THE PSYCHOTIC NEGOTIATOR

In the midst of all of the tariff noise, have you noticed that the Jay Powell-Trump saga has been quiet? What if this was all by design? What if Trump’s plan is to make the Feds do his bidding indirectly by tanking GDP? 

The trade deficit today was $131.04 billion versus $128.30 billion, the largest in history. This means we are importing more than we are exporting. 

Since the goods we import are made outside the U.S., we can’t count them in our gross domestic product (GDP) calculation. Therefore, when we buy or import more from other countries than they export from the United States, we create a deficit in our country.

Since GDP represents the total economic activity in a country—representing all goods and services produced over a year or quarter—a deficit gets subtracted directly from GDP.

Gross domestic product (GDP) is a measure of the total economic activity in a country. It represents the total value of all goods and services produced over a specific time period, usually a year or a quarter. Here are some key points to understand GDP.

Economic Indicator: GDP is one of the most important indicators of a country’s economic health. It helps to show how well the economy is doing. Now, there is more than one way to skin a cat, and since tariffs are the new Trump card—could creating instability and uncertainty be a tactic to get the Feds back to the rate-cutting table?

Think about it. If Trump strings along the tariff narrative long enough for two negative GDP prints, this would technically put us in a recession. At this point, it would trigger Jay Powell to start cutting rates to prevent a slowdown in business activity and the potential of high unemployment as the country slows down.

Now, one might argue that Joe Biden’s administration changed the definition of recession. I would argue that just because a politician moves the goalpost attempting to trick the American public, doesn’t stop the true impact of the economic consequences people are feeling on Main Street.

I choose to go off of historical data and not some political doublespeak meant to pull the wool over the eyes of the American people—who clearly felt the recession as inflation peaked in June 2022.

So, just to be clear…a recession is defined by two negative drops in GDP, regardless of what is said by a politician, which is laughable at best.

Analysts are predicting we will see a negative GDP of 1% to negative 1.5%. 

This would be enough for the bad actors on Wall Street to revise earnings numbers down and trigger a sell-off, further pushing the need for the Feds to take action. 

And on the flip side, Trump gets what he wants, and most likely the tariff situation will be magically solved and the market rallies on a low interest rate environment—which happens to be the ripest environment for growth companies to prosper. 

As farfetched as this sounds, it could be a masterful plan to finish the year strong.

Here’s the question…is the United States worth burning down to prove a point? Based on the trade deficit, it is obvious that our economies are interlocked with China, Mexico, and Canada so any pain you cause to them punishes our economy as well.

Well, some of Trump’s strongest supporters would argue—you might have to destroy to rebuild new, and if that means a little pain for the economy, so be it—if on the other side of the rainbow, there is a steep growth curve.

Regardless of the ultimate ulterior motives, it just seems very David and Goliath to me and we all know how that ended. We will see…

TIT FOR TARIFF…

Whether you voted for Trump or not—as an American, one has to wonder what our economy and democracy will look like after the next four years. If the last 45 days are an indicator of what’s to come, hold on to your seats ladies and gentlemen. 

Tariffs are having an alternative impact than what was intended. Instead of exacting the political and economic leverage meant to bend the smaller countries—like Canada and Mexico to their knees, we are witnessing, specifically Canada, go up against what is now perceived as the world’s economic bully.

Canada has retaliated with its own set of tariffs. 30 billion Canadian dollars (US$21 billion) worth of retaliatory tariffs have been applied on items like American orange juice, peanut butter, coffee, appliances, footwear, cosmetics, motorcycles, and certain pulp and paper products.

And the U.S. is staring down the chamber of a 125 billion dollar Canadian tariff-tipped bullet, set to hit first thing in April. 

Plus, Canada has a Trump card of its own, unbeknownst to many American citizens—Canada and the U.S. share an electrical grid in which Canada provides electricity to 1.5 million Americans across three states: New York, Minnesota, and Michigan. 

