Prof G Markets: What to Do in the Wake of Trump’s Tariff Pause

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Ed, a rabbi, a priest, and a stripper walk into a bar.

What does the bartender say?

What?

I don't know, but Donald Trump is a fucking idiot. I just made that up.
I'm proud of that. That's good.
That'll get the people going. And for those of you who think I have Trump derangement syndrome, I have this thing called capitalism and democracy addiction syndrome.
I really love Netflix and I love living somewhere nice and I love rule of law and I love people who make smart decisions and prosperity. I'm just so into this whole prosperity and rights thing.
I've gotten so used to it. So Megyn Kelly is super easy to find.
If you're looking for people to justify, like say he's playing 4D chess, right? No, he's not even playing fucking Jenga or checkers. He's playing Russian roulette with everyone's prosperity.
I am in a bad mood today, Ed. I can tell.
It is interesting how all these, I mean, the response to any criticism has always been Trump derangement syndrome. And I've said, you know, I think probably a month

ago that there's a new syndrome, which is TDSDS, which is Trump derangement syndrome, derangement

syndrome, where you basically ascribe any criticism of the government as a symptom of

Trump derangement syndrome. It is funny, this week I have not been hearing any accusations of the government as a symptom of Trump derangement syndrome.

It is funny, this week I have not been hearing any accusations of TDS. I think people have finally gotten it through their heads that that's not really a valid argument you can make anymore.
So we'll be getting into all of it today and all of the arguments that the other side has been making as to why any of this could possibly make sense. A few notes from me.
One, please go vote for us in the Webby Awards. Yes.
Please vote for us. I need a raise.
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We'll also leave a link in the description to make it easy for you. And the second point I will make, just a bit of housekeeping before we start the show, starting in June, we're going to be going every single day on this podcast.
And I think the events of this past week have made it very evident to us why we need to do that. We want to stay on top of the ball.
We want to be up to date. We want to make sure that everyone is informed as we embark on this unbelievably wild ride over the next several years.
So we're going to be doing markets daily, but that's only going to be happening on the ProfG Markets feed. It's not going to be happening on the ProfG Pod feed.
And so if you're listening on the ProfG Pod feed, the main feed, the logo is a turquoise symbol with Scott's head on it. I encourage you to go switch over now, subscribe to ProfG Markets.
It's a green logo with Scott and I bantering together in his living room, because that's where the action is going to be happening, and it's going to be happening in a couple of months. So please, if you haven't done so already, go subscribe to ProfG Markets, soon enough, we're going to be doing this five days a week.
It's going to be epic, but we won't be on the Prof G Pod feed anymore. And that is my housekeeping.
I'm now going to get into the headlines. No, no, no, no.
We need to talk about me a little bit more. That was a little too much ahead.
Okay. This morning, daddy went on La Vista, or as you gringos call it, The View.
I went on The View. And I was out with Whoopi, who loves me.
She said she loves, she's like, Professor, I love having you on. I love that show.
The women are like, there's some really like, really attractive women. You've been on that show a few times now, right? I think this is only my second time.
It's still a few. I think that's called A Couple.
Anyways. But Nothing Moves Books books like Morning Joe and The View.
And it's really interesting. They're both like, there's the behind the scenes, the operations, the producers, the resources.
Those guys are really good. You can tell that they're making so much money because they are serious when you show up.
But yeah, I think my future ex-wife is one of those panelists or one of the women of The View. I'll let all the viewers guess who it is, but my future ex-wife is one of the co-hosts of The View.
Oh my God. I am just fascinated with this woman.
You've said you find her hot before. She asked me a question.
I'm like, I see her lips. What's her name? Alyssaissa don't out me i'm like i see her lips moving but i don't hear the words because i love you i love you i saw her backstage and i'm like let's take a picture together so i can show this to our children oh my god and she's conservative which really gets me kind of absolutely but they're all smart and impressive.
And anyway, so I was on The View, Ed. That's very exciting.
Should we talk about what matters? That hurts my feelings. Get to the headlines.
The trade war has officially reached a boiling point. President Trump announced a 90-day pause on tariffs for most countries Wednesday while simultaneously raising tariffs on China.

The selective reprieve ignited a wave of investor euphoria.

Minutes after the announcement, the major indices skyrocketed.

The Dow was up nearly 8%.

The S&P rose by almost 10%.

That was its sharpest gain since October 2008 and the third biggest since World War II. And the Nasdaq had its best day in 24 years, climbing 12%.
The Magnificent Seven alone added $1.5 trillion in value. By mid-afternoon on Thursday, though, stocks gave up half of that rally as Trump raised the tariff rate on China again to 145%.
The Dow ended the day down 1,000 points, and the S&P and the Nasdaq closed down around 4%. Then stocks headed back up on Friday.
Scott, your reactions to the turbulence that we've seen in the markets in this last week. Where do you stand on tariffs today?

So the only way I can play,

I can think of to play this market,

and by the way, this is what I'm doing.

Don't try this at home.

