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April 16, 2025

Yesterday, we talked about what seems to be a "Mar-a-Lago Accord" in the offing.

 

It's been fourteen days since "Liberation Day" (reciprocal tariff announcements).  And it has been said repeatedly by the Trump administration that over 75 countries are clamoring to do a deal. 

 

But no deals done

 

Why?

 

Are they planning on doing a grand coordinated deal, all at once (and probably over a weekend)?  Maybe.

 

What would it look like, based on what's been guided by key Trump advisors:  Tariffs get slashed, in exchange for countries opening up their markets, boosting their defense spending, and committing to buy more from the U.S., invest in American manufacturing, and buy our Treasuries — and isolate China.

 

If we look at the behavior of gold and the dollar, the market seems to be sniffing out such a deal, to include an agreement to devalue the dollar

 

Gold is up 13% since Trump's 90-day pause on tariffs just one week ago.  The dollar is down 4%. 

 

That said, in a prepared speech last week, Trump's top economist (Stephen Miran) dismissed the conventional economic view that trade deficits get fixed, naturally, through currency depreciation.  Not when you have the world reserve currency.

   

Instead, he views tariffs as the solution — not currency manipulation. 

 

 

 

 

 

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April 15, 2025

As we've discussed over the past week, among the objectives in Trump's negotiations with global trading partners in the coming weeks and months, may be coordinating a global effort to put China in the global trade "penalty box" – a global retaliation against China's multi-decade predatory economic strategy.
 
According to a piece The Wall Street Journal ran today after the market close, that is indeed the plan.  And they say Bessent is leading it.
 
So, Trump has quickly drawn most of the world back into alignment with the U.S., using the U.S. consumer as leverage.
 
And now it's said that they will "extract commitments from trading partners, to isolate China's economy for reductions in trade and tariff barriers."  
 
With that, let's take a look at how this is shaping up, and how it might end in another Plaza Accord type of moment
 
Back in my November 25th note, (here), when Bessent had just been named Trump's Treasury Secretary nominee, we talked about the dealing with China issue, and some of Bessent's pre-nominee comments, particularly where he made the case for a "large scale globally coordinated currency, fiscal and monetary" agreement.
 
And the case was largely centered around China, China's predatory trade practices, driven by its manipulated (weak) currency, which has resulted in massive global trade imbalances, and China's accumulation of the world's largest pile of foreign currency reserves ($3 trillion).
 
With that in mind, Trump's Chairman of the Council of Economic Advisors is a guy named Stephen Miran.  He wrote a report on "Restructuring the Global Trading System" in November of last year.  A month later, Trump picked him to be his top economist.
 
Within his guide to restructuring global trade:  A "Mar-a-Lago Accord."
Here's what it looks like:  Leveraging tariff threats and the United States' role in global security and financial stability, the plan includes our trading partners "burden sharing." 
 
In this case, the dollar's role in the world as the reserve currency provides benefits to the world, and benefits to the U.S. but also drives persistent and unsustainable U.S. trade deficits. 
 
So "burden sharing" means, accept tariffs or open your markets, boost your defense spending and buy more from the U.S., invest in American manufacturing, and buy our Treasuries. 
 
The "Mar-a-Lago Accord" idea seem to be materializing.  And it seems that isolating China will be part of it.         
 
 
 

 

 

 

 

 

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April 15, 2025

While stocks have sharply corrected under tariff fears and the Fed’s missteps on policy, make no mistake the AI revolution continues to charge forward.

Over the weekend, the Trump administration signaled exemptions for critical AI inputs from China, while Nvidia announced it has started production on its most advanced AI chips in Arizona, and will be building “supercomputers” in Texas in 12-15 months. 

This “onshoring” is new global capacity, and that will be like pressing the accelerator on the AI revolution.

And with that in mind, one of the handful of people working on the frontier of this technology revolution said this about the state of AI back in February  

Elon is talking about teetering on the edge of artificial general intelligence (AGI).  It’s where the machine can reason like a human or better – in any domain.  The next stage, it can constantly improve itself and with no downtime.

