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TRUMP’S EMPIRE STRIKES BACK…

First, there was Deep Seek and the total destruction of the AI bull case, which in itself sounds like a Sci-Fi sea monster movie.

Then, it was The Empire Strikes Back, led by Trump’s starship, the executive order firing 25% and 10% tariffs at Canada, Mexico, and China.

Meanwhile, domestically we suffered two tragic airplane crashes— ironically after the firing of David Penske, the Administrator of the Transportation Security Administration, and eliminating all members of a key aviation security advisory group.

And to add insult to injury, Michael Whitaker, a top official in the Federal Aviation Administration (FAA), stepped down and left the agency that regulates airlines and aircraft manufacturers, and also manages the nation’s airspace—leaving them without permanent leadership at the time of the crash.

And then there is the infamous “quit letter” sent to federal employees offering them pay until September if they resign immediately. This all sounds like a scene out of a billion-dollar corporate takeover, where nothing matters but the bottom line.

And just imagine…all in the first 12 days of Trump's Administration.

Along with the tech world being temporarily brought down to its knees, tariffs were officially top of mind, as inflation fears entered the picture after Trump signed fresh executive orders on Saturday, February 1st to be implemented on Tuesday, February 4th. With inflation already sitting at 2.9%, consumers are bracing for higher inflation.

The Conference Board’s latest monthly survey shows that consumers expect inflation to jump to 5.3% a year from now, which is in line with the University of Michigan’s surveys showing consumers expecting Trump’s tariffs to raise prices.

Could the Trump administration be cutting off their nose to spite their face, when it comes to Canadian oil—considering we import about 4 million barrels of oil a day, refine it, and sell it back to the Canadians and other countries at a profit?

Canada and Mexico tariffs have been paused for 30 days but China plans to retaliate against U.S. tariffs, which could inch us closer to a recession. The last thing the U.S. stock markets need is a trade war. Trade wars will inflict pain on American consumers, which could slow down the economy.

Main Street is already experiencing shelter, food, and insurance hikes—energy could be the straw that breaks the camel’s back. It will affect supply chain and transportation costs, which impacts food delivery as well as goods, increasing prices at the grocery and all energy-related goods and services.

Businesses will pad their costs to account for the additional costs and if you understand Economics 101, inflation is good for business, because they also have the excuse to increase margins higher than usual under the dark clouds of rising costs.

This increases revenue and gross margins, which impacts the bottom line positively, but Main Street will suffer as Main Street doesn’t have the ability to leverage or increase its revenue beyond its one source of income—unless they work more hours or get another part-time job.

This puts stress on households causing a pullback on spending, which could impact the entire economy. Now, if the first 12 days of Trumponomics is an indication of the next four years, we could be in for a wild ride—protect your portfolios.

AVOID THE NOISE, GET RICH SLOW

What exactly is a Wall Street spin machine?

Wall Street is a place where people call plays without jerseys, based on the direction of the wind. But what most don’t know or understand is that money controls the win; therefore, they control the direction.

It’s as if each firm has a specified team of narrative shapeshifters, sifting through the news cycles just waiting for an economic shoe to drop. It starts with, “What would the retail investor believe?” After all, it’s an economic game of chess, not checkers.

They have spent years sheltered in their monied environments, creating wealth—how dare the economically disadvantaged retail investor intrude upon their money printing machine.

If you look closely, you can see the arrogance in the face of the stock market forefathers, whispering in silence, “We started this thing in 1792 with only 24 of us under the Buttonwood tree. We put this together, so it’s only right we charge the most expensive coin for their ignorance.”

While this description isn’t exactly rooted in fact, it feels awfully entertaining as the truth. Wall Street does use the news cycle and thrives off volatile events to move markets.

They have a bird’s eye view that the retail investor is not privy to; for instance, they know how much of the money invested daily comes from the retail investor as well as where it’s going.

This fact alone makes you question the validity of Wall Street’s insider rules.

What could you do if you could peek behind the curtain of the Wall Street spin machine and see every single move and trade? How valuable and profitable would this data be in the hands of the ordinary retail investor? What if a retail investor could see every institutional block trade, see every option, or see every hedge strategy, precisely at the time the strategy took place?

This would be invaluable information.

Sure…investors can buy tools and websites that give them information on option flows and look at SEC filings showing the insider and institutional trades, but the SEC filings aren’t in real-time. If the retail investor could see how they manipulated the narrative as well as the action they took, how even would the playing field be?

Currently, the retail investor stubbornly believes that they can beat Wall Street’s multibillion-dollar spin machine. The only problem with that thought process is that trading isn’t the way to do it. It’s like you are walking around in a glass house trying to hide the dirty laundry and Wall Street’s spin machine is looking dead at you.

If you choose the path of the long-term investor, you miraculously outlive short-term trading strategies because you rely on the tangibility of the financials. This reliance alone drowns out 99% of the noise. It also divorces you from the emotional activity of watching your stocks or news on a daily basis.