Be very careful because it has unlimited downside.

But options and volatility have gone crazy.

And so to buy options is super expensive.

So I have been selling options,

specifically selling calls,

because I think over the medium and the long-term,

we're gonna have contraction, multiple contractions. So I sell calls against stocks that I think are already overvalued.
And be clear, I imagine the thing tripling, the stock tripling, because there's unlimited downside, and it can't be more than 5% of my net worth. So you keep in mind when you do this, you are playing with fire.
But that's the only way I can think of to kind of play this volatility in this recklessness is to sell calls, quite frankly. So I was looking at Apple calls, and Wednesday in the morning, you could buy, I think the stock was at 175, you could buy a call on Apple for 40 cents, meaning if you sell it, you only get 40 cents.
And then about 10 minutes before he made the announcement, he was pausing it, Apple skyrocketed and the calls went to $4. So you invested a million bucks, you got 10 million.
And I didn't do this, but if you took a million dollars selling those calls, you had to pay that person 10 million. So people made and lost about a third of a billion dollars just on that one strike price, just on that one.
So literally billions of dollars made and lost. But it was clear someone knew what was going to happen.
And when you have a president who's comfortable opening a Swiss bank account where anyone can deposit money, call him and say, I've done this, and he doesn't ask to disclose it. When you have a president that is a convicted felon, to think that maybe he didn't call some of his donors or some of his insiders or friends and say, FYI, wink, wink, nod, nod, I think the markets are going to go up today.
I think we're going to find out, and in a digital world, there will be evidence of this. I think we're going to find out that April 9th will go down in history, is the greatest day of insider trading in history, where people were engaging in market manipulation and insider trading, trading on non-public material information, because clearly word got out.
In this market, there's someone on the other side of that trade losing money. And the whole point of the markets is there isn't a group of people in the know within a circle of proximity to people in power that get asymmetric advantage against you because then people just give up and stop investing in the markets and the cost of capital skyrockets for corporations.
So yesterday was D-Day for insider trading. And I think that will come out about a week after the next president is inaugurated.
I think the SEC and forensic accountants are going to find there was so much bad shit that went down yesterday. Any thoughts, Ed? Well, you said you predict or you believe that that happened.
I can tell you right now, the evidence is that it did happen. There was someone who bought a huge number of zero-day call options on the S&P hours before he released that tweet and released that announcement saying that he's pulling and pausing the tariffs.
And so this is basically a bet that the S&P would rise by a huge amount within one day. They expire at the end of the day.
And those options, we don't know who this was, but those options exploded by more than 2,000%. So this person, whoever it is, made millions.
And of course, the only rational implication is that this individual knew what was going to happen, and they were insider trading. Again, we don't know who that was.
The Democrats are now calling for an investigation into this.

And the big question is, did Trump tip someone off?

I don't see any way that it couldn't have been that,

or maybe it was sloppiness and word got out among his close group of friends

that this is what he was going to do.

But there is evidence in the markets that someone was doing this. Someone was insider trading.
So I think you're almost calling the prediction too late in that we know it actually happened. But all of your points there align with the first thing that I've been thinking coming out of this insane week.
We had these unbelievable swings in the stock market, in the Nasdaq, in the S&P, in the Dow, the entire US stock market. And essentially what's happened is the president has turned our economy or our stock market into a meme stock.
You know, falling or rising 10 or more percentage points within a day for six days straight, those are the characteristics of a meme stock. That's something like a GameStop or an AMC or a cryptocurrency like a Faultcoin or a CumRocket.
And that might sound funny or hyperbolic, but it was plainly true last week. The price movements of the S&P resembled those of a meme stock, which makes me ask the question, okay, well, what does it mean for us that our stock market has itself become a meme stock? I think there are a few implications.
One, we're going to see a huge surge in options trading, as evidenced by you. You know, people are going to be making and losing huge amounts of money based not on the cash flows and the earnings of our economy, but on the words and the tweets of the spearheader of the movement, which is the president.
I think we're also going to see a massive influx of young investors who have grown up in an era of crypto and meme coins and who are just more excited by this short-term upside of volatility versus the long-term upside of actual investment, value investment. And three, and I think this is the most important consequence, I think our creditworthiness is going to collapse because lending, far more so than investing, is fundamentally dependent on certainty and stability and reliability.
And that's why, you know, you look at every mean stock in existence, they all have a junk rating. You know, look at GameStop, AMC, MicroStrategy.
Yes, those stocks can at times outperform, but over the long term, the underlying default risk is way too high, which makes their debt essentially uninvestable. And now we are putting the entire economy in that position.
And this is the dark side that I don't think people are paying enough attention to right now. Because on Wednesday, stocks went up and people said, great, we're back to normal.
We're not perfect pre-tariffs, but we're back on track. And what they seem to gloss over though, which is now appearing to us in the form of the 10-year yield, they were not paying attention to the bond market because the yields came down a little bit from those insane highs that nearly tilted into a full-on credit crisis, but ultimately landed higher than where they were before the tariffs.
And now they're rising again. And what that tells me is that over the course of a few days, we essentially kneecapped our ability to borrow.
We damaged our reputation as an investable economy. We damaged other leaders' ability to believe what we say.
We damaged this global assumption that the US, generally speaking, knows what it's doing.

