Adam Parker (3:52)

Sounds good. I guess the problem, you know, is where rubber hits the road and what's in reality, you know, the global. There's, there's a million arguments for why manufacturing would be good, be great, we could do more manufacturing. The reality, however, is that manufacturing requires inputs that may come from other countries, machinery that comes from other countries. We're, you know, behaving a little bit like a guy who hasn't been to the gym for 40 years and says, hey, I got to get in shape. The doctor said you got to get in shape. It's obvious. Yeah, you have to get in shape, start going to the gym, but you don't go there and start deadlifting 600 pounds and trying to run a marathon on the treadmill. You might die. You got to ease into These things and such a shock makes it very, very difficult to adapt. So that's for one, it's just like the way this is implemented is probably going to be unsuccessful. But on top of that, we just know from this, it's very clear economic theory that globalization, that free trade benefits both parties. You don't engage in it if you can't. If anything, the thing that's caused problems in the US is our status as the world's reserve currency, which has allowed us to be rich. It's made demand for our currency much higher than it would be otherwise. Countries have to buy our currency. That makes Americans much richer. It makes it easy to buy goods from other places. It's an awesome thing that we get to be rich for it. But it does have its second order consequences that manufacturing. It doesn't make sense if you can buy stuff from other countries that's so much cheaper. Maybe tariffs are the path around that. But the reality is, having talked to a bunch of companies that are in active planning mode on building factories, they've actually paused that right now because all of a sudden the machines that they have to buy are going to cost 20 to 50% more depending on where they're being sourced. And economics don't work anymore. You know, it'll take time for the. You have to also have that machine made in America. Okay, but like if it's not, what do you do? You have to stop, stop your plan to manufacture. So, okay, it can go on and on about, about this. I'm very firmly anti tariff. It's bad for my business. So, you know, I'm selling my own book again. But there's plenty of economic theory from Milton Friedman onward to just show you Adam Smith, everybody else is show why free trade is benefiting both sides.

Ryan Peterson (6:21)

Yeah, but okay, here's, here's what the argument. I'm going to try to channel Bess in here. At least we should have his perspective represented. So what he says is that the United States, basically the economy has grown into this consumption economy. They're addicted to. Americans are addicted to cheap goods. We're cluttering our homes with stuff from Amazon and you know, while we're buying, we're not producing anymore. Do you think about that?

Adam Parker (6:45)

Yeah, I mean, I hope that they're factoring in the export of digital services, financial services, you know, Netflix, for example, generates 60% of its revenue internationally of 33 billion of revenue. Like if you're not counting all the Netflix subscriptions in these other countries, you're not actually modeling the Modern economy and the in the trade balances, I mean that's ultimately trade. They're buying our services. So I don't know how they're doing it if they're just doing physical goods. I think you're coming up short. Cambodian's probably not going to buy a lot of American manufactured goods, but I bet you they pay for some Facebook and Google Ads and Tinder boosts and some other stuff. The American economy is much different than. It's not some Charles Dickens industrial world. We have very advanced services economy and if you're not factoring that in, I think you're going to get the model wrong.

Ryan Peterson (7:38)

Yeah, it is interesting how tech has been both, I think maybe not accounted for enough by the administration here and then also like firmly in the crosshairs of the countries that are thinking about retaliating. And we're going to get into it in a moment. But since you brought it up, I mean one of the things that Europe is considering, for instance to retaliate is to provide greater restrictions for American technology that is coming into the continent in not going one for one necessarily on production, but trying to get the digital services to feel the pain. I'm curious if you think that's going to be effective and what you think it means for the tech CEOs that basically celebrated Trump's inauguration and sat there basically closer than the Vances.

