US Economic News

[EnSabahNur]

"Some of these companies who are impacted, may have excellent franchises and durable business models that actually come back stronger in future. And since I have the ability to wait out the turmoil, so that's where I will focus instead."

I agree with this. I think the risk here is catching a falling knife, which if we think we buy with a good margin of safety, that is fine

I guess what I am trying to say is that, what we used to assume, is probably suspect now.

The price we pay to own the asset, does not determine our MOS. Rather it is the underlying quality of the asset - a company with good business economics, strong balance sheets, durable moats, fairness of controlling shareholder etc that determines our MOS. It may also come from companies which are undergoing some transition (and eventually succeed). The price we pay to own the asset, determines our future returns.

I think what you are describing here are the moats rather than MOS

From Investopedia
https://www.investopedia.com/terms/m/marginofsafety.asp

What Is Margin of Safety?
The margin of safety is a principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value. In other words, when the market price of a security is significantly below your estimation of its intrinsic value, the difference is the margin of safety.

[weijian]

The price we pay to own the asset, does not determine our MOS. Rather it is the underlying quality of the asset - a company with good business economics, strong balance sheets, durable moats, fairness of controlling shareholder etc that determines our MOS. It may also come from companies which are undergoing some transition (and eventually succeed). The price we pay to own the asset, determines our future returns.

I think what you are describing here are the moats rather than MOS

From Investopedia
https://www.investopedia.com/terms/m/marginofsafety.asp

What Is Margin of Safety?
The margin of safety is a principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value. In other words, when the market price of a security is significantly below your estimation of its intrinsic value, the difference is the margin of safety.

Hi EnSabahNur,

At some point in our investing journey, we have to decide do we follow what the book says, or do we have enough (common) sense to follow our sense.

I followed Investopedia's definition for the longest time but along the way, my own experience and observation informed me that it isn't gospel truth. Finally, a kind VB put it down into words - MOS comes from quality (or moat), not price discount. And the moment I read it, it just clicked. Compared to the kind VB who figured it out 10years earlier than I did, I was late to the enlightenment.

Finally, this is what works for me. It would be foolish and arrogant of me, to say that what works for me, is gospel truth.

[weijian]

Most VBs already know that this tariff thing is only a losers' game for everyone, but their effects will take some time to transpire out, although stock markets are robustly predictive of them. If everything is uncertain, then some certain stuff will happen. If everything is certain, then some uncertain stuff will happen. What is certain is that we can never have good prices and good news at the same time.

It's interesting that the title of Howard Marks' memo is similar to the ones he had in Sept2008 and March2020. Those were great times of uncertainty (and buying opportunities). President Xi is younger and there are no elections in China - So he and CCP are expected to have a longer runaway than lets say President (or Doctor) Trump and his Republicans. Just like how the market disciplined Xi and CCP, US markets will surely also discipline their own politicians and it will be much faster.

Nobody Knows (Yet Again)

I’ve received a lot of kind responses to Friday’s appearance on Bloomberg TV, and I’m going to use a comment from a viewer to bring us to a conclusion on this subject:

In the 1980s, people like [Trump’s counselor for trade and manufacturing] Peter Navarro decided that Japan pulling ahead of the US in autos threatened the future of the U.S.

Japan did indeed pull ahead and never looked back.

The U.S. economy has more than doubled in size relative to Japan since then. It has doubled even after allowing for population changes and currency strength. It doubled in spite of losing the lead in autos, or is it that it doubled partly because of it? The margins on computer software and jet engines are probably a good deal higher than on mass-market automobiles. (Emphasis added)

https://www.oaktreecapital.com/insights/...-yet-again

[ksir]

Most VBs already know that this tariff thing is only a losers' game for everyone, but their effects will take some time to transpire out, although stock markets are robustly predictive of them. If everything is uncertain, then some certain stuff will happen. If everything is uncertain, then some certain stuff will happen. What is certain is that we can never have good prices and good news at the same time.

