{"id":1546804,"date":"2025-07-13T19:10:00","date_gmt":"2025-07-13T23:10:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1546804"},"modified":"2025-07-13T19:10:00","modified_gmt":"2025-07-13T23:10:00","slug":"fool-me-once","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/fool-me-once\/1546804\/","title":{"rendered":"Fool Me Once"},"content":{"rendered":"

Fool Me Once<\/span><\/p>\n

\n

By Peter Tchir of Academy Securities<\/em><\/p>\n

One of our favorite sayings is:<\/p>\n

Fool me once, shame on you.
\nFool me twice, shame on me.<\/em><\/p>\n

It is good on many levels. It indicates that it is okay to get fooled. We don\u2019t expect people to try to fool us, but we are susceptible to it. It does indicate that you have to take some responsibility (if you\u2019ve been fooled) and not get fooled again. If \u201cWon\u2019t Get Fooled Again\u201d <\/em>by the Who hasn\u2019t popped into your head at this point, there is little I can do on the musical front.<\/p>\n

In any case, focusing on \u201cFoolin<\/strong>\u2019\u201d (Def Leppard, and yes, it\u2019s been a long week) seemed to be a better way to start this report, rather than the other analogy that came to mind – \u201cboiling frogs.\u201d The boiling frog \u201cidiom\u201d (had to look that up), was that if you put a frog in water and gradually increased the temperature, it wouldn\u2019t notice, and would be boiled. Apparently there was research done on this (can\u2019t really think of why anyone would do this), and the frogs do try to escape, but that hasn\u2019t stopped people from using this phrase.<\/p>\n

So where is this all headed?<\/strong><\/p>\n

Last weekend we published Big Beautiful Production for Security<\/a>. We continue to believe that the more the administration focuses on the production, processing, and refining of a broad range of commodities and products critical to national security, the better for the economy and markets. Some <\/strong>aspects of the tax law, such as accelerated depreciation, dovetail nicely with this effort. The Department of Defense Investment in MP <\/a>fits our narrative almost perfectly. <\/strong>We\u2019ve argued that jumpstarting some industries may require government support. This action fits well into the Sovereign Wealth Fund idea that we haven\u2019t heard much about lately. The U.S. will benefit from its investment if it turns out to be a good investment. It isn\u2019t a handout. We\u2019ve seen a lot of headlines about private investment, particularly in chips, but this seems like a new approach (one that makes sense on almost every level).<\/p>\n

Using the DoD in this way seems like it can open the door to more investments and allow the American taxpayer to participate in these decisions, <\/strong>rather than just rewarding outsiders.\u00a0We feel vindicated in our assessment that National Production for National Security is an incredibly important investment theme (and one of the few \u201cconcepts\u201d that isn\u2019t entirely dependent on AI spending).<\/p>\n

Which brings us to tariffs.<\/strong><\/p>\n

Tariff Angst<\/h3>\n

In last weekend\u2019s report, the positive outlook was driven by National Production for National Security. We even had some confirmation of that.<\/p>\n

The risks were a renewed focus on tariffs<\/strong>. On Monday the President sent some letters, which the market more or less took in stride, prompting us to publish Fake News Tariffs<\/a>? As the week went on, much of the news flow from D.C. seemed to indicate a renewed emphasis on tariffs as a key policy tool. We even saw something \u201cnew\u201d in the tariff arena \u2013 potential 50% tariffs on Brazil over their treatment of Bolsonaro. <\/strong>The U.S. has a trade surplus with Brazil and it is difficult to see how this tariff fits an \u201ceconomic emergency\u201d which has been the underlying policy supporting the President\u2019s ability to determine tariffs unilaterally.<\/p>\n

Yet markets barely budged. Every time markets sold off on tariff concerns, the dip was bought and we went through the week virtually unchanged on the S&P 500 and Nasdaq.<\/strong><\/p>\n

<\/a><\/p>\n

The market is either:<\/strong><\/p>\n

Incredibly reluctant to price in higher tariffs, or
\n\tNo longer believes higher tariffs are bad for the economy, profits, and markets.<\/p>\n

Let\u2019s look at these two options for a moment.<\/p>\n

Tariffs Don\u2019t Matter<\/h3>\n

There are some people who will argue this. They argued for it before and after the Liberation Day tariffs. They will claim that despite tariffs, the market and economy have been fine.
\nBut is this a widely held view? I don\u2019t think so and it certainly isn\u2019t my view:<\/p>\n

