"Liberation Day" and the Gilded Age
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What "Liberation Day" Tells Us About Where We're Headed
This is not the newsletter I want to be writing right now.
I want to be gazing up at Ichimoku Clouds. I want to be plucking a tune on the Bollinger Bands. I want to be lighting candlesticks and measuring the size of the wick. I want to decide whether a Fibonacci Retracement would go better with a red or a white sauce, a red or a white wine.
I want to read quarterly reports. I want to research profit margins and free cash flows and debt/equity ratios and earnings per share. I want to talk about the future of technology and advances in medical science and improvements in agriculture.
But I can’t do any of that now because we are in a crises. And, if my hunch is correct, and if history repeats itself (I’m looking at you, Herbert Hoover, and you too William McKinley), we are heading for a recession and possibly worse.1
Today I will look at the following:
The Fear Index
Trump’s Gilded Age Dream
“Liberation Day” (insert eye roll here)
Why this is a Problem - #1 the Nature of Tariffs
Why this is a Problem - #2 International Response
My Recommendation
The Fear Index
On February 27, 2025, I talked about the CNN Fear & Greed Index. Please see my February 27 post for an explanation. At that time the Index was at 18 out of 100. Of the seven (7) indicators, four (4) registered EXTREME FEAR, and three (3) registered as FEAR. Now, as of the afternoon of April 3, 2025, the day after Trump’s “Liberation Day” announcement, the Index is at 8 out of 100, with ALL SEVEN indicators registering as EXTREME FEAR.
Just after posting this story I decided to edit it by adding the above graphic and, in the interim, the Fear Index dropped from eight down to seven. Sentiment appears to be getting worse by the second. And for good reason.
Trump’s Gilded Age Dream
Donald Trump is a big fan of President William McKinley. McKinley referred to himself as “a tariff man standing on a tariff platform.”2 McKinley was president at the end of the 19th century, a period that Trump refers to as a golden age for this country, but that is commonly known as the “Gilded Age.”3 A time when there were high tariffs, high immigration (read: lots of cheap labor), and few regulations. It was a time of rampant corruption and wealth disparity. Andrew Carnegie, John D. Rockefeller, Cornelius Vanderbilt, John Piermont “JP” Morgan, and Henry Ford all belong to the Gilded Age.
Trump is, by his own admission, a big fan of McKinley, and he appears to. want to bring America back to a time of high tariffs and deregulation. A time conducive for robber barons. (However, unlike during the Gilded Age, Trump’s form of nativism rejects immigrant labor.)
Ironically, towards the end of his life McKinley turned against tariffs and proposed much more of a free trade policy, shifting from protectionism to a system that includes reciprocity and the opening up of foreign markets. He gave a famous speech on the matter the day before he was shot. McKinley died several days later.4 Trump conveniently ignores this part of the history.
“Liberation Day”
What happened on “Liberation Day” (which I will always put in quotes because it is so ridiculous) caught a lot of people off guard. Investors were expecting the 10% across the board tariffs. What they were NOT expecting was the large-scale punitive tariffs that Trump would levy. Tariffs that go well beyond 10% for some of our largest trading partners.
Trump refers to these as “reciprocal” tariffs based on “Tariffs Charged to the U.S including Currency Manipulation and Trade Barriers”. See the second column of the poster board Trump was holding during the briefing.
However, according the the White House, the numbers in that column have nothing to do with tariffs or trade barriers. This is because the formula the Trump administration used to come up with the “tariffs charged to the U.S.” is exports minus imports, divided by imports.
In other words, this column highlights trade imbalances. This includes imbalances that were part of U.S. sanctioned trade agreements. It has nothing to do with tariffs or trade barriers.
In other words, he’s lying to us. Again.
Here is the stock market’s heat map for Wednesday, April 2, before Trump’s announcement.
Here’s what happened to the markets that evening after Trump’s announcement.
And here’s the heat map for the day after “Liberation Day,” Thursday, April 3, 2025:
The pundits were quick to respond. Note the following headline, immediately after the announcement on Wednesday, in Market Watch:
Trump’s tariffs amount to ‘worse than worst-case scenario’ as investors brace for stock-market beatdown5
Or the following from Bloomberg:
US Emerges as Biggest Loser in Markets from Trumps Tariffs6
Or from CNBC:
‘Absolutely nothing good’ coming out of Trump’s tariff announcement: Analysts react to latest U.S. levies7
or The New York Times:
‘It’s a Disaster’: Global Markets Slide After Trump Unveils Tariffs
Why This Is a Problem - #1 The Nature of Tariffs
First, the MAGA crowd that was conned into believing that China would pay the China tariffs will soon discover that it is the importing business who pays the tariff, not the exporting country.
You can therefore look forward to the following sequence of events:
Companies will bear the costs of the tariffs.
Companies will pass down most of those costs to the consumers.
People will spend less because of the higher prices. Higher prices will lead to lower demand.
Companies may try to absorb those costs by laying off workers.
This will add to the unemployment rate that is already rising due to the DOGE layoff of federal workers. Higher unemployment leads to lower demand.
People will spend less due to unemployment. Less spending means lower demand.
The reduced amount of spending, the reduced buying power, may force companies to lay off more people. The lower demand will lead to more unemployment which will lead to lower demand . . . leading us into a downward spiral.
Do you sense a theme here? This is called a recession. A recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster.8
And this does not even take into account the countermeasures to be taken by other countries.
Why This Is a Problem - #2 International Response
Second, the international response will be to do their own reciprocal tariffs, which means that, not only will imports be more expensive, but we will be selling fewer exports. In fact, this is already happening.