Related to that, remember, earlier this year Jensen Huang (Nvidia founder, CEO) said “the ‘ChatGPT moment’ for general robotics is just around the corner.

He said over the next several years, the combination of 1) agentic AI robots, 2) autonomous cars and 3) humanoid robots will become “the largest technology industry the world has ever seen.”

So agentic AI seems to be getting close (where the machine has “full agency”), fully autonomous cars are getting very close, and this year Tesla’s Optimus humanoid robots are expected to be working in the Tesla factory – with an aggressive plan to grow the humanoid robot population.
 
And with that, remember, Elon said years ago that the introduction of humanoid robots into the world, would mean “no meaningful limit to the size of the economy.”  Jeff Bezos has recently echoed that view.

So, as the crowd obsesses over tariffs, tight money and political mudslinging, the real story is relentless ascent of world changing technology.  

And as we’ve discussed often here in my daily notes, there is a wartime-like effort, by the U.S., to win the AI arms race.

With that, if you can look through the noise and pushback surrounding the Trump agenda, this broad market correction is an opportunity to buy the key stocks that are powering the AI revolution, on sale.  

But isn’t this another tech boom/bust cycle?

For perspective, the AI revolution is as transformative, if not more, than the advent of the internet, but there are clear differences in the investment.  

The dot-com bubble was fueled by a speculative mania. 

Money was being poured into companies with little-to-no revenue (like a few hundred thousand dollars of revenue) – and valued on the basis of eyeballs (web traffic).

On the other hand, as a proxy on the AI revolution, if we step through our AI-Innovation Portfolio we’ve built a 24 stock portfolio since launching in June of 2023, and ALL but one are profitable — not accounting tricks, legitimate net income.

That’s a big difference.   

And the one company that isn’t profitable, is expected to be profitable this fiscal year.

And all have positive net cash (most in the billions of dollars).

This is a very different technology boom, and it’s still early.

If you want to own the stocks of the companies building the infrastructure to power AI, the companies delivering the capabilities of AI to hundreds of thousands of businesses, and the companies that will best leverage the productivity enhancements from AI, you can find them in our carefully curated AI-Innovation Portfolio.

Consider this:  We added Nvidia in June of 2023, just when the AI revolution was kicking off.  We exited on the catalyst of the 10-for-1 stock split announcement, after the announcement fueled a further surge in the stock. 

So, we sold it last May for 184% return, at a P/E in the high 40s.  

We recently re-entered Nvidia at a forward P/E of 21down a third from its peak, trading back to its pre-split level — BUT, the company is now producing twice as much revenue, and twice as much profit, and the state of the AI-driven technology revolution is far more advanced than it was just 11 months ago.

So, this correction in stocks revalued Nvidia to a multiple very near the broad S&P 500 market multiple.  That’s extremely cheap for a company with 78% year-over-year revenue growth and operating margins greater than 60%, with $35 billion of net cash. 

The best investors in the world have built their careers in markets like this, buying when others are selling.  

This is an opportunity to buy the technology revolution on a dip.

Here’s how you can join me…  

The AI-Innovation Portfolio is about allocating to HIGH-GROWTH.

For $297 per quarter ($99 per month), you’ll gain exclusive access to my in-depth research, expert analysis, and timely investment recommendations focused on the generative AI revolution — all email delivered to your inbox

You can join me by clicking here — get signed up, and then keep an eye out for Welcome and Getting Started emails from me.

Best,

Bryan

 

 

 

 

 

 

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April 14, 2025

The March inflation numbers came in last Thursday at 2.4%.

The last time we saw a number that low was September of last year.

Before that, it was Q1 of 2021.

What happened in September of last year?  The Fed kicked off its easing campaign — with a 50 basis point rate cut.

So, headline CPI is running at a level that supported the launch of an easing campaign, and an aggressive start to it.

Add to this, as of April 1, the Fed has dramatically dialed down its quantitative tightening program (effectively ending it), because there were “signs of increased tightness in money markets.”