And beyond the politics and the embarrassment and the ridiculousness of it all, I think

the numerical consequence of all of that is a massive long-term increase in our borrowing

costs, which, as Trump has correctly pointed out, is something our nation is overly dependent

on and which, by the way, he has not made a plan to wean us off of. So that's the point I'd like to begin here, is just what a dark week this actually was for America.
I mean, the way to summarize it, I would say, is that last week, we officially fired the starting gun on this global rotation away from America, which you have been talking about for more than 90 days now. And that's not to say we can't come back.
I don't think we're necessarily doomed. But in the same way that a landslide is triggered, not by the buildup of pressure at the top of the hill, but by someone stumbling on the rock and releasing that pressure and causing the slide.
That's what I think happened last week. One of the things you're saying that's really interesting is that if you listen to Ben Bernanke's congressional testimony during the great financial recession, he talks about the great or the depression.
And he said, while everyone was focused on the stock market, he said the thing that really took us into depression was the credit markets. And the stock market is more fun to look at, but it's really the credit markets are much bigger than the stock market and are much more influential on everyday business.
And my thesis is the following, that the president has access to more information than any individual in the world. He has access to the best security apparatus.
He has access to the best economists. He really is the person that could do the most insider trading, which I think this is going on.
But distinct to that, he has the most information. And this is what I think happened.
The adult in the room is the tenure. We've been saying this.
And I think he got information the following, and that is companies are cutting their spending. They're paralyzed.
They don't know what to do. They're cutting their spending.
Companies are rerouting the supply chain. Every economic indicator is that there's less money and less activity.
At the same time, interest rates are going up. That is stagflation.
That takes you potentially into a depression. If the cost of capital goes up as productivity and spending is going down,

that is literally nitro and glycerin that explodes into stagflation and then a depression.

I think he got both those data points. And someone said, this is really, really bad.

And probably just as importantly, Alyssa was wearing a yellow ribbon to signify

the hostages. Do you think she was doing that to impress me?

I need a distraction here, Ed. I need a distraction.
Seriously, I think she's into me.

I think she's into me. What do you think?

I have no comment on that. We were really getting somewhere.
We were breaking new ground.

I don't know. He thinks he's into me.
What do you think? No comment on that. We were really getting somewhere.
We were breaking new ground. Had to bring it back to Alyssa.
I'm sorry. Stagflation.
I'm sorry. I think what you're saying there is the important point, which is that the bond market was the adult in the room.
And you've said that for a while. And Andrew Ross Sorkin said it as well on this podcast.
If there is any blockade to this administration's efforts and the Republicans to get what they want over the next, call it two years, because we'll see what happens in two years in the midterms. The only potential governor on them is, oddly enough, the bond market.

If, in fact, the investor class around the world says, you know what, we're just not doing it this way.

We don't like what's going on here.

