April 14, 2025

“A little revolution now and then is a healthy thing don’t you think?”

Captain Ramius from the Hunt for Red October.

After numerous conversations with many of our clients this week, I felt compelled, with all humility, to try and explain what is happening in this version of our newsletter. Further, as next week is Easter week, Tax Day, and I will be at my Mother-in-law’s funeral out of town, I will forgo next week’s update except for the raw data. Please excuse the length for there is much to explain here.

But first, here are the numbers in markets that did their impression of Dr. Jekyll and Mr. Hyde last week. The S&P 500 had its best week in 18 months up 8.27%, The Dow Jones Industrial Average followed up 6.16%, the Nasdaq roared gaining 11.66%. Internationally, the FTSE 100 finished off 1.13% but the MSCI-EAFE added 4.91%. The 2 Year Treasury paid 3.495% and the 10-Year yield was 4.497%. Mortgage Rates rose slightly with the 30-year average of 6.825% up from 6.602% the previous week and the 15 year was 6.05% up from 5.787% last week.

While equities closed the week on a high note, bonds came under pressure. Yields surged Friday as investors dumped bonds in response to renewed fears of an economic slowdown (bond yields and prices move inversely). Good news, the core wholesale inflation number dropped unexpectedly to 2.7% from 3.2%, Oil prices also fell to its lowest level in 17 months. Consumer sentiment, not surprisingly, dropped to 50.8 from 57.0 the month before as all these fireworks gave many pause about what will happen.

And now for something completely different…. What is going on? First, we need some historical perspective, as a Philosophy major and History minor with 45 years of experience, plus growing up in the sixties and seventies, going to college in the bastion of liberalism, (central Minnesota, where I survived by having loving, principled, but pragmatic parents and remember Sir Winston Churchill’s dictum that “ any 20 year old who is not a liberal has no heart, and any 40 year old that is not a conservative has no brain.”)

I submit the following: We believe that what is happening is of historic proportions as the Administration is attempting to reset the entire world economic order. Historically, the United States Government operated on tariffs up until 1913 when the progressives in the Wilson Administration introduced the first income tax with a maximum rate of 6%. That, plus the great Depression and introduction of Keynesian Economic policies using government spending to stimulate the economy, (which initially looked good and gets credit for easing the Great Depression, but in reality it was the Second World War which restored the US Economy.) led us to where we are today.

In the past 40 or so years the Globalists (The Davos group of the World Economic Forum, founded January 24, 1971 by Klaus Schwab (no relation to Charles) to “gather business, political and civil leaders to discuss problems and foment cooperation” nice sounding objectives) have dominated American foreign and economic policy.  The result has been an attempt to order the world as these globalist elites decide. Their solutions are contrary to what the U.S. was founded to be, a land of individual liberty and achievement, and strong nationalist identity. But that original vision of the United States was, at the same time, the biggest obstacle to the Globalists’ goals. What the Globalists want, need, is bloated managerial bureaucracies, distractions such as identity politics and climate change and more economic growth in the public (governmental) sector, as opposed to the private sector, and to and use of tax and monetary policy to control the populace.

The result of the Globalist project has been the destruction of the middle class, our manufacturing base, assaults on our values and culture, the dumbing down of our population by inferior schools not only here but in other developed countries in the world, concentration of wealth, and the creation of a dependency class which can be controlled. None of this was by accident. It was and is critical to destroy the ability of the American people to resist control by a tiny number of elite managers. And, up to now, it has been working.

So that is where we are. I am sure many will debate this, but I submit that President Trump’s increasing popularity and the inability of all the powers on earth to destroy him, from contrived false scandals, lawfare, constant media attacks and assassination attempts are nothing short of miraculous, in the full metaphysical sense of that term. Ask yourself, with intellectual honesty if any other politician or man could endure what he has endured and still be standing let alone thriving at the end?

Orwellian speech over.  So, what is he really doing? The objective is to establish US economic and military dominance, to stabilize the world, and thwart attempts of both western money elites initially, and ultimately, the Chinese from dictating how all on this planet will live for generations to come.

In order to do that, several things had to happen, A popular mandate needed to be won (November 5, 2024), Congress has to be bludgeoned into passing tax and economic policy to support that objective (just passed the house last week). We need to get control of and greatly diminish the Federal bureaucracy both for cost savings in the future and reduction of the ridiculous deficits that this government, under both establishment parties, has let run wild (DOGE).  America must reset the world trade order which our political and business leaders allowed and which enabled foreign powers to take advantage of the United States to undermine it and support the globalist vision. (Use of Tariffs and leverage of US Economic power and consumer markets).