Adam Parker (8:28)

Yeah, it'll be very interesting. You know, even Elon's kind of distancing himself on the tariff issue. He's been posting Milton Friedman videos and saying, you know, being he, he's quite anti tariff and pro free trade. So I do think you're going to see a split. I've seen it amongst my friends who supported this administration and then are now really, I don't know that they're willing to turn against the administration, but they're certainly against the tariff policy and how it's been implemented. And it feels a lot like central planning. It feels a lot like putting your head in the ground and imposing things that just don't have any ground in economic theory. And the tech industry will be the natural place to target. It's our best industry, our best companies and if you wanted to retaliate against America, that would be the place to hit. So hopefully, hopefully I think I do have some confidence that this will get resolved. There was this rumor earlier today, I think we're going to drop this today. But earlier on Monday where it said that they had agreed to a 90 day pause, it turned out to be false. But it set the S and P surging and nasdaq. I believe there will be deals cut. I don't know if in time to pause the tariffs altogether. And I believe that because the cabinet secretary told me that there would be a negotiation, I should say not a pause. But he said two weeks ago that this was the start and not the end of the, of the process, that they want to send a message to the world's countries that they mean business, that America's, in his words, tired of being taken advantage of. But. And then they expect companies to come to the countries to come to the table. And we've seen that now over the weekend they announced that 50 different countries have come to try to negotiate. The EU just said they would take tariffs to zero to get a deal done. So is India. I mean these are countries that have had pretty high barriers to U.S. goods. Now tariffs aren't the main complaint. If you listen to. I do recommend people watch the administration's content that they're putting out. I thought Lighthizer's video recording with Tucker Carlson, he did a pretty good job of making his case or at least so you can understand what the case is. And their argument is really it's not just the tariffs that these other countries put up, but it's the non tariff barriers. Industrial policies, subsidized credit, straight up manufacturing subsidies. They get free land or free buildings. They may get repressed organized labor. That was a big part in Korea's rise. They made the six day work week mandatory and banned labor unions and environmental laws. We have much stricter environmental laws. So there's all these other things that they're saying, hey, these are making America uncompetitive and our retaliation against that is tariffs. And so it's not just that they're trying to get equal tariffs. That's why they have these reciprocal tariffs that were have nothing to do with the actual tariffs these people charge us. And that's a bit of what they were getting at. Even if in fact it was implemented with a really silly formula that had nothing to do with that. Even. So.

Ryan Peterson (11:32)

Yeah. Okay, so that's really interesting. So it's both the intent and I'm just like we have to try to unpack the intent here to sort of understand what's happening. I feel it seem like a lot of analysis that has just been like this is crazy. And you know, look, maybe it's not advisable, but I think it's worth an exercise of trying to figure out what they're trying to do. So the Intent seems to be both to bring manufacturing back into the United States in some way and then also for US Exporters to try to get them on more fair footing so that they're able to export their goods. I mean, there might not be a huge market in Cambodia, but there certainly is in Europe that one.

Adam Parker (12:07)

So I think there's at least four things that they want to achieve with this. One we've already gotten to a little bit is, hey, they'd like to negotiate lower barriers, including tariff. But all these other barriers that I just mentioned so that US Exporters can be more successful. Two, they'd like to have manufacturing in the United States as a really. It's a national security thing that in a time of war, you know, your car manufacturers become your tank manufacturers and everything else down the chain. So if we don't have manufacturing capacity, that is a national security threat to us. Third is we have a massive debt crisis in this country and they would like to raise revenue. These tariffs would be very significant generator of revenue if nothing changes. And then there's something too, culturally, they want to see us be a country that makes things. And there's some element of that in all of this that they don't want to see us be. I don't know. You don't want to be that. What's that, the robot movie wall either. People just cruising around outer space and don't know how to make anything or do anything. Like, they don't. I don't think that's the future we want for our country.

Ryan Peterson (13:15)

I mean, then why. Why do you think that this is a bad idea? I mean, you just outlined their plan pretty well.

Adam Parker (13:20)

I mean, I can understand. Yeah. If you can't. This is like a good rule in life is like, don't argue with anybody unless you can state their position more clearly than they can.