They can vote with their wallet and they can say, we are not going to be buying your bonds unless you're going to pay us a lot more for them, in which case everything becomes a lot more expensive for all of us. And that is the only thing, frankly, that I can even imagine that is a governor on the politics of our country over the next, call it two years.
That's not what the administration is saying, though. And I think we should clear this up here.
The way they are justifying this pause on the tariffs, the pullback, they say it was all this, it was this 40 chess move to put China in a corner to bring our trading partners to the table. And most importantly, they have said this, that it had nothing to do with what happened in the bond markets on Tuesday night, where yields exploded and markets were digesting the very likely prospect of a credit crisis.
And so Howard Lutnick, as soon as this happened, he went on CNBC and they asked him point blank. Did the market reaction cause the administration to rethink its tariff plan? Absolutely not.
Scott Besson, he also went on CNBC. They asked him the same question.
I would say that the negotiations are the result of the massive inflow of inbound calls to come and negotiate. Had nothing to do with the market.
But the best interview to me, the most telling interview, was Trump's, where he's standing outside of the White House and unprompted, he starts rambling about the bond market. Bond market is very tricky.
I was watching it, but if you look at it now, it's beautiful. The bond market right now is beautiful.
But yeah, I saw last night where people were getting a little queasy. People were jumping a little bit out of line.
They were getting yippy, you know? They were getting a little bit yippy, a little bit afraid. And by the way, apparently he was watching Jamie Dimon's interview on Fox just a couple hours before he hit send on the tariff pause.
And that's the interview where Jamie was saying he was expecting a recession. So this idea that this was all part of the plan and that this was not a reaction to the bond markets, that it was just a coincidence that it happened right after yields went haywire, total lie.
It is absolutely a response to the bond markets. This was the administration realizing the markets are more powerful than they are, the world will only tolerate so much of their craziness, and they were essentially strong-armed by the bond vigilantes, the bond investors, into admitting defeat.
Now, of course, they can't say that. We remember who Trump's mentor was, Roy Cohn.
His number one rule, never admit defeat. So they come out and say, this was a big win for us.
But I think the most pathetic thing that I saw was watching all of his backers file into a line and having been genuinely and publicly rattled by what had happened, genuinely frightened by the world's response, they go out and say what a genius Trump is. And I'd like to read you some quotes here from Stephen Miller.
This is from Twitter. He said, quote, you have been watching the greatest economic master strategy from an American president in history.
From David Sachs, quote, once again, Trump was right about everything. From Bill Ackman, quote, this was brilliantly executed by Donald Trump.
Textbook, the art of the deal. And my response to Bill Ackman would be, what deal? I mean, seriously, tell me, what is the deal? What did we get here? Their incompetence is just bursting at the seams here.
They can't even coordinate their messaging. And although I don't think Bill's coordinating, well, I don't know this, but that Stephen Miller tweet and that David Sachs tweet, that was written by a White House communications director that works for Dear Leader.
I mean, look at how just similarly sycophantic it is. Doesn't it sound like the same person writing this shit? I mean, those guys, you know, not, I don't know.
David is a smart guy, regardless of what you think of his politics. That just so, that sounded so ridiculous.
So they're clearly coordinating on tweets, but they can't get their message straight when they go on CNBC. And, oh, they're not freaked out about the market, but they're going on CNBC every fucking day? Oh, we don't care.
No, the credit markets didn't make us do this, but we need to go on CNBC to tell everyone the credit markets didn't make us do this. I mean, the level of, I don't know, just constitutional necrophilia here combined with the incompetence of these guys going left, going right.
I mean, And at some point, we got numb to the fact that, oh, the economy can survive this level of incompetence. And I've said this to you before, pulling the knife halfway out of the back of the economy by pausing the tariffs.
This again, weakens our hand. We're pausing the tariffs.
This guy is blinking left and right. What was the impetus? They were trying to accomplish a few things, according to them.
One, bring jobs, good manufacturing jobs back to America. Two, reconfigure global trade to our advantage.
And three, raise a bunch of money through tariffs. All right.
Tariffs never increase the treasury. They might protect an industry, an infant industry like in South Korea or ensure a certain level of domestic production, but they're not revenue generators, tariffs.
On the whole, they reduce revenues too. Reconfigure the supply chain to our advantage.
It's done exactly the opposite. We have declared war on everyone, meaning all of our imports are more expensive.
Bach's checked.

He is reconfiguring the global supply chain, but he's reconfiguring in a way that is to our huge disadvantage. I mean, enormous disadvantage.
And then the notion we were going to bring back American jobs. The average assembly worker in Shenzhen working for Foxconn who builds the iPhone makes about $6,000 a year.
So Apple has said, here's an idea. Let's outsource the really shitty low-paying jobs.
And let's hold on to the design, the business development, the store technology, the strategy, the marketing, all of the jobs that pay kind of like $200, $300, $400 grand a year, and will outsource the jobs that pay $6,000 a year. And by the way, that unlocks more margin, more profit that Apple then reinvests in growing their market, which creates more high-paying jobs.
It just cracks me up that these folks think that they're going to bring back these fantastic manufacturing jobs. And I love that stat.
The Cato Institute did a survey on manufacturing, and 80% of Americans think that we need more manufacturing. There's a romanticization of manufacturing, but only 20% of Americans want to work in manufacturing.
Do you, Ed, let me ask you this. Now, granted, you went to Princeton and, you know, you're a little bit of a debutante.
But do you have any friends that are just dying to get into manufacturing? Seriously. No.
We're the second largest manufacturer already. It's not like, and our manufacturing is high value add.
We put together really cool shit that we can sell for a lot more money than it costs to bring. It's really complicated.
It's really value add. And the quote unquote lower value add stuff that quite frankly, they can find people who decide, all right, if I move in from a rural town in a province in China and I make 500 bucks a month, that's an upgrade to my quality of life.
And it's just hilarious that the fact that what Trump has not calculated in his quote unquote game theory is that Americans will not endure very much pain. I mean, the Chinese will endure a lot of pain.
Russians will send a million of their young men to die. You know, we lose 57,000 in Vietnam.
We leave even though the Viet Cong has lost a million men. I mean, our tolerance for pain, our threshold for pain, we're the men of the species.
And that is because of childbirth, women are born with the ability to a much higher tolerance for pain because they have to endure childbirth. We're the men.
We're the ones like, well, fuck that. That hurts too much.
Stop. Stop.
And China and Russia are the women in the sense they will endure much more pain than we will. You bring an eye.
All of a sudden, if you announce the first iPhone that goes on sale here for $2,100, again, he's going to blink.

