Schrödinger's Dead Cat Bounce

There is only one person who knows the future of the stock market, and he's not telling. Like Schrödinger's cat, it may be alive or dead, but we won't know for sure until we open the box that is DJT's brain. The trouble is, its decaying contents are now poisoning the global financial markets. The cat may already be dead.

Good luck with playing any bounce here. The stock market has been hanging on to a fiction of 'method to the madness' with respect to Trump's tariffs. Unfortunately, that 'hope over reason' approach was violently upended over the past week as even perma-bulls like Dan Ives and Jim Cramer admitted defeat. They tied their wagon to the wrong horse. "Art of the Steal," I call it. Take the billionaire's money and get elected. Obviously, Orange Julius Caesar knows all about stealing from his days running Trump University.

The fight for a restoration of reasonable policies under Trump's reign of economic terror has a long way to go. I love hearing the cries from the now chastened billionaire class like Jamie Dimon and Bill Ackman about the damage that Trump is doing to the world order that has existed since the early 1950s. Did they not hear the 'beautiful word' tariff he lovingly lauded? And yet, they still financed his election bid! This time, Trump means business. Unfortunately for the global economy, he is good at destroying businesses.

Peter Navarro, Trump's reincarnation of Grigori Rasputin, is advising him on a complete trade policy make-overt that is doomed to failure, but damn the torpedos, proceeding at full speed ahead. Conversely, Treasury Secretary Scott Bessent described tariffs as a melting ice-cube this morning and offered a potential negotiating off-ramp. These conflicting messages demonstrate the problem with handicapping the near-term future of a market cycle that is suddenly at risk of ending prematurely. I remain unconvinced.

The problem remains: populists like Trump are fully committed to reversing globalization. Conflating a trade deficit with a tariff, as Trump's now famous charts illustrated, may have been disingenuous, but it is now his prima facie justification for his damaging policy actions. Taken to their extreme, every country, despite any natural comparative advantages they enjoy, will be forced to reverse engineer their economies into autarkratic silos of inefficacy.

If repatriating textile sweatshops and mind-numbing assembly lines from poorer countries is what is meant by 'America First' I don't think Trump's approach will go over so well with his base. You can't get them to work for less than $50/hr, let alone cut the lawns for minimum wage at Mar a Lago. Re-shoring these jobs won't happen easily. Robots make cars, not people. Employment declines in the goods sector were 'stolen' by technology, not by 'cheating' trade partners. The vast majority of people are in the service sector and are more vulnerable to AI than to any foreign imports. Luddites are apparently enjoying a comeback in MAGA-land.

And where are all these people whose jobs are gone? Unemployment is at a 40-year low. And that's before the mass deportations. The construction trade workforce in Florida is 40% 'illegal' according to my brother-in-law, who's a builder there. With all the climate-related damage, there aren't enough workers to go around - even before the reshoring factories get set up. Don't confuse Trump with facts - his alleged mind is already made up. But when you take your advice from a Harvard PhD who's never had a real job, what can you expect?

So, is it so bad - it's good? Are the tentative complaints from some Republican corners about to swell into a Trump's potential Caesarian backstabbing? Et tu Bessent?

One can only hope. But this week, I suggest selling any bounce. Hope is not a strategy - it is a dead cat.

Risk Model: 0/5 - RISK OFF!!!

Every indicator is busted now, and it's a long way back to the bull case.

When you have to look at a 20-year chart to understand what's going on, it isn't usually very pretty.

The copper/gold indicator's false signal a few weeks back was violently reversed by Trump's tariff bombshell. The pre-tariff inventory build of tariff-free copper has quickly reversed due to lowered global growth realities. The resumption of the secular downtrend in this indicator is hard to swallow, as I had expected at least a trade into the seasonal top for hard cyclicals. It's not going to happen!

And don't even start talking about oil. The only thing getting drilled this year is my portfolio!

Like my Florida vacation, I might take the next two years off.

Especially damaging is the Fed's preoccupation with inflation in applying their rear-view approach to policy-making. The word inflation get thrown around a lot but what is it really? I don't think a one-time step up in the relative price of imported goods into America, with all the deflationary effects on consumer confidence and consequent business inaction should be the main driver of monetary policy during the unprecedented existential threat to economic activity we currently are facing.

To quote a now discredited financial commentator - "The Fed knows nothing!"