The current cat and mouse game on tariffs is being carefully orchestrated by a man who understands power and leverage (Name of the game in Real Estate) and has been preparing for this fight for at least forty years. (Ask Oprah.) The results so far, despite the ankle biting of activist courts, which is the last weapon the opposition has, are highly encouraging. This administration is in the process of isolating China and forcing all the developed countries of the world to decide which vision they want going forward for their countries.  So far, 100 have come to the table.

So, what about China? From the Epoch times (admittedly, an anti-Chinese communist paper) reporter Terri Wu, this analysis makes immense sense to us. “April 9 marks a watershed moment in U.S.–China relations. That’s the view of Mike Sun, a U.S.-based businessman with decades of experience advising foreign investors and traders doing business in China.’ ‌ ‌‌On this date, China hit the United States back with an extra 50 percent in tariffs, the third round of retaliations from Beijing. Later, Trump raised tariffs on China to a total of 145 percent while pausing higher levies on all other countries. China then raised tariffs on the U.S. to 125 percent. The Chinese regime has crossed the threshold from being a mere strategic competitor of the United States and started moving toward enemy status, like the Soviet Union during the Cold War, according to Sun. Cold War or not, the experts we spoke to agreed that U.S.-China relations have turned a page. The tariff standoff is at its core a battle over the world economic order, experts say, and neither Beijing nor Washington will accept living in a future where the other party sets the rules. During the previous Trump administration, China proposed to buy American products. Sun said this addressed Trump’s need to reduce the trade deficit between the two countries. The negotiations led to the “phase one” trade agreement signed in January 2020, which Beijing didn’t fulfill.

This time, however, the game is different. Citing the goal of achieving reciprocity with all countries, Trump is seeking to rebuild the global economic order, Sun said. ‘The Chinese Communist Party has seen the difference between Trump’s current and previous approaches, too,’ Sun told The Epoch Times. He uses a pseudonym for fear of reprisals from the regime. ‘The regime has seen that making concessions to the United States would lead to a future it cannot stomach, so it has chosen to fight.’ Both the United States and China are busy talking to trade partners to build up their camps. Xi Jinping held a two-day conference with the Party Politburo on April 8 and 9, emphasizing ‘building a community with a shared future with neighboring countries” and “creating a new situation in neighboring work.’ Meanwhile, Trump has over 70 (100 as I write this) countries eager to negotiate with the White House. Though he has scaled down the universal tariffs to 10 percent on all countries except for China, they’re still four times as high as they used to be. The European Union is a weighty player in the global trade order realignment.”

The danger? The Chinese economy cannot withstand these tariffs and closing of their export markets for too long. “Invading Taiwan remains a viable option for Xi to turn the tables, according to China expert Alexander Liao. “A war can solve many problems for Xi: first, the economy wouldn’t matter so much anymore,” Liao said. “Second, he could calm down his opposing factions within the CCP and give the Chinese people an external reason to justify the rule of the Communist Party.” Which is why this Administration is moving as quick as possible on reestablishing our industrial base, military might, and economic strength. US Strength, much like during the Cold War must be reestablished to deter Chinese aggression.

Mechanically, how is this strategy being implemented back in the US?  President Trump needs the Stock Market to correct at least 20% causing a flight into Treasuries, causing the Federal Reserve to cut interest rates so he can refinance the debt to near 0% and cause some deflationary pressure which will lower the cost of everything. The president is also using tariffs as an incentive for companies to rebuild or build in the US to avoid paying the tariffs, this may cause a squeeze on US Farmers due to retaliatory tariffs on US agricultural goods, lower food costs, further granting US companies who are now committing to repatriate manufacturing for a reprieve from the tariffs (this is where surgical exceptions will come into play. This is the short-term pain he is referring to. President Trump is realigning the global economic order to literally take from the rich to give to the poor, re-establishing the middle class with the opportunity for upward mobility. This approach, ironically, will further the stated goals of the Davos group which is to solve economic problems and bring cooperation with the world’s governments to benefit their people. But those at the top of the current order will fight it tooth and nail because, this time, all the world’s population will enjoy the benefits, not just the global elites.

Finally, consider that 5 trillion dollars of commitments to return manufacturing into the United States have been pledged in response to the tariffs. (These people are not stupid and they’re betting that Trump will succeed.) Recently, some of those companies have been rewarded by exemption from the tariffs. Second, the inflation numbers are dropping and the falling wholesale price on key food products (for example eggs) will result in those reductions becoming visible to the consumer in the coming months. The same is true of oil prices which will show up in time for Memorial Day.

America cannot help the world if it is on its knees. And standing up will not be fast and will not be easy. For any of us. But stand up we must, for our workers, for our investors, for our entrepreneurs, for our liberties, for our land, and for our people. And once we are on our feet, the world will rise with us.

If you have managed to read this far, I hope I was clear enough but trying to take so many complex issues and strategies and make sense of them was my objective. I am doing so because you have trusted me to guide you through the coming financial storms, and you need to know what kind of ride all of us are in for.

Mike