Americans won't tolerate that. They will not tolerate it.
The first time the 77% of toys under the Christmas tree go up, doubling costs, and American households have to cut the number of toys under the tree in half. Americans won't tolerate that.
They won't. They'll burn their MAGA hats.
So the notion, what he doesn't realize is, yeah, maybe on a dollar per dollar basis, we can hurt these guys more than they hurt us, not taking into effect that the dollar we get is usually a higher margin, much higher market cap dollar. These folks are willing to endure much more pain than the American consumer.
He is playing with such a weak hand right now. We'll be right back after the break.
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I'll bring us back to what the tariffs mean for our actual economy going forward, but I just want to stay on what happened in the stock market for a second. Because I think what we saw when the markets ripped back up was Trump and the MAGA base basically bragging that this was a win, that this was a great deal.
Of course, that doesn't make any sense. I mean, he was literally gloating, oh, wow, we've had one of the greatest stock market rallies in history, after he, of course, brought one of the greatest stock market crashes in history, too.
So I think we can all agree that this was not really a win. But I also want to emphasize what a loss this actually was for so many regular Americans.
You know, if you took our advice, your advice, which was to do nothing, then you were fine. And you're okay for now, generally speaking.
But the trouble is, not everyone listens to this podcast and not everyone listens to you. And there were many people out there in America who actually did sell, who got super freaked out.
They saw the market was down 10%. They thought it was going to keep sliding and they decided to liquidate.
And I would point you to a statistic, which is that April 7th, Monday of last week, was the fifth largest trading day for 401k assets in recorded history. And you look at what happened, what were people doing with their 401ks? They sold their stocks and the money, they either kept it in cash or they moved it into more quote unquote stable assets like bond funds and money market funds.
And you look at what's happening to those assets, T-bills and notes, those assets are going down too. But the reality is that, you know, these are the stories you don't hear.
You don't hear about the guy in Pittsburgh or Gary, Indiana, who only has so much in his 401k and his retirement account, who actually sold at the bottom. And hundreds of thousands of Americans did this.
And they're looking at their 401ks this week, and they have to digest this now. They have just registered not an unrealized loss, but a realized loss of 10% or more because they sold.
So I just want to point that out too, that for many of us, it was just a wild week, right? It went up and went down and went up and went down. Looks like it's coming down again.
And it looks like the long-term trend is down. But for many people, this was a flat-out loss.
Just pure, unadulterated, down 10%. And no amount of the 40-chest justification or the sycophantry is going to change that.
And I just want to point that out, you know, that a lot of people got really, really hurt last week. Now, on investing trends in general, what we're identifying here is a massive fuck up from the administration who went ahead with this crazy tariff idea.
The bond market told them that was a bad idea, and then they pulled it at the last minute. We've been talking for a while about this global reorganization of the investment economy, where America has benefited from, generally speaking, massive inflows, perhaps unjustified, but at the very least justified by the fact that we had a stable government that was respected by investors around the world.
Our thesis has been that we might be witnessing a rotation away from that dynamic, which would massively upend global markets. Given what happened with pulling the tariffs, what do you think that does to this dynamic? What is happening now? No one gets out of this alive.
I mean, there'll be a few people who bought puts or something and show their picture on Reddit or whatever. There'll be a few, you know, a few quote unquote speculators that win.
But 99%, I mean, there's so many cohorts they're going to lose here. Let's talk about people hoping to retire.
And they thought, wow, the markets have done great. They thought, okay, I can retire.
Well, that's maybe not as true now. Families, If these tariffs are anything resembling what they're stating, the example I use is toys under the Christmas tree.
They're just immediately going to fill it. Young people, what do you think has happened to hiring in the last week? I got to imagine so many people recruiting at colleges, high schools.
You finally get an interview of said, hey, we love you. We want to bring you in.
But we're putting everything on pause right now. Microsoft just announced, was scrapped a $1 billion data center project in Ohio.
Stellantis paused production in Canada and Mexico, leading to 900 layoffs at U.S. plans in Michigan and Indiana.
I got to think there are so many interviews and recruiting plans that have been paused. And typically, paused means they're not happening because they don't double up.
If they canceled our recruiting for two, three months, they then don't double their recruiting the following two or three months. My brother-in-law is at business school right now.
He went into class last week. The professor came into the class.
He said, I just want to apologize to everyone. They said, what for? He said, I don't think any of you guys are going to get jobs next year.
So this is already happening. Well, the double whammy of companies trying to figure out if AI replaces a lot of these kind of high-end information workers with total uncertainty.
It's like Eisenhower said, the bad decision is wrong. No decision is worse.
And I love the term, we have been thrust into this dynamic of the U.S. brand is now toxic uncertainty.
We would have been much better off if he had said 10% tariffs across the board or whatever it is, and he just stuck to it. The back and forth, what? You dare threaten me, fine, sir? Your tariff is now 125%.
Or, oh, I like you. I just had lunch with you in Mar-a-Lago.
I mean, nobody knows how to plan their business. So when you don't know what to do, what do you do? You do nothing.

You don't hire people.

You press the pause button.

And the pause button is essentially,

it's a light no, but it's still a no because the number of people who need jobs,

the number of people who have rent doesn't go on pause.