Thanks to Trump’s new toy (tariffs), these states will see a 25% increase in their electricity bill starting Monday the 10th. The insane part is that Ontario’s Doug Ford said that turning off the grid was an option if the tariffs persisted or any other U.S. tariffs were imposed.

Imagine the type of political chaos that shutting off electricity would cause for President Trump and his cabinet of billionaires. Although the U.S. tariffs were said to be noble in reason, which was to protect American citizens from the flood of fentanyl and illegal immigration flooding our country—according to Canada’s Prime Minister Justin Trudeau, Canada has complied with the request laid out by Trump’s White House, so it makes sense to question why the on-and-off, tit-for-tariff responses we are seeing. 

 As evidenced by the electrical grid, we are too big and intertwined to decouple and I highly doubt that’s the intention, besides the screams that countries should pay their fair share.

So, perhaps there should be reciprocal tariffs, as this seems logically fair, but imposing unwarranted and inflationary tariffs will have an adverse impact on U.S. citizens, given the amount of crucial imports we receive from Canadians.

This makes you question the ulterior motives of the Trump administration. There is a group of Americans who believe that Trump and his cronies are deliberately causing economic disturbance meant to crash the market so they can further increase their purses. 

If they can create uncertainty and then, create an artificial decline in GDP, the Feds may need to respond with rate cuts to stop the loss of jobs and high inflation, furthermore, to stop the threat of stagflation—but not before the market takes a 20% or more hair-cut—creating the buys we witnessed with the pandemic and those with wealth getting wealthier. 

This may seem like a stretch, but this is where the mind of the American public goes when they can’t explain the reason for creating both economic and political instability around the world. 

DEATH IS EVITABLE

Here is a reality check. No matter what you do, you can’t outrun the grim reaper. So while you are in full faculty, it’s best to be proactive instead of reactive, and get your financial house in order.  First question. Do you have life insurance? Second. If so, do you know how it works? 

What if I told you—based on actual experience, the first time you see your agent is the last time you see your agent. And based on thousands of clients seen in my career, most people put their insurance away without even having looked at it.

 Which begs the question…how do you really know what type of insurance you have?

The problem with agents is that most are more interested in their commissions, instead of explaining insurance properly so that the client truly understands their protection and feels secure with the coverage. 

Not all agents are this horrible, but unfortunately, a lot of them are…so, protecting your family with the knowledge of how the products work is crucial if the coverage is to do what it’s intended to do—in the event of your demise. 

There are three types of life insurance: (1) whole life, (2) term, and (3) universal life insurance. 

The common, most sold of the three is term life insurance—simply, because it’s the cheapest in most cases, but there is also the psychological aspect besides the financially obvious. People are of the belief that cheap is great and more coverage is fabulous, but they are unaware that 97% of all term insurance policies never get paid out. 

Typically, 90% of all insurance you come in contact with at the job is term. Usually, you are paying something minuscule like $13 to $15 every two weeks for basic coverage, but you can get up to one to five times your salary. 

But in most cases, it’s a basic 20k to 25k depending on the company. More than 65% of working Americans rely on workplace insurance or the workplace insurance of their spouse or family members. 

53% of American workers have insurance mainly through the workplace—but most are unaware that if you lose your job you lose your life insurance, and even if you can take it with you, it’s based on the age when you leave the job, not the age you started the job.

I have had my life insurance license since 2008, and I have made a business out of educating every person who’s ever crossed my path. In my opinion, it’s not about any one, particular type of insurance—it’s about how you use your insurance. 

Term life is great for covering your liabilities and income replacement, especially if something should happen to the breadwinner(s).

But when seeking term coverage, it’s only part of an overall financial plan—it isn’t the plan. For instance, term insurance premiums increase at the end of the term. For clarity, there are 10, 15, 30, 35, and 40-year terms and it’s not a matter of if the premiums will increase, it’s.

Take a look at your policy’s payment schedule. You will find this at the back of your insurance policy. What you will find is a fixed payment for the periods of your term, and then a dramatic increase at the end of the term—often 20 times the beginning premium amount. 