It's interesting that the title of Howard Marks' memo is similar to the ones he had in Sept2008 and March2020. Those were great times of uncertainty (and buying opportunities). President Xi is younger and there are no elections in China - So he and CCP are expected to have a longer runaway than lets say President (or Doctor) Trump and his Republicans. Just like how the market disciplined Xi and CCP, US markets will surely also discipline their own politicians and it will be much faster.

Nobody Knows (Yet Again)

I’ve received a lot of kind responses to Friday’s appearance on Bloomberg TV, and I’m going to use a comment from a viewer to bring us to a conclusion on this subject:

In the 1980s, people like [Trump’s counselor for trade and manufacturing] Peter Navarro decided that Japan pulling ahead of the US in autos threatened the future of the U.S.

Japan did indeed pull ahead and never looked back.

The U.S. economy has more than doubled in size relative to Japan since then. It has doubled even after allowing for population changes and currency strength. It doubled in spite of losing the lead in autos, or is it that it doubled partly because of it? The margins on computer software and jet engines are probably a good deal higher than on mass-market automobiles. (Emphasis added)

https://www.oaktreecapital.com/insights/...-yet-again

Below is great:
I want to say about 2008 and the other crises I’ve invested through – as well as today – that I don’t reach my conclusions with confidence or act without trepidation. There’s absolutely no place for certainty in the world of investing, and that’s particularly true at turning points and during upheavals.
I’m never sure my answers are right, but if I can reason out what’s most logical, I feel I have to move in that direction.

[edragon]

A Trader's view.

The Last Tariff: China Ended the US’s Trade War With a Whisper | Gerry Nolan, Saturday, April 12, 2025

"Washington still believes in a world that no longer exists. It thinks it can dictate trade terms while running trillion-dollar deficits, threaten its way into solvency while its factories rust, and that China will forever tolerate economic warfare just to retain access to Walmart shelves and US Treasury bonds, bonds that are a ticking time bomb for the hollowed empire.

But that world is gone. China has reoriented trade through Belt & Road. It’s fortified currency alliances with BRICS+, hardened internal markets, and invested across the Global South. Most importantly, it has shifted away from Western export dependency." 

[specuvestor]

Though March CPI was much weaker than expected Fed officials have been starting to warn about inflation but market still looking for 3-4 rate cuts as Fed put. At best there might be just a pre-emptive 1 cut but with stagnation scenario becoming real if the tariff continues to be in place in 2H25. Ironically imports will surge in March and April to front run the tariff

What is surprising is China's hawkish response on friday 4 April when the tariff only kicks in 9 April, presumably to entice Eurozone to do the same for their meeting on 7 April. Nevertheless CHina has gone through 1st trade war, longest COVID shutdown, shift of production to Vietnam etc, sanctions on Huawei and semicon, transfer listing from US to HK, etc. BYD became largest EV maker without US probably also gave them some confidence

Mar CPI 2.391%
Mar Core CPI 2.789%

As of 11 Apr Cleveland Fed expecting
Apr CPI 2.42%
Apr Core CPI 2.76%

Mar PCE 2.19%
Mar Core PCE 2.54%
Apr PCE 2.17%
Apr Core PCE 2.50%

US economy slowing down in 1H25 is expected which is why the Fed cut rates in Sep-Dec24 but market now framing it as a recession that needs up to 3 rate cuts vs last year around this time 7 rate cuts. Bipolar again

Trump's policy likely to be inflationary which will likely elevate prices in 2H25 and stay higher end of 2.5-3%. So economy better recover in 2H25 else we might have a complicated stagflation scenario

Feb CPI 2.822%
Feb Core CPI 3.117%

As of 12 Mar Cleveland Fed expecting
Mar CPI 2.46%
Mar Core CPI 2.99%

Feb PCE 2.38%
Feb Core PCE 2.60%
Mar PCE 2.07%
Mar Core PCE 2.47%