Ryan Peterson (13:28)

Yes. And that's what we're trying to do here. So what would your counter argument, Ryan, go ahead. You can debate the administration that you just sort of put there their perspective out what's. Why would you oppose what they're trying to do? I mean, they seem like, at least in the intent, good goals.

Adam Parker (13:44)

Yeah. I think those are all reasonable things. The short of it is, again, our modern economy. You look at how a Boeing airplane is made. Some people have published some infographics of these. There are parts coming from all over the world, and that is an optimized supply chain. It's a complex system. We don't work in this simple, centrally planned model like these. There's a Very complex dynamic system. And you have this sort of fundamental principle is don't mess with things you can't understand. And nobody understands this like across the broader economy. I mean, I bet you there's no one, even at Boeing who understands all the details of where all these things come from. It's a complex system that has evolved and been put into place through a many year process. And if you overnight try to upseat that and say, oh no, I need you to do it this way. Like the reality is those component manufacturers, parts manufacturers, are not in the United States. You cannot source it. And so all you're going to do is jack up the price of manufacturing the airplane or anything else and actually hurt the manufacturing you're hurting. Your own stated goals would be the simplest way to refute this. To say nothing of actually. President Milei in Argentina has made some very. He's a free market economist if there ever was one. And he's put some very clear and he's dealt with the exact same things in Argentina where he's been bringing down trade barriers. And those trade barriers may protect American jobs. Now in our case, these jobs have already left and we're trying to bring them back. So that's a different argument. But when there are trade barriers, they may protect the job. So let's say you, you have a product, your local company can produce the thing for $600 and they can produce it in Cambodia for 200. So you say, okay, let's put up tariffs and make the Cambodian product cost $610, so everyone has to buy ours in the U.S. well, that extra $400 that consumers had to spend on the local thing, they would have spent on other stuff. They would have gone to buy travel services, hotels, other goods from other companies. And that money doesn't get circulated and generate growth and demand for other things or just end up in their savings account to pay for their kids college. So we don't live in this simple world where it can be centrally planned. The Soviets tried this, it's a disaster. Don't forget the images of Boris Yeltsin coming to the United States, looking at our grocery stores and having his mind blown by all of the, the choice available through the free market. So it's very dangerous to play with systems that you don't understand.

Ryan Peterson (16:26)

Okay, one more thing I want to talk about with the plan and then we can sort of move on to whether this will stick and what the impacts are even if it's rolled back now. But I want to ask you this one More thing which is that there's also a conversation about this being about refinancing the debt. So the U.S. has $34 trillion in debt. Seven trillion of that needs refinancing soon. Interest rates recently hit 4.8%. The idea is to drive down the interest rates, you know, basically by killing the stock market and therefore saving billions by refinancing the debt. What do you think about that plan?

Adam Parker (17:03)

It's kind of genius, I don't think. I don't know. I mean, it sounds a little crazy, but I do think we, we have a massive debt crisis. Like, I acknowledge that. And on some level you're a Ponzi scheme if you just keep spending more than you take in over a long enough period of time. And it's compounding. We're now at the point where entitlements plus interest payments is 100% of the tax revenue and our taxes are already pretty high.

Ryan Peterson (17:25)

That's crazy. That is actually crazy.

Adam Parker (17:27)

Yeah. So you do have a debt problem and tariffs will help with that. You either have to raise income taxes, cut spending or. Yeah, raise taxes or cut spending. And tariffs are a form of the taxes. So I'm not saying you have to have zero tariffs. And I do acknowledge the points that they have around industrial policy of these other countries. And I'd like to see them use these tariffs to negotiate free trade agreements around the world and reduction of other types of subsidies for their local companies and other things. So all of that's valid. I'd like to see government, I like what they're doing at Doge. I'd like to see more cuts to waste in government. I don't know if they can cut a trillion dollars. And their plan was to cut, you have $2 trillion deficit. So the plan was to cut a trillion of spending and increase GDP enough that taxes go up by a trillion. Taxes or tariffs? And we'll see if now that second half of that sentence seems at risk. I don't know that they're going to get GDP increases at least in the short term.

