I think this is an accumulation year for Nvidia.
You either believe in the thesis or you don't. You either believe that robotics are going to need tons of GPUs and self-driving with all these OEMs are going to need GPUs. You believe that there is actually an AI revolution and chat GBT is going to get billions and billions of users and they need GPUs and all these LM are going to be integrated in every part of our life and you believe that means Nvidia will be more valuable or you don't like I think it's just that simple and I believe in that future.
I think that future makes sense to me. Maybe I'm wrong about that future but as a result I buy Nvidia. Now, what happens here in regards to Chinese investigations, uh, their illegal selling of chips potentially, all of those are headwinds in the short term, they it doesn't destroy the thesis. It probably takes away a little bit from the valuation, the price of earnings, the multiple you put on that.
I was projecting 450 of EPS this year. Maybe that ends up being 350, which obviously changes the direction that the stock can go, but I don't think that changes the narrative. So although it's bad and it sucks and it's not fun to see Nvidia get investigated by uh the United States and potentially be used in this new probe on how chips got to China, it is the inevitability of what we're dealing with right now.
And in the next topic, which is going to be our last topic of the day, we're going to talk about what Nvidia is doing or how Nvidia is likely being used as a pawn in the China trade war. All right, final topic of the day, China and the trade war. Now although JPAL picked up a lot of headlines, I think this was actually the most important headline if the article is true.
So the Wall Street Journal, what did they say? They said, "The US government is initiating tariff negotiations with over 70 countries to economically isolate China." Now, okay, interesting. We knew that the United States is probably talking to Vietnam and Thailand about China and how they're navigating it.
uh Xi Jinping I talked about in in I think I think on Monday in that episode that uh he's traveling to Vietnam and Cambodia and Malaysia to probably isolate them from the United States. But uniquely what the Wall Street Journal said today is that the strategy according to their sources involves urging these nations, the 70 countries that we're talking to, to prevent Chinese firms from operating within their borders and to block China from routing goods through their territories to circumvent US tariffs.
And what's interesting about this um about this argument right here is because Trump had a quote yesterday and Trump's quote was some countries might have to quote unquote pick between the US or China. Then you get this article today saying, "Hey, the United States is thinking of isolating or getting these countries to isolate themselves from China, aka pick the US over China." And I mean, who are you going to pick?
I thought this was the most interesting headline today because if the trade war is getting as advanced as it's getting and and I do think inevitably we're going to reach a conclusion and hopefully China and the United States just sit down like adults and figure it out. But if Trump wants to flip the new world order and he wants to enter us into a fundamentally new economic paradigm, isolating China would be one of the easiest ways uh to get that done.
I say easy in a in air quotes, but like easy being if you can get a lot of countries to pick you over China, China's economy is already crippling. They grew 5.2% 2% GDP, which was against expectations last night, which was good. But the reason they're growing so much is because the STEMI stimulus is being pretty heavily printed in China.
So, it's not like they can really afford to have the entire global economic ecosystem isolate them. But maybe according to this reporting today, that's what the United States is trying to do. Now, if that's the case, I don't think we're going to get a deal anytime soon because why would we? We are like at that point, it's just full-on trade war with China, and we're going to continue to isolate ourselves against them.
But if this is being used as a negotiation tactic or Nvidia and not being able to sell their H20 chips into China is also being used as a negotiation tactic, which by the way, the other thing I forgot to say about Nvidia is that Huawei is developing tons of momentum. And the H20 chip, if Huawei develops something like that, then that just means China is going to have their own Nvidia inside.
Not as good as Nvidia, but they're going to have their own company building those chips, which means the profits are going to be made. It's just not going to be made by Nvidia. But if they're using Nvidia as a pawn in this trade war and then they're using Thailand and Vietnam as pawns as well to try to get them to isolate from China, which makes sense why they would issue this executive order on Nvidia because there's no way you can isolate China if Nvidia is selling their chips to China.
Well, then maybe this is the new global economic paradigm that we're living in. And the first takeaway I had when seeing this, which I don't think is going to happen, but it's something to definitely think about. What if China gets so pissed off that they invade Taiwan? Because they're like, "All right, all of you guys don't mess with us anymore.
All of you guys are going to not let us do business. Cool. We're going to invade Taiwan. China still has a military. China still has nuclear weapons. Tai the Taiwanese people believe it's a question of when, not if, if China invades them, what if this pushes them over the edge? Now, why do I think that's not going to happen?
Because to invade Taiwan, you need the will of the people. And if the people are broke, if the people don't have food, if the people are depressed, if your economy is down the gutter and people don't have motivation, it's kind of hard to unite all those people to invade Taiwan. I mean, maybe China could figure it out, but obviously if they're not in a economically strong position, uh, their chances of invading Taiwan or successfully invading Taiwan might not be as strong as well.
So, there's a lot of nuances to this, a lot of stuff going on. This headline to me was the most important headline of the day in terms of the United States actually trying to isolate other countries from China. And if that is the approach, which I would have to imagine maybe it's a negotiation tactic and it's not really the approach, but if that is the approach, this is a trade war that can last longer than expected.
And maybe it's a successful version of events. Maybe we have a new world order where China has to kiss the ring of all these other countries because no one wants to work with them. But China has the cost of goods uh as one of the lowest in the world. The US has the best consumer. Who do these 70 countries pick?
the consumer or China's cost of goods. . Appreciate everyone that was part of the market open and market close stream today. We had a long stream for the close. Um, and we got to see JPAL talk and analyze that. Now, one thing that's important is Friday is Good Friday. So, tomorrow is the last day of the trading week for the stock market.
I think I'll do a stream with like Steve on Friday. We'll we'll figure out something. But, uh, yeah, Friday there's going to be no stock market open or close because the stock market's not open. But we will be back tomorrow to see how we end out the week uh for the third trading week of Q2 officially ending tomorrow. Thank you everybody. I'll see you guys on the next
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