The \u201cpause\u201d put tariffs back into the \u201cneighborhood\u201d of \u201creciprocal\u201d tariffs<\/strong>. Worse than what many had expected when policy was targeting \u201creciprocal,\u201d but in the ballpark. There are a number of \u201cestimates\u201d out there for what the \u201ceffective\u201d tariff rate is. We\u2019ve seen some as of the end of May as low as 8.8%, but other more current estimates have it around 14%. If we go ahead with these new levels, slated to take effect August 1, the effective rate will increase significantly in the coming months as imports that arrive get hit with these new tariffs. It is difficult to believe that higher tariffs won\u2019t impact the economy over time.<\/p>\n

\tTariff mitigation strategies. <\/strong>We\u2019ve written repeatedly that many (including ourselves) underestimated the various mitigation strategies that could be employed, especially around the \u201cpause\u201d level of tariffs.<\/p>\n

\tTariffs take time to have an impact.<\/strong>
\n\tCompanies pre-ordered <\/strong>ahead of tariffs, delaying any impact of tariffs until they need to re-order.
\n\t\tThere will be negotiations with suppliers about \u201ceating\u201d some of the tariff. <\/strong>Not much will be passed on while those negotiations take place.
\n\t\tFinally, with the administration keeping an eye on prices<\/strong>, it behooves some large companies to \u201ceat\u201d the tariffs themselves as price hikes linked to tariffs appear to draw the attention of the administration.
\n\t\tUnexpectedly, the dollar is down about 10% since early January <\/strong>(measured by DXY, a broad index of the dollar), which makes imports even more expensive (and makes U.S. exports less expensive \u2013 a side benefit).<\/p>\n

Tariffs, so far, have been small in actual dollars <\/strong>(it is easy to get caught up in a world of percentages, but the total dollar amount, so far, has been small relative to the size of the economy).<\/p>\n

<\/a><\/p>\n

I find it difficult to believe that markets think that higher tariffs won\u2019t impact the economy and markets negatively over time.<\/strong><\/p>\n

That explanation just doesn\u2019t cut it from my perspective.<\/p>\n

Tariffs Won\u2019t Get Implemented<\/h3>\n

This is the real reason markets are taking all the tariff headlines in stride. We were \u201cfooled\u201d once:<\/p>\n

Expect short-term pain for longer-term gains.
\n\tMain Street over Wall Street.
\n\tUnfair and predatory practices against the U.S. must be eliminated or punished.
\n\tDealz. Countries lining up and begging for deals.<\/p>\n

We went through that.<\/p>\n

And let\u2019s not forget that the Liberation Day tariffs actually were, in theory, implemented. <\/strong>We went through the midnight deadline with no \u201cstay of execution.\u201d Rallies based on \u201cpauses\u201d or \u201cextensions\u201d headlines faded rapidly, until we got the Big Beautiful Pause.\u00a0<\/p>\n

Since then, stocks have rallied. The first leg was driven by the \u201cpause,\u201d but stocks have been helped\u00a0by the ongoing commitment to AI spending, progress on Peace Through Strength, and the Big Beautiful Bill.<\/p>\n

Will this administration risk the progress to refocus on tariffs? Why do this, when other avenues for economic development exist (National Production for National Security, the Sovereign Wealth Fund, etc.).\u00a0Heck there is the possibility of \u201cdealz.\u201d Though it is a bit concerning that there is no clarity over what was agreed to with China, there seems to be confusion about what Vietnam agreed to or didn\u2019t agree to, and many nations are signaling that their negotiating teams are struggling to understand the U.S. objective.<\/strong><\/p>\n

So maybe the market doesn\u2019t want to overreact because we could see deals? That is possible, but it seems unlikely as progress on deals has been slow and if 10% with good friends like the U.K. is the best a country can expect, <\/strong>then we might be ripe for disappointment on deals (or the U.K. may regret what they agreed to).<\/p>\n

Or is it the belief that the administration will back down again?<\/strong><\/p>\n

Trump Always Chickens Out (TACO) has become a theme. It is not a theme we subscribe to.<\/strong><\/p>\n

The President will PIVOT<\/strong>. He will shift away from \u201closers\u201d to \u201cwinners.\u201d <\/strong>Do a Google Trends search on \u201cPeter Navarro\u201d \u2013 it has dropped to almost nothing since peaking in early April. That has been the President\u2019s style.\u00a0<\/p>\n

Having said that, there are reasons to be concerned that this shift back to tariffs could be real and could be implemented:<\/p>\n

