The End
Back in November 2024, I attended an NFL football game with a group of financial experts.
I wrote about it in the December 2, 2024 issue titled: Trump went to a UFC fight.
At the time, I told you:
There were four analysts and a high-net worth financial advisor. We were in a suite, hosted by “The Reclusive Millionaire” of internet ad fame.
As you can imagine, the conversation moved to the coming year’s strategies.
The host said that he doesn’t expect tariffs to be anything more than saber rattling. I was interested in the tone of the group. There was no fear. None.
These folks are usually cautious. While not conservative, they do take a cautious approach to the market. And yesterday, that was absent.
There was almost a euphoria around the market…as you can infer from the idea of making an investment on oil, based on the president elect’s neighbor at a UFC fight.
It was a short issue, but prophetic.
Tuesday morning, as we began yet another day of market bloodletting after “liberation day,” I reflected on that issue. I wondered what those same financial experts thought. So, I grabbed my mug of coffee and walked over to their office. And as you would expect, it was a completely different tone from that football game.
It’s a beautiful day here in sunny Florida. Blue sky. Pretty ocean. But in the office, it’s gloom and doom…
“This is dumbest thing we’ve ever seen,” my formerly bullish friend lamented. “We thought this was going to be a 10% tariff as negotiating tool. Instead, it’s an all out attack on global markets!”
He’s not wrong. This is the ultimate in economic stupidity. There is no beneficial endgame here.
Let’s look at Nvidia as an example.
Nvidia isn’t a chip maker. Not really. They are a “fabless” company – they outsource the actual chip manufacturing process to Taiwan Semi-Conductor Manufacturing (TSMC).
TSMC makes chips. Nvidia designs them. It’s an intellectual process that helped the company secure an incredible 70% gross margin on its revenue. That’s incredible. And it’s twice as high as TSMC could garner, making the chips.
The point is that manufacturers are usually low margin businesses. Service jobs, which America excels in, are higher margin. That means U.S. companies earn a much higher profit on the work they do. Which is how we built the world’s largest economy and became the richest country in the world.
We should want that to continue. We want our kids to work at Nvidia developing chips, not in a foundry pouring silicon.
That’s in part because these tariffs have no basis in economic reality. Derek Thompson pointed this out in the Atlantic, using the African nation of Lesotho as an example:
By the numbers, the tariffs are less an expression of economic theory and more a Dadaist art piece about the meaninglessness of expertise. The Trump administration slapped 10 percent tariffs on Heard Island and McDonald Islands, which are uninhabited, and on the British Indian Ocean Territory, whose residents are mostly American and British military service members.
One of the highest tariff rates, 50 percent, was imposed on the African nation of Lesotho, whose average citizen earns less than $5 a day. Why? Because the administration’s formula for supposedly “reciprocal” tariff rates apparently has nothing to do with tariffs.
The Trump team seems to have calculated each penalty by dividing the U.S. trade deficit with a given country by how much the U.S. imports from it and then doing a rough adjustment.
Because Lesotho’s citizens are too poor to afford most U.S. exports, while the U.S. imports $237 million in diamonds and other goods from the small landlocked nation, we have reserved close to our highest-possible tariff rate for one of the world’s poorest countries.
The notion that taxing Lesotho gemstones is necessary for the U.S. to add steel jobs in Ohio is so absurd that I briefly lost consciousness in the middle of writing this sentence.
We have not found a better summary of the confounding stupidity of this current policy. Tariffs are on, then they are off. Then back on again. The uncertainty is a huge problem for the market. Because there is no logic, there is no plan. And no plan means risk.
We will see just how big that problem is, as companies report their first quarter performances and issue guidance for the end of the year.
Each company gives guidance to investors about their expectations for the next three months and full year. Companies face difficult choices between risk and growth. The reasonable thing to do for investors is to not issue guidance…because we literally do not know what this capricious administration will do.
For example, considering rising cost from the tariffs, Microsoft cancelled a $1 billion investment in three data centers in Ohio. The company deems the current situation too risky to put that money to work right now. That’s a trend we expect others to follow.
Like my friends, the market is not taking this well. For only the 16th time in 96 years, the S&P 500 fell over 15% from its record high. It was the fifth fastest decline on record (just thirty-two trading days). Historically, these declines don’t recover for at least six months, according to SentimenTrader.com.
More concerning is what the bond market says to us.
The 10-year Treasury yield rose from below 4% to over 4.5% in a single week. That’s enormous. And the 30-year yield hit 4.87%. It had its largest weekly jump since 1982. These are U.S. debt. When the yield moves up, it means you have more sellers than buyers.
The data is concerning. Investors withdrew $15 billion from U.S. bond funds in early April, the largest weekly exit since December 2022. High-quality investment-grade bonds saw $6.6 billion in outflows.
This is a strong indicator that the world thinks that the U.S. economy is in trouble. And that’s bad news. The U.S. has $9.2 trillion in debt that must be refinanced in 2025. Rising yield makes that more expensive.
What a week. We can’t even imagine what next week could bring.
Watching the stock market whipsaw through the week took us back to that December issue and revisiting our stops. We had some revisions to the portfolio, based on our guidance:
Alphamin Resources (TSXV: AFM) – Alphamin closed at $0.86 on February 14, 2025. That triggered our stop, and we closed our position with a 42% loss on the position.
Canadian Premier Sand (TSXV: CPS) – Canadian Premier Sand closed at $0.19 per share on April 7, 2025. That’s below our trailing stop of $0.21 per share. We closed our position with a 34% loss.
Largo Inc. (Nasdaq: LGO) –On April 4, 2025, shares of Largo closed at $1.44. That’s below our trailing stop of $1.47. We closed our position.
Lundin Mining Corp. (TSX: LUN) – On April X, 2025, shares of Lunding Mining closed at $9.50. That’s below our trailing stop of $9.62. We closed our position with a 24% loss.
Standard Lithium (Nasdaq: SLI) – On February 21, 2025, shares of Standard Lithium closed at $1.40. That’s below our trailing stop of $1.42. We closed our position with a 23% gain.
TOYO Co. (Nasdaq: TOYO) – on December 5, 2024, shares of Toyo closed at $3.35. That’s below our trailing stop of $3.36 per share. We closed our position with a 34% gain.
These stops are critical for keeping our losses to a minimum.
We don’t want to sit on dead money. We need to have capital ready to go, for the market recovery. That’s the secret to navigating these downturns.
We all hate to sell positions. And some of these could recover. But many will take months to years to get back to previous levels. And we don’t want to wait for that when we could be making money in other stocks.
For the Good,
The Mangrove Investor Team