It’s been my experience that most will lose or drop their coverage at this point. But what if you aren’t healthy and deemed uninsurable? Now you are stuck between a rock and a hard place forced to keep paying the increase or be without life insurance. 

This is why it’s so important to understand your coverages while you are still young and healthy enough to get coverage. Whole life works as it sounds. If paid, it stays in force for your entire life and the premiums never change. 

Using both whole life and term life correctly, you can effectively protect your liabilities and your biggest asset—your life and guarantee a funeral. I used to tell my clients…protect the top of the house—your liabilities, but tuck a whole life policy underneath, so at bare minimum you don’t leave a burden on your family. 

But as I stated…this is not your entire plan. You want to contact an estate attorney and you want to have a powerful investment strategy with the insurance and umbrella policy, while you are building your wealth, as well as a trust to protect what’s achieved—and most importantly, avoid probate. 

I wish I knew what I know now, back when I was younger, but it’s my purpose to pass on the wisdom and build a legacy that extends outside of my family. 

THE MILLIONARE MAKER

There is nothing more nerve racking and at the same time—exciting to a new investor, than watching the stocks trade daily. Underneath the belly of this excitement is the anticipation of profits and wealth to come, and the simultaneous fear of losing money.

These feelings are natural and often occur depending on how you acquire the stock. Meaning…did they do the research or was this an impulse transaction? If it’s the latter of the two, it appears that in the midst of the excitement, they’ve confused the price with the value of the company.

This is where perception and reality intersect. One may think that because the stock is having a green day, it is a wonderful investment.

Or you may be expecting a blockbuster announcement or something major that will have a material impact on the stock, by way of chatter from the chat rooms—while others simply bought the stock because they were familiar with the company.

Nevertheless, none of these rationales protect this type of investor from the emotional distress of down days.

Red or bloody days without the proper understanding or data are the ingredients of poor decisions—just as continuous green days are a top ticker’s impulsive dream (person that buys at the top of the market).

If you were to ask the bloody day seller why they sold, they would say they did not want to lose any more money, or in other words, they wanted to stop the bleeding. If you ask the top ticker the same question but in reverse, why did you purchase? — fear of missing the opportunity to make some money.

While these are perfectly acceptable answers, none of the initial decisions to purchase were grounded in the valuation of the stocks. Most of these transactions or rooted in price. And the reality is…price often has little to do with the value of a company’s stock.

Valuation is about measuring and predicting based off the measurement.

So, just like a carpenter measures twice and cuts once, a seasoned investor not only reads the earnings transcripts, researches the company’s products and position, and inspects the management team, but based on the sector or industry, they figure out the potential future valuation of the stock.

In my opinion, this is where the fire is discovered; the fire is the conviction based on the data that allows you to see the reverse of what everyone sees on down days as opposed to up days. When you are well informed as to why stocks go up or down, it allows the decision-making process to become a lot more simplified or programmed.

After all, it’s easier to purchase a stock on a down day that you think is worth three times the value when it is trading at two thirds its value, but if you don’t understand valuation the old emotional attachments with money will stop you from buying on what I like to call discount days.

I have a saying, “When a stock is red you make the bread, when the stock is green, it means you did the right thing.” It’s akin to the Rothchild’s saying, “Buy when there is blood in the streets.”

This is why you get wealthy in bear markets as opposed to rich in bull markets.

You must be able to see past the emotions, straight through to the true valuation based on the data metrics of the company and buy with the thought process as if you knew something no one else took the time to discover.

ARE WE IN A CRISIS OR OPPORTUNITY?…

So, wait a minute. You loved the stock when it was 30% higher, but now that it’s 30% lower I sense hesitation, what’s the discrepancy? 

In any other consumeristic time, you’d be jumping out the window for a sale or that steal of a deal. Since when did the word discount have an alternative juxtaposition, besides sale?