Ryan Peterson (18:29)

Right. So we're looking now at these tariffs. So 10 tariff across the board went into play over the weekend. Now we're going to see another. All the bigger tariffs, like the extra 34% on China that's supposed to go into play on April 9, which is Wednesday. So Ryan, do you see what's going to happen next is basically the administration has announced these tariffs and now they're going to go try to negotiate with the other all the countries on the list. Maybe except the penguin island to try to figure out like what an appropriate working relationship would be and whether to actually keep those in place or lower them. Is that what the next week looks like?

Adam Parker (19:09)

I think I would give it like 70% chance that that's what's going to happen. Not, not within the two day. You know, they didn't give themselves a lot of time to negotiate these deals. So it may go live and then be undone. Now remember it's, they did it april 9th based on when the vessel departs at origin. So the actual, that's when the clock starts. But the duties will be paid, these tariffs get paid when the vessel arrives. So you got another couple weeks before that. So to potentially to avoid these tariffs actually hitting, I give it like a 70% confidence level that they negotiate some deals. I think the China tariffs probably stick and I suspect what they're actually asking for from these countries is for them to put their own similar barriers, tariff and otherwise, against Chinese trade and say, hey, take two sides here, take the US side or the Chinese side. But you can't have it both ways. I suspect that that's a big part of the negotiation that's going to go down with the EU and some other countries and I don't know how amenable people will be. I think a lot of countries rather, if you're forced to make that decision, you might rather have access to all the great manufactured products coming out of China.

Ryan Peterson (20:23)

Yeah, cutting China off is not like a simple ask. I mean they do make so much of the stuff around the globe, especially.

Adam Parker (20:30)

For like developing world. Like if you don't have a car industry native in your country, you got to get these Chinese cars. They're so freaking good. They're so far ahead of anything that the, the west or even Japan and Korea are making that like if you're in Africa, you'd rather have some ten thousand dollar amazing brand new Chinese car than you would. Well, I don't know. It's a good trade off. It's a good question for them. Would you rather have an American military base protecting you or, or Chinese cars?

Ryan Peterson (20:57)

I'm pretty sure if, if what you're saying is, is accurate, that that is the exact trade off that they're all going to be considering this week, which is wild.

Adam Parker (21:04)

I don't, you know, again, these are just like my intuitions. I've got a little bit of conversation with some administration folks, but I, I don't really know how it's going to play out at all.

Ryan Peterson (21:13)

Okay, so now the Question is, all right, let's say this negotiation period does happen, the 70%, you know, possibility it plays out, then what are the risks? Because we've already seen the markets fall. They're down. The s and P500 is down 15% this year. It was slightly in the green when we started this conversation around what was probably a rumor that there was going to be a 90 day pause. Now it's back down again. So who knows? But the markets are crashing. And this is from Brad Gerstner. The danger with shock therapy approaches in complex systems. It's impossible to model the negative reflexivity. Ben Thompson also writes the current economic system, flawed the way we may now recognize it to be, is a complex system built over decades. One ought to be very wary in remaking complex systems in a top down manner. There's a reason that new economic systems usually arise after major wars. It's easier to build something new after the old thing has been destroyed. So what are the risks? Even if the US negotiates lots of deals that put them in a better position to export and maybe bring some manufacturing back home, what are the risks that this could do long term damage and have unintended consequences?