Your landlord doesn't say, well, I'm pausing rent

because I know you had a bunch of interviews lined up

and you don't have them now, so I'm pausing.

That's what I'm pausing rent because I know you had a bunch of interviews lined up and you don't have them now, so I'm pausing. That doesn't happen.
Your expenses continue to roll on. So whether it's people looking to retire, whether it's people just out of college looking for a job, whether it's families, can you imagine how many corporations probably correctly are going to say, we're all new hires and quite frankly we're freezing salaries there's no bonuses who's going to say all this uncertainty is bad but we see an opportunity in all this and we're going to hire faster i haven't heard any company say that think about how many foreign companies were planning to build plants here.

And there's a ton of them.

They want to build production over here who have all of a sudden said, let's just press pause.

We don't know what's going on. Or I'm on the board of a company that was thinking about relocating or opening a second headquarters in New York.
and they're worried that in the second layer of mendaciousness,

they're like, we're not sure if we don't know the state of immigration and we don't know if we're going to be able to staff it with some of our folks from here. So we're just doing nothing right now.
The IPO market is dead. Nobody wants to go public right now.
This is across every point of the economy, literally across every income class, from CEOs, they're going to see their pay go down, to the worker making minimum wage, to the college grad, to the family. Everybody gets hit here.
Everybody. And as we've always said, a few more elegant ways to hurt everybody than tariffs.
Just some examples of companies that are on hold or pausing or freezing, however we want to call it. The reality is they're no longer producing output or contributing to our economy like they used to.
So you mentioned that Microsoft, they are now pulling back from AI spending, which of And of course, Trump was, you know, on the podium, gloating about what a tremendous chip investment the U.S. is going to make.
So Microsoft, which is going to be the biggest spender, they're now pulling back. Audi halting shipments to the U.S.
They also froze 37,000 vehicles that were waiting at ports across America. Amazon canceling their vendor orders across Asia with no explanation.
This is reported by Bloomberg. Roughly half a million dollars worth of goods were frozen.
And this is a signal, not that Amazon will be paying the tariffs as we expected, or as I assume Trump expected, but they're just going to halt their production entirely from China. So we're going to see a lower supply of goods in America, which, you know, Econ 101 means we're going to see higher prices.
Hollywood, this is going to massively affect Hollywood. China is reducing, they've said they're going to reduce their imports of American films.
Last year, American films grossed $585 million in China alone. In other words, all of this nonsense is happening in the stock market, and we're all getting flustered about it, and rightly so.
But meanwhile, the real economy is grinding to a halt. We're already seeing layoffs.
We're seeing order cancellations. We're seeing price increases.
Walmart just said that we should be bracing for price volatility, and that's Latin for price increases. So, you know, beyond Trump, beyond politics, we're seeing massive effects play out in the real economy right now.
And so, Scott, what do you think we as regular people can expect? And is there anything we can do to sort of brace ourselves for this change? I do think it's powerful when you call your local representative and it sounds, you know, I'm going to write me a letter. But I do think your representative in Congress does listen and they track very closely the calls they get.
So I do think if you think that these policies don't make sense, I think reaching out to your, I mean, my representative is Lois Frankel. She's a Democrat.
I'm pretty sure she's on board with how I feel. But if you haven't heard or if you wonder if your representative has not been vocal enough or is still trying to bend the knee and bend the knee and bow to dear leader, at some point the dam needs to burst and the person riding shotgun, the Republican Party that's in control here, needs to say, hey, you know, you're drunk, pull over, stop driving the car this way.
Somebody has got to get a sanity check here. So, and then in terms of your own personal behavior, I think that, I mean, there's a couple of things to remember.
Recognize that this is important, but it's not profound. And what I try to tell myself, I went to the doctor yesterday and my blood pressure had been so good.
It's so weird, Ed. I used to be so, I used to love getting my physical.
And I think I told you for the first time I had high blood pressure and it freaked me out. So I took my drinks down from 12 to 16 a week till 11 to 12.
But I'm trying to manage my blood pressure. And then this week I go back in and it's totally fucking spiked.
That's mostly because I'm back in New York and daddy loves to go deep in the pain. But I read something, I've been reading a lot of Buddhism recently because I find it fascinating.
And there's so many interesting things in there. And I read this one line that really struck out of me.
And it said, when you're healthy, you have thousands of problems. When you're not healthy, you have one problem.
And what I would say is to anyone out there that feels emotionally straught or like this is really taking a mental health because they look at their phone 15 times a day or they're losing money or they're worried about their job. Are you healthy? If you're healthy, you got 49% of everything, 51% of everything.
Do the people in your life who love you and that you love, do they still love you and do you still love them? Then you're right in about 90%. And again, I go back to the same thing that life isn't about what happens to you.
It's about how you respond to what happens to you. And we're probably going to look back on this over the medium and the longterm.
And this is really rough for people trying to retire because they don't have time to make more money, but over the medium and the long term, the markets tend to be up and to the right, especially if you diversify across asset classes and what we've been saying across geographies. You're going to look back and you're probably, probably 95% of us are going to think, I wish I hadn't reacted so emotionally.
Very few of us are going to say, I underreacted, right? Because you have the media and you have algorithms all trying to say, this is quote unquote economic. Somebody described it as economic Armageddon.
I'm like, no, it's not. I remember my second week at Morgan Stanley in 1987, the Dow went from like 1400 to 900 in one day.
That would be like we wake up tomorrow and the Dow's at 28,000. I mean, I feel like your generation doesn't really know what war is like, what combat is like when we hit a real speed bump.
Just to interrupt, because you look at the numbers and the swings that we've had, they are at that level. They do rival the largest crashes and crises we are seeing.
Not on a percentage basis. On a percentage basis, yes.
Well, over a three-day period, right? Sure. But here's the reality.
It hasn't even taken us back a year yet. Okay, so we've lost, I think as we see here today we've lost seven months of gains you know the the 2008 great financial recession at the lows took us back i think it took us back several years and the question i think everyone is wondering and by the way i'm not i'm not disagreeing with your point here but the question is are we reaching that point point? Is it possible that the stock market will continue to slide? Do we have a 2008 or maybe a 2000 type event on the horizon here? And I'm with you that we don't have enough data to make that call yet.
And we don't really have the right to start panicking and saying that the sky is falling. But are you saying it's just not on the table? Of course it is, but it always is, but it's impossible to know.
And again, I go back to the same level of advice. What do you do? You do, in my view, you do nothing.
And because we said on Monday, the markets could go up 2,000 points than they did. And today they're down 1,000 points.
What you can do though, is if you do decide to sell and diversify, the good news is that you're not selling at a low here and buying in at a high. All markets are down right now.
So to a certain extent, it's a bit of a free trade around diversification right now, because the majority of markets have also taken a hit because see above, the definition of being stupid is hurting yourself by hurting others, and we've done both. So the markets have gone down here, but guess what? They've gone down pretty much everywhere else too.
So you get to ARB into diversification here, kind of almost cost-free after you've figured out the tax implications, but you get a bit of a freebie here in terms of diversifying. And that is investors tend to be a little bit rear view mirror looking, and that is, oh, the markets are down here, so I'm going to go into this other better market, and the better market has already gone up.
That's not the case here. Almost everyone has been hit pretty hard.
So I'm all about, not to keep calm and carry on, but I do think diversification across geographies is something everyone should be thinking about, because I believe that over the next 10 years, there's a real non-zero probability that the return in the S&P in the U.S. market is zero.

