Control Panel: Is it capitalism?

Investment Analysis Clubs Macro Economic Trends and Risks
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Partisan politics is forbidden on METAR to avoid pointless squabbling that does nothing to enhance our investment results.

But never before has there been an administration that meddles so directly in corporate decisions or that violates the Constitution without pushback from a supine Congress. Trump enjoys whimsically changing his mind to jerk around billions of dollars of investments. He’s unpredictable and also has a finger in many pots that should be off-limits to government stirring in a capitalist economy.

https://www.nytimes.com/2026/02/22/business/economy/trump-republicans-economy-capitalism.html

Trump’s Challenge to Free Market Capitalism

Stakes in private companies. Handshake deals with chief executives. The president’s economic policy has drifted far from principles that long defined the Republican Party. Is it capitalism at all?

By Ben Casselman, The New York Times, Feb. 22, 2026

…
The Trump administration has taken ownership stakes in corporations, intervened in business deals and negotiated a cut of the revenue of American companies’ overseas sales. Mr. Trump has unilaterally deployed tariffs and other policy levers to help industries he favors, like artificial intelligence and cryptocurrencies, and to punish those he dislikes, like wind power. He has wielded the powers of the federal bureaucracy to pressure executives, sometimes in ways that blur the lines between his policy objectives and his personal business interests.

Mr. Trump has often failed to offer a clear legal justification for his actions, and some of them may have been illegal. On Friday, the Supreme Court struck down many of Mr. Trump’s most sweeping tariffs, finding he had exceeded presidential authority when he imposed them. Mr. Trump quickly announced that he would impose new across-the-board tariffs using a different law…

Mr. Trump has cut taxes and reduced regulations in his second term, too. But he has been much more aggressive in his crackdown on immigration, and has shown far more willingness to meddle in the operations of specific industries and even specific companies… [end quote]

The unpredictability of Trump’s moves is a risk factor that impacts many businesses – listed in detail in the article – and nobody knows what he will try next. There’s also a lot of politics embedded in the article.

The Supreme Court just tossed out Trump’s authority to levy tariffs but he’s got other tricks up his sleeve.

https://www.wsj.com/economy/trade/what-to-know-about-trumps-new-tariff-73aef4e9

What to Know About Trump’s New Tariff

President is turning to an untested legal authority to rebuild his global tariff regime

By Chao Deng, The Wall Street Journal, Updated Feb. 21, 2026

President Trump announced Saturday that he is imposing a new 15% global tariff on all imports entering the U.S., effective immediately. The new tariff will replace the 10% global tariff that Trump announced Friday shortly after the Supreme Court ruled that much of his existing tariff regime was illegal.

To impose the new tariff, he is turning to a legal tool called Section 122 of the Trade Act of 1974. Broadly speaking, the provision, which has never before been used for tariffs, allows a president to impose tariffs of up to 15% for as long as 150 days to address problems caused by persistent trade deficits…

U.S. companies and consumers shouldered more than 90% of the costs from Trump’s tariffs for most of 2025, according to the Federal Reserve Bank of New York, with some companies freezing hiring and investment as a result…

January’s inflation report showed recent price increases in several categories of tariffed goods, including appliances, furniture and new cars. That suggests that retailers were starting to push those costs through to consumers… [end quote]

The charts show that the SPX and NAZ are languishing. The DJIA, which isn’t as tech-heavy, is still in a rising trend. Price to earnings ratio based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio) is over 40 compared with a median of 16.

VIX has been steadily climbing. The Fear & Greed Index has dropped slightly into Fear. The trade is slightly risk-off as the 10 year Treasury price is rising faster than SPX and junk bonds.

The Treasury yield curve has dropped along its entire length. USD is rising in its channel but the trend is negative. Gold, silver and copper have steadied. Oil is rising. Natgas is steady. Bitcoin is still flat on the floor, continuing a drop that began in October 2025.

4Q2025 real GDP growth was only 1.4% even though the Atlanta Fed’s GDP Now model has been consistently over 2% for many months. The Atlanta Fed’s GDP Now model Latest GDPNow Estimate for 2026:Q1 was 3.1% on February 20, 2026. That’s a strong forecast but it’s higher than the Blue Chip consensus as usual.

The Cleveland Fed’s latest Inflation Nowcast shows inflation creeping up.

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The METAR for next week is partly cloudy. The charts and the news aren’t pushing the markets strongly. There may be some noise but not extreme moves.

Wendy

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So….how has all of this altered your investment decisions?

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The 2016 election got me to start moving my portfolio out of the USA — too many USAians were responding to pseudo-religio-maniacal spoutings of social media hucksters rather than reality in making all manner of decisions, including in their voting.