Adam Parker (22:26)

I mean there's massive risk here. Is these the tariffs? I mean take for example Flexport's customer base where we're one of the largest logistics providers in the world. And we did on Friday a call down for, I mean we didn't get in touch with all of our customers but we called a lot of customers on Friday and 28% of them told us that they're pausing all their ocean freight, all their bookings are paused. That's a massive, I mean I don't think, I don't want to read too much into that. It's a catastrophe if it holds. A lot of what's happened is these folks knew about April 2 deadline for the last few months and pre ordered and they're well stocked on inventory and they, they brought it in beforehand when the tariffs were lower. So that's a lot of it. The other half is they're expecting like I am, that some of these countries will have deals cut and the tariffs may come down. So that said, if it holds, I mean you can already see it on day one. That's massive. Business models are at risk. Merchants on E comm, the ones that we track of our customers have raised prices of 5 to 10% already to the consumer already already. And so you're going to see even more of that as these price, as these actual tariffs flow through the system and start getting paid and cost of goods sold goes up. So you'll have inflation and yeah, I don't know, maybe interest. You know, the easiest way to balance trade is to have nobody trade with anybody. So they might achieve their goals, but it's going to make everybody a lot poorer, let's say.

Ryan Peterson (23:56)

They say, just kidding. Is there going to be stuff that's happened over the past week that is already irreversible?

Adam Parker (24:02)

Yeah, psychologically, some lack of confidence and perhaps. But at this point you still have some time. It hasn't even taken hold yet. So. And I don't, I don't think, you know, they didn't give themselves enough time so they could say, okay, let's, we're not, we're going to pause. I thought the thing this morning was part of the reason it went so viral is it was credible. It would be like, that would be a sensible thing, smart thing to do. Yeah, give ourselves a 90 day pause and then negotiate some deals and then you can come out of this looking like you got a win. Oh, actually we wanted more free trade with Europe and now, you know, we got them to drop these barriers and that's a big win. So there's still time for that. But every day that goes by becomes a lot more difficult. And if you just look, you know, the role of government is to set the rules and define those. And then business got to find a way to make money. So even if these tariffs hold, it's like, okay, cool, your job as a business person doesn't change much. Still the same as it was before. Go find a way to make some money. Given the rules of the game, the challenge becomes when the rules are constantly changing, and they're constantly changing right now by this administration, every couple days or weeks, there's new interpretation, new rules, new stuff coming down the pipeline. We have on April 17, no one's talking about it right now, but in 10 days they're going to impose fees on ships made in China when they make a port call in the US it's going to totally rearrange the shipping networks and make ocean freight incredibly unreliable. So number one, that's coming down the pipeline. So the rules are changing constantly. And that's true with this administration, but also we have to assume that there's going to be another administration, this party or back to the Democrats, who knows? But four years from now, and in two years, you have the midterms. Remember that under the Constitution, the president does not control the tariffs, Congress does. The only reason he's able to put these tariffs in is because of acts of Congress where they delegated Bowers to the president under a national emergency. So he declared an emergency when doing this. Well, Congress has the power to overrule that, but right now it's a Republican controlled Congress. So if he loses the Congress in the midterms, which if all this holds, like he probably he might. I'm not an analyst of politics by.

Ryan Peterson (26:09)

Any means, but look at the market.

Adam Parker (26:11)

He loses control of Congress. He no longer has control of the tariffs. And so if you're a business person going, how do I plan for this? Am I going to set up my manufacturing in a world where everything can change in two years? Like, no, you can't. So.

Ryan Peterson (26:23)

But do you think that the business, businesses are basically going to wait it out? I mean, from the c. You spoke to so many of your customers and a lot of them are pausing, but do you think it's probably just them saying, listen, this is not going to last forever because Congress could shift or.

Adam Parker (26:37)

The president too much into the pausing? I think it's a few weeks and then we'll start.

Ryan Peterson (26:41)

But broadly, what are your customers saying about that?