By buying quality businesses on a monthly basis, you grant yourself the privilege of getting wealthy slowly.

Getting wealthy slowly in time is a confidence builder because once you discover its value over time, you will stop trying to take expensive shortcuts that 90% of the time lead to financial dead ends.

PUNCHING ABOVE YOUR WEIGHT CLASS

Nothing shapeshifts like the narrative under the dark cloak of seasonality.

Typically, February is a flat to slightly up month in the stock market, but now you have to add the Trump Effect.

Trump is an institutional trader’s wet dream as there will be plenty of market manipulative headlines that will create the volatility necessary to disguise and exploit the ignorant retail investors to the market manipulation.

At first glance, this looks to be a builder’s market for the long-term investor and a treacherous market for the retail trader. The cards are heavily stacked in the institutional trader’s favor—from both an intel and capital perspective.

The retail trader is significantly outmatched as Wall Street’s super informational highway is closed to outsiders. It’s as simple as understanding that Wall Street has a strategy for every season and opportunity and it’s like taking candy from a baby.

It’s like they are watching the retail investor condescendingly from above, while they clumsily line up on one side of the market trying to beat the machine with limited capital and information.

The retail investor doesn’t have the insight nor foresight to analyze or strategize from a high level. It’s like an episode of The Truman Show, where they repeat the same failing behavior trying to luckily beat the market.

They fail to ask the right questions.

In order to beat your opponent, you have to understand their thought process and the level of playbook they have at their disposal.

In this case, one must ask, “What type of presidency will Trump provide to the stock market in terms of opportunity?”

Think of a Trump market having a personality and if you add in the traditional market seasonality and a little sprinkle of institutional exploitation—a Trump market provides enough cover for institutional money to not only write a blank check but own the paper it’s printed on.

Just in terms of vision, the retail investor lacks access to the data that allows decisive real-time strategies, leaving them at a severe disadvantage and punching above their weight class.

For instance, on two consecutive Sundays, January 27, and February 2nd—the market was sparked by news of Deep Seek and impending tariffs scheduled to go in effect on February 4th.

Deep Seek was the gut punch that made the markets question their Tech consciousness, and the Trump tariffs stoked the fears of reflation. Both sent the markets down significantly, allowing those in-the-know to profit significantly.

Just imagine…if you knew that the Deep Seek news report was coming—hindsight being 20/20, how much money could have been made on the short side of the market?

The reality is, retail investors aren’t savvy or well-heeled enough to put on the type of risk that short exposure presents.

The ironic or coincidental nature of the news is that the story was 30 days old, which reeked of manipulation by the Wall Street machine.

And they used the widely-known, world economic forum, Davos, to start the panic, so it would filter back to the market along with well-known economist, Ed Yardini, to be the tipping point.

The tariff situation was a little more telegraphed.

The market had already placed the bet that Trump would follow through with his threat of 25% tariffs on both Mexico and Canada, with China to be hit with a 10% tariff. So, when the news broke that Trump signed the executive orders Sunday evening, markets were down sharply.

Now, this was a huge coincidence or an orchestrated move. If not, the question remains to be seen—who profited the most from the last two weeks of downside in the market?

These are institutional-level moves from the nosebleed section of the economic stadium, and at that level, the information available is above the retail investors’ pay grade.

PRICE HAS NOTHING TO DO WITH VALUE…

Believe it or not, very often in the stock market, price has little to do with value.

And I would argue that price is what buyers are willing to pay and sellers are willing to receive on any given day, and it is purely decided by market sentiment and the forces of supply and demand.

But value means understanding the enterprise value of a particular asset based on fundamental analysis.

This involves understanding the competitive landscape and the internal levers, such as revenue generation, profit margins, operational efficiency, and more importantly, the company’s ability to produce earnings while creating value for their shareholders over the long term.

When guesstimating future value, there are plenty of methods used to predict a variety of outcomes, like discounted free cash flows or valuation based on price-to-earnings ratios, but nothing is static or guaranteed as the result truly depends on the execution and consistency of the executive management team.

A company’s moat will determine how well it creates and increases both revenue and gross margins, as well as its ability to gain market momentum and market share. Think of a moat as a body of land protected by water—with one way in and only one way out; a company’s moat has to do with its proprietary technology, its patents, and its product that establishes its market dominance.

Now, as simple as this may sound— the market…which is a future-telling mechanism, may disagree with your assessment if you fail to do the proper research. The market could care less about your P&L (Profit & Loss); its only concern is profit and the winning side of the trade.

Since institutions move billions of dollars daily, it’s going to be about liquidity. Liquidity, in this case, is how many shares a company trades and the ability of institutional traders to get in and out without causing a disturbance or telegraphing their moves.