I now have almost nothing invested in the USA. However, i do think the citizenry is finally waking up, and I am now thinking of planning some new forward looking potential investments in the USA, with a particular focus on what still seems to me to be inevitable — big increases in trade and cooperation across the entirety of N. America — starring railroad and other transportation infrastructure, accepting economic co-dependency. Because of North America’s strange geography and demographics, only with political sanity and economic integration can we truly trump (LOL!) all competitors, but without that sanity we will lose big time.

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“Trade deficits” is incorrect, balance-of-payments problems is correct, and this nuance matters a lot. Odd that the WSJ doesn’t get this right:

What it is:
Section 122 of the Trade Act of 1974 authorizes the President to impose temporary import surcharges of up to 15 percent or quotas for no more than 150 days when the United States faces fundamental international payments problems, such as a serious balance-of-payments deficit or rapid dollar depreciation. It was enacted after President Nixon used the Trading with the Enemy Act (TWEA) to impose a temporary 10 percent import surcharge in 1971. Section 122 thus represents Congress’s effort to codify a narrower, time-limited version of that emergency tariff authority, intending it as a short-term tool to stabilize the dollar, not as a long-term protectionist policy.

What changed:
Section 122 has never been invoked. Its logic reflected the fixed-exchange-rate era, but once the United States moved to floating exchange rates in 1973, the need for balance-of-payments tariffs largely vanished. Since then, monetary and fiscal policy, not trade restrictions, have been the preferred instruments for managing external imbalances. Still, Section 122 remains a dormant but legally available option for short-term, across-the-board surcharges without findings of unfair trade or national-security threats.

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How much did the S&P 500 increase during the period you were out of the US market?

intercst

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Wendy,

I have been in cash for over two years now. I am not in a money market.

Mentioned yesterday in a discussion elsewhere, my thinking is in terms of institutional investing. If my video game is successful, it would be institutional money.

I will wait and see until 2029 if I do a corporate inversion in Ireland. The current climate is unpredicable. The law can change and cause material losses if I do an inversion now.

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I’ve continued the “skim-free”, long-term buy & hold approach that delivered the more than 20-fold return on the S&P 500 over the last 30 years.

intercst

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I would be amazed if significantly more than my real estate and private lending stuff. But I would love it if sanity returned to the single largest and most powerful economic entity on the planet, and allow me to relax a bit about my investments, and just buy some USAian wealth fund or other as I wander off into senility.

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I have, for years, favored a wide variety of foreign companies. Currently more than half of my stock portfolio consists of foreign companies - with concentrations in Switzerland, the EU, Australia, China, Japan and lesser amounts in other venues.

While my stock portfolio is at a new high, that is despite sales of about 20% of it late last year (reflected in capital gains taxes) as I decided to remove some piles of chips off the table.

Jeff

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Factoid: No administration outlasts most businesses, If you are in for the long haul your investments can safely ignore most administrations. Trading costs money but gives no guarantees.

Admin Clock: How long to regime change?

The Captain

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S/p was up about 16%, my international and Europe ets up about 33%, but internationals and Europe also still have much lower pe’s and higher dividends and the dollar is still in decline. And we are still pursuing policies to exacerbate that decline.

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However, I should clarify several things. First, I was only able to move about 25% of my equities to international equities because I was not so confident in my position that I was willing to incur hefty taxes on long term gains. Second, I am aware of the precarious nature of my belief that we are now looking at systemic issues with the dollar that will persist, given that 40 year charts show long term outperformance by the dollar with international equities and money only outperforming over one or two year stretches. Third, even if we are devolving from democracy to dictatorship it may not hurt the stock markets. To captain’s point, international corporations are in many ways more powerful than any one government.

So… although I am shifting money from the U.S. to international equities and real estate, I am not trying to talk anybody else into it. I am just putting my peg in the ground and articulating what I am doing and inviting discussion pro and con.

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To what extent are you willing to discuss your specific international holdings/allocations/reasoning?

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iampops5 asked me the cryptic:

“To what weren’t are you willing to discuss your specific international holdings/allocations/reasoning?”

Well, I’ve been discussing this for years, but ever since TMF changed sites and simultaneously made it painful for me to log onto their boards (I can only use the TOR Onion browser to do so), I’ve been doing most of my posting on shrewdm.com

My portfolio is both broadly foreign and favoring specific sectors which I think are advantagious. Two that I’ve been playing for years are the mineral diggers (such as PHP, RIO and VALE) and the electrical infrastructure guys (long list of domestic and international players here).

Jeff

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