23 Apr 23rd April 2025
Index Movement Last Week
| S&P500 | -1.5% |
| Nasdaq | -2.3% |
| Aussie ASX200 | +2.3% |
The tariff circus continued last week but at least the news now is more positive than negative. After ratcheting up tariffs against China to 145%, Trump came out yesterday and said that tariffs will “come down substantially” and that he “won’t play hardball” with them. Someone has finally sat him down and told Trump to behave.
Quite a turn-around since the prior week.
He also had a swipe at Fed Chair Powell last week calling him a “major loser”. It is quite incredible that we have the leader of the free world insulting the leader of his Federal Bank with name calling. Here is how it played out.
Chair Powell gave a speech correctly identifying tariffs as a shock higher for inflation and lower for employment and the President got angry.
The President complained that Powell “should have lowered Interest Rates long ago” and “should certainly lower them now” before saying “Powell’s termination cannot come fast enough!” Later, he said to reporters regarding Powell that “If I ask him to, he’ll be out of there”. The Wall Street Journal reported that the President has been discussing removal of Powell “for months” with no final decision made.
That was what caused the market to fall last Thursday.
Yesterday Trump said he “has no intention of firing Jerome Powell”.
Funny thing is he has no power to anyway.
Now Trump is happy with Powell again markets rallied.
It really is becoming one big joke. Much like the CBA share price.
Why the backflip on China? I suspect because China has ceased heavy earth exports to the US. Brilliant move by China and one that could cause longer term problems if it stays in place.
These heavy earths are used in all kind of advanced computing things from flat screen TVs to electric cars. China is just about the only place in the world you can get them. Without them, US industry stops.
Yes, we have a lot of them here. We dig them out of the ground, but before you can use them you have to refine them and we ship them all to Malaysia and China for that.
Here’s an idea Dutton and Albo. Rather than buying votes by offering various discounts to us, how about seeing an opportunity and building a refining plant here. Do it in the middle of nowhere if you are worried about the toxicity of it. We have a lot of nowhere we can use.
Trump will lose this trade war. His only weapon is the size of the US consumer base. But others have many weapons they can use.
At this stage I still don’t see anything to really worry about. This is just a short-term bit of excitement. It is not the beginning of the end.
We don’t have a credit crunch. We don’t have a pandemic. We don’t have an employment problem. We don’t have sprialling inflation. We don’t have supply chain issues. Interest rates are going down, not up.
All we have is a guy who reminds me of Drew Barrymore in Fifty First Dates who wakes up each morning and can’t remember anything so starts each day making random decisions.
Polls are showing his approval ratings are plummeting and already it looks like the Republicans will lose a significant number of seats in the mid-terms. One thing we can count on Polititians for is to preserve their jobs. The Republican Party will fix up Trumps antics. New Trade Agreements will be made and things can get back to normal.
This will all pass soon and we can get back to the business of bull markets.
Earnings season so far has been ok. 71% have beaten profits and by an average of 6.9%.
Except Telsa (TSLA). That result was shocking. Revenue was down 70% on same quarter last year. They made a profit of $400 million, but if you strip out the $550million in carbon credits other businesses paid them then the company made a loss. But it’s all ok right? Because they are going to build robots. Not without the heavy earths from China they aren’t. Elon said so himself. It’s so bad that Elon announced his job with DOGE is almost done and he will be spending more time back at Tesla. That won’t make much difference.
On the topic of car companies, I found out something interesting this week.
General Motors builds almost as many vehicles today and during the peak in 1978. But it does it with just one-twelfth of the workforce. Robots dominate the high-volume, repetitive welding and painting tasks. Humans have been replaced.
The same is going to happen with AI. It will replace human workers. IKEA began replacing jobs in 2023 with an AI chatbot named Billie. Hundreds of employees at Google were laid off in March as executives made AI deployment a central focus. Sundar Pichai, the CEO of Google, said that 25% of all coding is being done by AI.
Elon Musk believes that AI and robotics will drive the cost of goods and services to near zero.
Is this future likely? I think so. Technological advancements have always happened and this is just the latest one. Leaders at the world’s largest tech companies understand the size of the opportunity. The scale and speed of AI deployment by Meta Platforms (META), Microsoft (MSFT), Amazon.com (AMZN), and Google (GOOG) underscore the conviction that the technology is transformative and that immense rewards await the firms that build and control the foundational systems.
Regardless of what Trump says this week, he cannot stop this happening. AI is coming so it is time we just accept it and jump on board.
Nvidia (NVDA) the world’s leading AI chip-maker traded under $100 last week. That’s a 35% discount to the highs of $150 in January. Go out and buy it now. Then thank me in six months when everything looks very different.
Warning
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