This move looks like a clue that something in the financial plumbing might be breaking.

And if we recall back to 2019, it was similarly “strains in the money markets,” that forced the Fed to slash rates, and go back to expanding the balance sheet (i.e. quantitative easing – QE).

With this in mind, let’s revisit some things Jamie Dimon (JP Morgan CEO) said about liquidity conditions back in October — and what he said this past Friday.

Back in October, he warned about the risk of volatility in the Treasury market.

He complained that the banks have tons of excess cash but can’t use it efficiently due to regulatory constraints.  It affects their ability to provide liquidity in the Treasury market, while the Fed is simultaneously extracting liquidity from the Treasury market.

And with that, he implied that we will likely see another episode of big Treasury market volatility, caused by the Fed’s quantitative tightening.

Fast forward six months, and the Fed is still extracting liquidity from markets, though now only at a rate of $5 billion per month (as of April 1).

And we’ve just had a huge spike in the 10-year yield.

What did Jamie Dimon have to say about liquidity conditions now?

He made the same case for regulatory change, for this reason:  so banks could intermediate more in the markets to provide stability, rather than the Fed.

And by Fed involvement, he means more QE.

 

 

 

 

 

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April 10, 2025

As we've discussed over the past week, Trump's "escalate to de-escalate" strategy is about drawing the rest of the world back into alignment with the U.S., using the U.S. consumer as leverage.  
 
And then isolating China.
 
Check, and check — though Europe might be an exception, given they scheduled retaliatory tariffs against the U.S. yesterday (before the Trump pause was announced). 
 
For the rest, among the objectives in Trump's negotiations in the coming weeks and months, may involve coordinating a global effort to put China in the global trade "penalty box" – a global retaliation against China's multi-decade predatory economic strategy.
 
So, what is China's plan B?  It looks like Europe
 
Remember, over the past few months, the European Commission has announced plans for a massive fiscal spending spree, to catch up in the AI arms race and to "re-arm" itself — all by piling on debt to an already fragile fiscal situation, in a weak economy.
 
Who's looking for a new market to direct its excess manufacturing capacity toward, while also supplying the credit to buy their stuff?  
 
China. 
 
With that, the market activity over the past twenty-four hours seems to be telling that story.  
 
U.S. government bond prices down.  Dollar down
 
European government bond prices up.  Euro up.
 
It looks like Chinese capital flowing from the US and into Europe. 
 
If so, would the European Commission take the invitation to partake in China's capacity dumping, credit fueling, industry gutting economic partnership?  Maybe. 
 
Keep in mind, from 2010 to 2012, Europe was in the depths of a sovereign debt crisis.  The debt dominos were lined up for default and ready to fall, which would have unraveled the European Monetary Union.  It would have been game over for the euro. 
 
It didn't happen because the world stepped in to save it, with a coordinated policy response from major central banks (the ECB, the Fed, the BOE and the BOJ).  And China played a large role.  They came in as buyers of euros, and European sovereign debt and state-owned assets (like Greek seaports).  They bought plenty of influence.   

 

 

 

 

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April 09, 2025

As we've discussed here in my daily notes, the Trump tariff strategy is really all about China.
 
And with the reciprocal piece of the tariff plan due to be enforced across global trading partners today, the President made that crystal clear.  His escalation tactic forced the world to take a side.  And with 75-plus countries reaching out to the administration to make a deal, they've sided with the U.S. consumer
 
The de-escalation came today, with the announcement of a 90-day pause on the reciprocal tariffs, except for China.
 
Stocks exploded higher on the news. 
 
It was the third biggest day (up) for the Nasdaq over the past 25-years …
 
 
Interestingly, all of these big 10%+ days for the Nasdaq, in this chart above, were relief rallies in bear markets. 
 
With that in mind, the Trump "escalate to de-escalate" strategy we've talked about over the past few days is successfully isolating China — and it's been quick work.
 