We'll be right back.

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G Markets. I think you look at what has happened over the past 10, 20 years.
The reason that we've had all this capital entering the U.S. markets is because it was sort of the only place where you could get these really strong returns and you had a guarantee of relatively low risk compared to other nations.
And when you say that the U.S. has sort of given up its edge, I think what's really happened is the U.S.
has given up its edge in terms of a relatively risk-free investment. There is now all of this associated risk attached to America that didn't exist before.
And this is the kind of thing that affects the Chinese markets. I mean, those Chinese companies that we talk about, they do very well, but the multiple is contracted because of this government risk that everyone prices in.
And now we're seeing a reversal of that trend. And, you know, if you go into Europe, I think a lot of investors are thinking, I can get, you know, relatively similar returns at lower risk, but also it's very cheap right now.
You just look at the multiples compared to the US, the entire European stock market on a price to earnings basis is cheaper. So I think

what we're saying, I mean, we have been saying do nothing, which I think is the right call on a

weekly basis, just given the volatility we saw last week. But when else would we rotate out than

now? I mean, isn't it the time? I think that's a fair point. What I would suggest is the following

is that it is very hard to read the label from inside of the bottle. You want to talk to a tax advisor.
Also, this sounds superfluous. You want to talk to your partner.
You want to get alignment with your partner. Hey, this is what's going on in the market, because what you don't want to do is tell your partner in six months, you made a decision, got unlucky.
You want alignment, financial alignment with your partner. I don't know if you've been watching.
It's really volatile. I'm thinking diversifying in other companies.
You definitely want to talk to a tax advisor. Because if you sell a stock that has huge gains or whatever, you have a taxable event, it might be an unwelcome thing you didn't see.
And if you talk to a tax advisor, you might have said, well, you should have sold stuff that where we could harvest the losses or whatever it might be. Or there might be, you might be an investment vehicle where you can do tax-free exchange, whatever it might be.
Unfortunately, the code, the tax code has been weaponized by the wealthy who can afford tax advisors. You really want to be thoughtful for tax.
You want to speak to people. You want to do a little bit of research.
You don't, you want to make informed trades. But to your point, right now, it's not a bad idea in my view.

And this is what I'm doing.

I am diversifying out of the U.S.

And I'm trying to be thoughtful about stocks or about taxes.

I'm trying to be thoughtful around which regions I go into.