If you ask any red-blooded woman what the word sale means, her eyes will shift as if she’s heard a bell like Pavlov’s dog and start salivating for her favorite brand names. Why doesn’t investing capital translate in the same fashion as the purchasing of material goods?

At least with investing, you are putting capital to work with an opportunity to profit, versus spending money where you kill every opportunity to profit off money as an asset. 

Investing on bloody days requires an intimate knowledge of value versus price. You have to really understand the company’s future potential, its sector, and the macroeconomic and geopolitical environment it exists in.

This is probably more important, if not crucial, to investing in the actual business. At the moment, tariffs are the headline news, but there is an entire set of dynamics at play. 

We have an inflationary economy. There is approximately 2.66 trillion dollars in excess money in the system according to the Fed’s balance sheet, which was at 4.1 trillion before the pandemic and now currently sits at 6.667 trillion dollars. 

This dynamic alone has a spiderweb of implications; although the Feds have moved to a quantitative easing cycle, lowering rates the Feds fund rate by 100 basis points to 4.25-4.5. 

If you look at the size of their balance sheet and the fact that they are still rolling 35 billion in mortgage back securities and 25 billion in treasuries off their balance sheet, this means they are the net seller of bonds. 

This also suggests that they are still in a quantitative tightening stance. When the Fed sells bonds to Wall Street they are in fact tightening the money supply.  When they are the net purchasers of bonds, they are providing liquidity. 

Now, if you add the fact that our national debt is 36.22 trillion dollars, and as a country we are only producing GDP that is 29.72 trillion dollars, which leaves a gap of 6.5 trillion dollars which we partially cover in 2 ways—(1) from tax receipts. In 2024, the government received 4.92 trillion in tax receipts and (2) through the Congressional Budget Office, which has a meeting with Wall Street banks, pension plans, and hedge funds every year to discuss the federal government’s needs, according to the federal deficit at which point currently sits at 1.58 trillion dollars. 

So, in reality, unless we do something about the deficit, it is actually inflationary because it leaves banks with no choice but to keep rates high to cover the shortfalls in their own liquid capitalization. 

The second dynamic would be to understand how both bonds and stocks correlate with each other. Also, how mortgage rates track the 10-year treasury. I’m sure you’ve noticed that the mortgage rates have been going in reverse of the direction of the Fed fund rate cuts. 

This is because…not only is a risk premium built into mortgage rates based on the current environment, but Feds aren’t providing liquidity by buying back mortgage-backed securities, so investors who are willing to purchase in an illiquid market are requiring higher yields to do so. 

So, if you zoom out into the macro, consumers are feeling the pinch of high rents mainly due to the lack of supply and the fact that it’s cheaper to rent than to buy. 

Now, this is backed up by the latest CPI report because it shows that rents are 30% of the net increase in inflation, which means inflation isn’t going anywhere until the Feds become net buyers of bonds—increasing liquidity and supply in housing increases and moves 100% into a buyer’s market. 

Although home prices will rise, it may become cheaper to buy than to rent and if and when this happens, I believe the biggest source of inflation (rent inflation) will drop and so will rents across most geographical areas, leaving the consumer with an option to take their expenses down rent wise or buy a house—either way, it’s a win.

This, in my opinion, will make it cheaper to buy a home than to rent, as supply will force a reduction in home prices, but we need the Fed to start cutting rates by another 100 basis points to get mortgages down to the 4% range. 

Unfortunately, there is too much built-in inflation in the system to do that in the current state—with 25% tariffs on both Mexico and Canada and a 20% tariff on China, now in effect as of March 4th. 

The uncertainty in the economy has put the markets on an unknown roller coaster. While there is a legitimate reason to be concerned, one has to realize that the tariff conversation will literally leave the conversation, or we will get over it as we did in the past. 

If this is the case, one has to look at the downside in the market as an opportunity, not an emotional burden. 

Simply, because there has been no crisis or situation in the last one hundred years that time did not solve—and the question you have to answer is if not at a discount, when do you buy, after the sale? When the entire market turns and everyone jumps on the bandwagon?

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