The European Union as well says they are prepared with countermeasures.9
The most startling devolopment of the Trump Tariffs is the trilateral cooperation between China, Japan, and South Korea.10
Do you have any idea, historically, how much bad blood there is between these three countries? Japan and South Korea? China and Japan? This was absolutely not on my bingo card. I mean, how big of a dick do you have to be to get these guys to shake hands?
So, you can revise my sequence of events from the previous section to:
Lower demand in foreign markets will lead to high unemployment, thus strengthening the chances of a recession.
The takeaway from this is that free trade agreements in strategic geographic areas will isolate the United States. Asian countries will create free trade agreements among themselves. European countries will also bolster each other up.
The United States will be isolated. Financially and politically.
My Recommendation
(Caveat: This is for educational and entertainment purposes only. Please do your own research. Blah-blah-blah you know the drill.)
As mentioned in previous posts, I sold almost all of my winners, such as META, NVDA, and COST, before things got really ugly.11 I am still holding onto stocks that were in the negative before things got ugly and now, for a handful of those stocks, I am getting absolutely slaughtered: MRNA -51%, VRT -44.7%, LEU -33.55%, FICO -19.76, CCJ -17.95%.12
There is a school of thought that says that these are buying opportunities. I agree, generally, but the timing needs to be right. Here’s what to watch for:
It took almost five years for the stock market to recover from the 2008 recession. If you buy now, and if my predictions of a recession are accurate, then you may need to wait five years to get your money back. If you need your funds to be liquid within the next five years, then DO NOT BUY NOW. (But if you’re Scrooge McDuck and you just need somewhere to put your money for the next five to ten years, then I would recommend something more stable like gold or bonds.)
You so nor want to grab a falling knife. (See my newsletter for the week of November 18, 2024 regarding catching a falling knife.) As I stated earlier, I believe we are heading for a recession. If that’s the case, then there is still plenty of room for the market to fall. Don’t buy now. Wait for a bounce and for a confirmation of a long term change in trend.
There are plenty of people who give Trump the benefit of the doubt by thinking that he is using these tariffs as a bargaining chip and that he will not be enforcing them long term. That, to me, is a sucker’s bet. Wait to see what happens.
The truth is, even if Trump does change his mind about these tariffs, the damage is already done. First, the market hates uncertainty and so people are going to be hesitant to buy. Second, business hates uncertainty so no company is going to be making investments in infrastructure or factories any time soon.13 Third, foreign countries are already protecting themselves against American nationalism, and the effects will likely be lingering.
If you must buy, consider bonds, or gold and silver and copper, or energy. These tend to be safe havens.
And, finally, if you do want to buy anything, check the fundamentals first. The financials need to be solid in order to be certain of a rebound later.
I will keep an eye open and let you know if I see any promising developments. But for now, I am waiting.
Mahalo and Bueno Suerte
1 We are also likely launching headlong into fascism, but that will be addressed in my other newsletter, Letters to a Young Cynic.
2 Isidore, C. (2025, February 12). The truth about William McKinley, the ‘tariff king’ and Trump’s idol. CNN. https://www.cnn.com/2025/02/12/business/trump-william-mckinley-tariffs/index.html
3 Note: Whereas golden would imply that something is made of gold, gilded means that something is gold plated. Like Trump’s toilets. (Gilded Age was a term coined by Mark Twain as a criticism of the time.) You can’t make this shit up.
4 Id.
5 Adinolfi, J., & Images, A. V. G. (2025, April 2). Trump’s tariffs amount to ‘worse than worst-case scenario’ as investors brace for stock-market beatdown. MarketWatch. https://www.marketwatch.com/story/trump-tariffs-amount-to-worse-than-worst-case-scenario-as-investors-brace-for-stock-market-beatdown-4cf6d5ca?mod=home_lead
6 Henderson, R. (2025, April 3). US emerges as biggest loser in markets from Trump’s tariffs. Bloomberg.com. https://www.bloomberg.com/news/articles/2025-04-03/us-emerges-as-biggest-loser-in-markets-from-trump-s-tariffs?embedded-checkout=true
7 Jie, L. H. (2025, April 3). “Absolutely nothing good” coming out of Trump’s tariff announcement: Analysts react to latest U.S. levies. CNBC. https://www.cnbc.com/2025/04/03/absolutely-nothing-good-coming-out-of-trumps-tariff-announcement-analysts-react-to-latest-us-levies.html
8 https://en.wikipedia.org/wiki/Recession
9 Harvey, L. (2025, April 3). Europe prepares countermeasures to Trump’s tariffs, calling them a ‘major blow to the world economy.’ CNN. https://www.cnn.com/2025/04/03/business/europe-tariffs-us-von-der-leyen-intl-hnk/index.html
10 Huiyao, W., & Huiyao, W. (2025, March 31). Opinion | In a broken world, China-Japan-Korea cooperation is Asia’s backbone. South China Morning Post. https://www.scmp.com/opinion/asia-opinion/article/3304376/broken-world-china-japan-korea-cooperation-asias-backbone
11 I actually accidentally bought Costco again soon after selling it when the price dropped. I had a limit buy set up that I forgot to cancel. Fortunately, Costco has been doing relatively well in this dark time so it rose back up and I sold it for a small profit. The one winner I did not sell is Netflix, which has dropped, but which I am confident will resume its upward trend in the long run.
12 Oddly enough, for those of you who remember my comedic foray into General Dynamics, GD has had a bit of a rebound and is only -6.53%. Which bolsters my argument that fundamentals should always come first before buying because then, even when things get bad, you can be confident that they will eventually get better.
13 Demsas, J. (2025, March 14). The chaos economy. The Atlantic. https://www.theatlantic.com/ideas/archive/2025/03/chaos-economy/682033/
Nothing in this email is intended to serve as financial advice. Do your own research.
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