But China, if a company in China does a billion in revenues and is growing 10%, it trades at, or 5% growth, it trades at 14 billion. The same exact company in the US right now trades at 25 or 26 billion.
I think that's going to normalize. I think it's much more likely that China goes to 20 than the US goes to 35.
And I think there's a much greater risk that the U.S. goes below 20, then China goes below 10.
And we have had an incredible run. If you live in America and you've participated in any way in the markets by virtue of the job you have, the house you have, the stocks you have, you've done well.
So the idea of taking a little bit off the table and diversifying right now, it's a free diversification arbitrage because everything's gotten the shit kicked out of it the last week. That is not a bad idea.
And if you want to do it over the next week, I get it. I've been doing it over the last three months because I want to be thoughtful and measured about it.
And my sense

is the markets are now moving a bit in unison. They will disassociate from one another once

things settle down. But to your point, for your own mental health, what you want to do is adopt

the military decision-making strategy. And that is when they look at the results of a military

operation, they don't look at the outcomes. They look at the information the officer had at that moment and did he or she make the best decision possible based on the information at the time.
And this is what you want to do. You want to speak to people.
You want to go to a robo-advisor. There's so much good information online.
You want to talk to friends, be open about money, and get alignment with your partner such that you could look back. And even if things don't pan out as well as I think they will, if you diversify or you do, you made the right decision at the time.

That's how, because what people don't realize is there's returns, there's financial returns,

and there's mental health returns. I really did have this suspicion that the markets were going

to puke. And I thought a couple of times about going deep and really shorting the market aggressively.
And I didn't do it. I would have made a lot of money.
But here's the thing. I'm really diversified right now.
And that's been the right decision. So I haven't gone aggressively at any one strategy because I've decided at this age, I'm not looking to get rich.
I'm looking to not get poor. And if I talk to enough smart people, which I do, they would say, Scott,

you need to just be wildly fucking diversified.

Even if you leave some upside on the table,

you need to be wildly diversified.

You can take some big swings right now,

and I'm not suggesting you do that,

but you can take bigger swings than me.

And by virtue of the fact you're young,

you're probably gonna have to be overly concentrated

in a house at some point,

or overly concentrated in terms of your wealth and your job, whatever it might be. But you have another 40 years to make money.
If you're a little bit older and you have some assets, I absolutely think that the D word should be on your mind all day long, and that is diversification. Yes.
And I also want to emphasize something you point out there, which is that this has been a months-long venture for you. It wasn't that you woke up one day and you decided, okay, I'm rotating out.
This has been something you've been doing over the course of several months, which makes sense because the entire bet that we're describing here is a bet based on capital flows. We're not betting that some massive crisis event is going to trigger a reversal that's going to happen within a day.
We're describing a bet that involves large institutions and large investors gently and gradually re-steering their investment into a different locale. And that is something that we're going to see play out over, let's face it, years.
So if you're going to make this play, I think what you want to do is what Scott is describing here, which is drag it out. You don't have to do it all in one go.
You can make it a month's long play, you could even make it a year's long play, because the bet is that those returns are going to come not within a day, but within several years. Let's take a look at the week ahead.
We'll see earnings from Goldman Sachs, Johnson & Johnson, Bank of America, US Bank, TSMC, UnitedHealth, and Netflix, i.e. earnings season has begun.
Scott, any predictions? Yeah, a few, which means three, Ed. One, Trump is going to blink.
This guy plays the worst poker in the world. He's literally like a guy at a poker table who starts convulsing if he has a good hand.
I mean, he is the worst poker player in the world. And President Xi looks at President Trump the way Logan Roy in succession looked at his kids and said the following, you are not serious people.
The fact that we're going to stare down China is just fucking ridiculous at this point, given our lack of credibility, given our lack of willingness to endure pain. Apple is not going to see any tariffs.
I can't imagine the riots if all of a sudden Gen Z has to pay $3,500 for their iPhone. Thousands of you will decide to run for office and say, make America iPhone great again.
Anyways, Tim Cook is the CEO or the business person that Donald Trump thinks he is. He's going to figure out a way to give an exemption to all Apple products.

And I also think, generally speaking, we're going to look at, we're going to be closer to normal in six months. We're going to be back to the future.
This tariff situation is going to look almost identical to what it was before we started this mess. The only difference is the U.S.
brand will now have a strong association of toxic indecision or toxic uncertainty. And we're going to see a pretty serious clip in that multiple contraction, which will take everything down.
This is going to be a round trip where on the way home, we realized we have just been through hell and back for fucking nothing, for nothing, except a loss of reputation and a serious downgrade in the prosperity and wealth of Americans. This episode was produced by Claire Miller and engineered by Benjamin Spencer.
Our associate producer is Alison Weiss. Mia Silverio is our research lead.
Isabella Kinsel is our research associate. Dan Shallan is our intern.
Drew Burrows is our technical director. And Catherine Dillon

is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast

Network. Join us on Thursday on Prof G Markets.
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