And among the objectives in Trump's negotiations with global trading partners in the coming weeks and months, may be coordinating a global effort to put China in the global trade "penalty box" – a global retaliation against China's multi-decade predatory economic strategy. 
 
The problem:  The Chinese Communist Party won't comply, because they can't.  They can't deliver on the demands of fair global trade and generate the domestic economic growth necessary to stay in power.
 
We saw it in the "Phase One" deal.  They shook hands on the deal with Trump in the Oval office in October of 2019.  Then they waffled on signing the deal, but ultimately sent the Vice Premier (not Xi) to sign the deal on January 15, 2020.  And a month later, a pandemic originated from China.  And, not surprisingly, the Chinese government hasn't delivered on its obligations.
 
So, despite the relief today, we should expect more disruption for markets over the coming months, as the global focus turns to China. 
 

 

 

 

 

 

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April 08, 2025

Yesterday we talked about Reagan’s strategy to end the Cold War, “escalating to de-escalate.”  It looks like Trump is taking the same approach in his attempt to end China’s multi-decade global economic war.

And just as the Soviet Union responded to Reagan’s escalation with escalation, China has responded to Trump’s escalation with escalation. 

The Soviets were drawn into an arms race with the U.S. that economically broke them.  Similarly, China has now been drawn into a trade war, which will economically break them.

That said, as we’ve discussed in recent weeks, we should expect China to counter Trump’s tariffs by weakening the yuan.

No surprise, heading into tomorrow’s doubling of tariffs on China, the Chinese central bank has been walking its currency lower, and now have set it to very near the weakest level (versus the dollar) in 18 years.

As for the rest of the world, as the additional “reciprocal” piece of the tariff plan kicks in tomorrow, it should represent the high-water mark, from which any news should be in the direction of lowering tariffs.   

 

 

 

 

 

 

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April 07, 2025

Let’s talk about some comments made over the weekend by the Treasury Secretary, Scott Bessent, and how it relates to some of today’s activities.

Bessent had an hour long interview with Tucker Carlson that was posted on Friday (see it here).

In this interview, he made a brief comparison of the Trump tariff strategy to Reagan’s tactic of “escalating to de-escalate” in dealing with the Soviets.

To describe it simply, core to this tactic was Reagan’s massive military ramp-up, which provoked the Soviets into a costly arms race.

Reagan then (arguably) coordinated with the Saudis to flood the oil market with supply, crashing oil prices.  That slashed Soviet oil income, which it needed to finance the military buildup.  From an economically fragile position, Gorbachev made a deal.

Importantly, Reagan, unlike his predecessors, viewed the Soviet Union as an existential threat, and was focused on defeating it, not managing it.

As for Trump’s tariff strategy, it’s really all about China.

In Trump 1.0, he thought just getting any movement on trade with China would be considered a success.  In Trump 2.0, it’s about ending China’s multi-decade economic war.

As we discussed in my note last week, if anyone is wondering if the bark might be worse than the bite, they can look no further than Trump’s Secretary of State selection.

In Rubio’s book, he called the Chinese Communist Party “a totalitarian regime bent on world domination.”  And in his confirmation hearing to become Secretary of State, he said “if we stay on the road we are on right now, in less than 10 years, virtually everything that matters to us in life will depend on whether China allows us to have it or not.”

All this to say, the first level of Trump’s “escalate to de-escalate” strategy seems to be about drawing the rest of the world back into alignment with the U.S., using the U.S. consumer as leverage.  And he’s getting movement, from over 50 countries so far — even Europe.

After re-aligning/rebuilding allies, the second level of the “escalate to de-escalate” strategy seems likely to be about isolating China.  Like Reagan, Trump escalated, and now provoked a tit-for-tat increase in tariffs, and China’s economy will be the biggest loser.

So, if we consider this, today when it was falsely reported that Trump’s economic advisor said he was considering a 90-day pause on tariffs, the recovery in markets was explosive.

The S&P 500 spiked 8.7% in about half an hour.

The U.S. 10-year yield spiked 20 basis points.   The yield curve steepened.