The President has embraced the concept of tariffs for decades. <\/strong>This is not something he needed to be convinced of. It has been his policy and he believes in tariffs.
\n\tIt is easy to see how the President could view tariffs as \u201cwinning\u201d so <\/strong>far \u2013 no inflation, stocks at all-time highs, and tariff revenue is real. It is far too early to take a victory lap based on tariff policy so far, but there is a narrative around it that could encourage those who really believe in tariffs.<\/strong>
\n\tThe President isn\u2019t afraid of taking a \u201csecond bite at the apple.\u201d <\/strong>He can pivot away from something and then pivot back. He walks away from deals only to close them later (sometimes with better terms). He can blame the timing on why market reaction was so bad. To some degree, we would agree that had he started with taxes and other policies, then went to tariffs, with a real focus on China, the market would not have reacted as badly. We would have seen some positives and a more targeted approach. So maybe it is worth another shot? It is not a shot I would take, but we aren\u2019t in charge, and the idea that with some other big wins in hand, it is time to try the tariff policies again, has a certain appeal.
\n\tIt is easy to interpret market complacency as market acceptance. <\/strong>Our argument is that the market is pricing in a low risk of implementation, rather than accepting that higher tariffs won\u2019t be harmful. But if you believe in tariffs, it is easy to be convinced that the market is signaling that it is ready for another round of higher tariffs.<\/p>\n

The idea that the market is simply unwilling to accept that higher tariffs will be implement and kept in place <\/strong>seems to be the best explanation for why tariffs have failed to move the market this past week.\u00a0The market has been fooled once and won\u2019t be fooled again.<\/p>\n

Bottom Line<\/h3>\n

The market has been fooled once and won\u2019t be fooled again. Or will it?\u00a0Has the market simply become so complacent that it is not only missing (or ignoring) signs that the administration is serious about trying again on tariffs, <\/strong>but also that the complacency is giving the administration the conviction it needs to try again?<\/p>\n

There are a lot of good things going on with the economy and hopefully the MP deal referenced earlier is a template and a sign that the administration is going to aggressively address crucial areas where we are nowhere close enough to being self-sufficient to be secure.<\/p>\n

For markets, be overweight anything that should benefit from this theme of National Production for National Security.\u00a0<\/strong>Be underweight industries most affected by tariffs. While it might be \u201csafe\u201d to assume the administration will back down, extend, and try to move towards deals, there seems to be some real risk to that.<\/p>\n

On rates<\/strong>, if it wasn\u2019t for tariffs, I\u2019d be bullish again here, but with tariff risk, probably neutral to slightly bearish the long end.<\/strong><\/p>\n

Credit <\/strong>should continue to do well under most scenarios, but owning the companies that will benefit from domestic production should outperform.<\/p>\n

Crypto <\/strong>should continue to benefit from uncertainty, and the increased attention that the administration will pay to it in the coming weeks and months now that they\u2019ve knocked off some other big projects and have time to focus.<\/p>\n

A President, who has had several big recent wins, truly believes in tariffs, and cannot like the TACO meme (which we don\u2019t like either) may be far more serious about this then is currently getting priced in.\u00a0With those other big wins under the belt, the market should not respond as poorly as it did the first go around, but a pullback of 5% would seem highly likely as we near August 1st without any major reprieve.<\/p>\n

Academy Securities gets the week started from 6-6:30 Monday morning on Bloomberg Surveillance. I wonder if the President will be watching as he certainly was on jobs day when he posted this on Truth Social.<\/a>\u00a0If so, we will be trying to send one message loudly and clearly \u2013 continue to focus on extricating ourselves from supply chain bottlenecks in areas where we need to be truly secure \u2013 chips, pharma, and certain refined\/processed commodities<\/strong>.\u00a0That is where the economic opportunity lies and it will be good for jobs, the economy, the national psyche, and markets.<\/p>\n

Good luck, I hope I\u2019m wrong on my tariff concerns and hope that we are just at the very beginning of a big push towards national production for national security<\/strong>! We have been \u201cfooled once\u201d but are we set up to be \u201cfooled\u201d in the other direction? That seems to be the biggest risk to this market.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSun, 07\/13\/2025 – 15:10<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/fool-me-once<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Fool Me Once By Peter Tchir of Academy Securities One of our favorite sayings is: Fool me once, shame on you. Fool me twice, shame…<\/p>\n","protected":false},"author":0,"featured_media":1546805,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1546804","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1546804","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1546804"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1546804\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media\/1546805"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1546804"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1546804"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1546804"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}