This is why the Magnificent 7 is so popular, as it represents approximately 16 trillion out of the 46 trillion dollars in market cap in the S&P 500—collectively, they trade approximately 114 billion dollars daily, based on their three-month daily volume average, and have a combined 459.65 billion dollars of liquid cash on their balance sheet.

These companies, both individually and collectively, have what Wall Street calls, fortress balance sheets.

Institutions will not only use the Magnificent 7 as their safe haven, but as a source of funds when seeking to either rotate from one sector to another or as their own personal momentum play.

Street sponsorship or institutional interest is very important when assessing a stock's potential because it could be the best-kept secret in the world, but if nobody knows about it, it will go nowhere.

Hate it or love it, you need Wall Street’s big money machine behind the companies you invest in mainly because institutional money controls 60% to 80% of the daily volume.

It’s not the retail investors investing 114 billion dollars a day in the Magnificent 7, it’s the institutional monies moving the market. So, no matter how exceptional your research is, your money is no match for the deep pockets of BlackRock, Vanguard, and Fidelity.

I DESERVED TO BE RICH

Just because we weren’t taught financial literacy, it’s not an excuse to continue the trend. Our children deserve better.

I grew up playing chess. The most important piece I had to protect was the King and the most powerful piece on the board was my Queen.

This taught me that our household was only as strong as the family structure, which explains the extreme turbulence in my childhood, but somehow God made a way, putting the right obstacles in my life—testing both my integrity and drive, as well as my compassion for others.

Playing chess taught me to be strategic and to be well-thought-out, but when it came to money my ignorance was a deep well of misunderstandings.

The use of money was anchored in my psyche as this magical cure for every moment of unhappiness because being poor meant you couldn’t afford to be happy. Like any child, I had a big imagination and grew up watching the world through the lens of a 13-inch television with ‘rabbit ear’ antennas with aluminum foil on top.

Making music was my outlet and would eventually allow me to experience the world and sip a taste of financial prosperity. At the age of 23, I secured a major record deal with Warner Bros. Records.

My first single was a hit record called “Stomp”, and it allowed me to see the world from the driver’s seat of my musical passions.

Since I had no formal upbringing in the understanding of money, after about four years of touring and doing shows, the approximate 2 million dollars of earnings dried up and I found myself penniless and on Wall Street

It all started because of the movie, Trading Places. I was enamored with the action and the world of commerce. It was a world that was so much bigger than I could have ever imagined.

I worked hard to regain my financial footing but still had no concept of building wealth. I didn’t realize that I was financially institutionalized—in a systemic jail of an educational system that was passed down from generation to generation, that carried the thought process that as long as I had a roof over my head and food in my belly I was in pretty good shape.

I realized that was a lie when I saw how the cost of living made it impossible to be happy just making it. But the true eye-opener…no matter how much money I earned, it left as fast as I could make it.

This was a fault in my financial understanding I sought to correct, so I picked up books and became a voracious reader and learned about people like Reginald Lewis and his leveraged buy-out of Beatrice Foods in 1987—one of the first African American men to build a billion-dollar business.

I realized I had no examples of building wealth, so I fell in the rabbit hole seeking the formula for wealth and its sustainability. I then discovered Peter Lynch and his method of “buy what you know” resonated with me as it simplified my stock selection to something less than rocket science.

The last piece of the puzzle was, I had to believe I could be wealthy. This is the most important dynamic piece in my psychological profile as I had to believe I deserved to be wealthy.

It was my disbelief and lack of understanding of my role to my family that allowed Apple at 18 dollars a share to pass me by in 1995. I couldn’t conceive ownership in a corporation from the concept of being an investor, since all my life I was on the lowest part of the totem pole, and just because I arrived at the distinction of a Wall Street stockbroker, that didn’t change my poverty mindset.

It took me 10 years before I realized I deserved to be rich along with a series of ups and downs. It was 2005 when I came to realize that who I thought back then to be a friend was only friends with the person who had notoriety—and not Kevin, the faulted human being.

The turning point came when he asked, “How could you be a stockbroker and not own any stock?” Unfortunately, this was the criticism that woke me up to the understanding that he was exactly right.

This pushed me to own a mortgage company and then consequently an insurance agency.

It took quite some time but I finally realized that my wealth was inside of me and that I had an uncanny ability to identify great companies, and the understanding of the economic environments it took for them to thrive, and more importantly… to do it for myself.

This is the lesson I took from my journey and will pass on to my children when they are of age and able to understand their financial ABCs. The only difference is I won’t tell them they should do it—I will teach and show them by example.

If investing is all they know, it will be as routine as tying their shoelaces after they put on their shoes because investing is neither easy nor hard, it’s just simple discipline.

 Quick Links…

The Report Card Recap…As of Feb 7th

Meanwhile, In DOGE We Trust…

Is There Such A Thing As Renter Friendly…

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Kevin Davis Founder of Investment Dojo and Author of The C.R.E.A.M. Report