Even after the report was debunked, markets held up.

Did this market reaction, on the idea that Trump may pause tariffs, prove that Trump does indeed “hold the cards” (as he likes to say) … that the economy is strong … and that he can turn the dials, at will, to unleash it?

Maybe.

Perhaps a clue: The stock of the most important company in the world, traded in a 17% range today, and put in a bullish technical reversal signal (an outside day).

And the S&P, traded just shy of this big line from the covid lows, before bouncing 7% …

  

 

 

 

 

 

 

 

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April 3, 2025

With the big decline in stocks today, let’s take a look at the historic one-day declines of similar magnitude (or more) … 

This is the S&P 500 futures.  As you can see this roughly 5% or greater decline has some rare company. 

Interestingly, among these severe declines is a down 5.4% day on February 5th of 2018

And while it wasn’t directly attributed, at the time, to tariffs, it came just two days before the effective date of a 30% tariff on solar panels and a 20% tariff on washing machines — mostly all having to do with China.

The next day was the low of a 12% decline. 

The decline was from the record highs, and happened over the course of just six days. And it took a little more than six months to regain new record highs.     

Guess what else happened on February 5, 2018?

Jerome Powell was sworn in as the new Fed Chair. 

Trump tax cuts had just been signed into law two months earlier.  And just three days before Powell took the helm, a hot employment report hit, with the hottest wage growth since prior to the Global Financial Crisis.  Government bond yields were already on the move (trading to the highest levels in four years, around 2.7%).  And Trump had just kicked off tariffs. 

From the outset of the Trump administration, the Fed viewed Trump economic policies as inflationary, and started to exit emergency level policies of the prior eight years.  They started a series of mechanical interest rates hikes

By the time Powell became Fed Chair, they were several months into quantitative tightening.  And there was clear concern in markets about the potential of a misstep by an inexperienced Fed Chair, in dealing with the unknowns of quantitative tightening.

With that, we have the plunge in stocks today, of similar magnitude to this February 2018 day.  And we have the “tariff” commonality.

Also, like in 2018, we have plenty of Fed influence on the stock market correction.

In the current case, we have a Fed that has hit the pause button, early into the easing cycle, even as they have rates at historically restrictive levels (continuing to put downward pressure on the economy and on inflation).

And, again, they’ve judged, based on their actions and their forecasts, that the balance of risks from the Trump policies would skew toward inflationary.

But both the bond market and the stock market over the past two months seem to be telling us the Fed pause was a mistake

As we’ve discussed many times in my daily notes, the turning points in markets over time tend to be determined by some of form of monetary policy adjustment.  You can see it in the chart, just over the past four years.

In the current case, we should expect the Fed easing cycle to re-emerge.

 

 

 

 

 

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April 02, 2025

After the market close, the President revealed details on broad-based tariffs.
 
It starts on April 5th, with a blanket 10% on all countries.  
 
And if no movement, the escalation would be on April 9th where largely the "reciprocal" tariff plan calls for an amount that's about half of what's currently being charged on U.S. imports.
 
Excluded from tariffs are copper, pharmaceuticals, semiconductors, lumber, bullion, energy and other critical minerals.
 
So, as Trump said in the Oval office a couple of days ago, the tariffs wouldn’t be of equal scale, but rather they would be “very nice by comparison,” and “lower than what they’ve been charging us."
 
Even so, not surprisingly, the tariffs are toughest on China.  China gets 34% and it seems to be on top of the existing 20% (the blanket China tariff was doubled from 10% to 20% early last month) — so, 54% for China.
 
Given that these details were delivered AFTER the market close, you get a reaction in thin, after-hours markets.  That means big moves.  And in this case, it was stocks down, yields down, dollar down.
 
Now, following the announcement event, Scott Bessent said this would be the high-water mark, assuming no retaliation.
 
So, we should expect plenty of countries to come to the deal table between now and April 5th, and more into the April 9th escalation date.  And with the "high-water mark" in mind, the incremental news should be in the direction of lowering tariffs.