Adam Parker (26:43)

Businesses will have to pass through the higher price. The tariffs are, are that high, they will have to raise prices. We're already seeing that prices are going to go up even more and then the demand for their products will fall. We just know that that's economics 101. If you charge more, people buy less and then it'll shift consumption patterns to things that are made in America. Or even if it's just not a manufactured good made in America, you can spend your dollar at a restaurant or get a massage, go travel to a hotel. There's other things that you'll spend your money on and that will put these businesses at risk. And many of them are manufacturers. The other thing that's happened, I was with one of our customers that does. I was at their factory a few weeks ago and they said that this is an American company, Manufacturers in Los Angeles. And they said that demand for their products in Canada and in Europe has fallen off a cliff because of sentiment about America. And so you're like even an American manufacturer who should benefit from all of this is seeing that it's hurting them.

Ryan Peterson (27:45)

Yeah, I guess if you try to rearrange the whole global trade system and you take down all your export barriers and people say actually we don't really like Americans, we're not going to consume your products anymore, then you've basically gone behind. Even if you've won.

Adam Parker (28:00)

We'll see. We'll see.

Ryan Peterson (28:01)

Complex it is. So just reading through what you're saying. There is no going back at this. Like, like basically you can't wait it out. This is going to lead to price increases. No. And, and companies will not be able to say we're just going to like basically wait till the con next Congress comes or the next administration. They're going to have to all deal with that.

Adam Parker (28:19)

You know, I met with a customer, had dinner with a customer two nights ago and 150, 150 million is what they spend on their products business, Electro Enterprise Electronics. 150 million of cost a year and that's going up to 185. So it's an extra $35 million. I don't, I don't even know if they make 35 million in profit. I doubt it. So there's just literally they have to raise prices for their products.

Ryan Peterson (28:42)

So you think inflation. We're going to see inflation.

Adam Parker (28:45)

Yeah, yeah, you're going to see inflation. Now the of the goods that are imported for 100% certain the US relies on imports less than almost any country in the world. Where, you know, we think it for manufactured goods.

Leah Smart (28:59)

Sure.

Adam Parker (29:00)

Like on all the trinkets and Amazon goods and stuff are manufactured abroad. But as a, as an economy it's only 14% of our GDP is imports. That part of the economy is going to have inflation. Energy is coming down. That's what they're celebrating right now. The price of oil is down 15% in the last few weeks. Price of housing might come down if interest rates fall. There's other factors beyond that. It's, it's a, it's hard to say that there'll be like, I'm not a macro economist by any means, but the price of imported goods will definitely go up.

Ryan Peterson (29:38)

Okay, let's talk quickly about what's going on with tech. First thing that we should talk about is this de minimis loophole has been closed. That is the way to basically get a package of some goods from Xi and her team who shipped from China and not have to pay duties on them. So that's going away. So I'm curious, hasn't closed yet.

Adam Parker (30:01)

You have until May 2 to buy as much of that stuff as you can duty free.

Ryan Peterson (30:04)

So how do you see that impacting your clients and what do you think it means for Shein and Temu?

Adam Parker (30:10)

Well, we fly a lot of E commerce parcels in on our aircraft. We have three 747s that fly and there's a Lot of E Commerce parcels flying in those planes every week. So definitely a big impact. It's going to crash. The price of air freight would be my prediction. I think it's possible. I don't want to speak to those companies in specific, but the model generally of E Comm parcels flying in from Asia, the tariffs is one big part of their advantage. That not going duty free. But there's several others. Not having to pay for expensive US real estate for warehousing, expensive labor on warehousing. They're doing that at origin, less working capital. So the goods just like sort of just in time. You don't have as much inventory sitting there not earning a return while it travels across the ocean or sits in a warehouse. Their last mile costs are lower because they're flying the plane into the local region instead of trucking it, instead of going to a port and then trucking it across the country. So there's a few other advantages that. And then you know, their cost of goods. Remember these duties are on the cost, not on the final price.

Ryan Peterson (31:16)

Right.

Adam Parker (31:17)

And these, a lot of these companies are just like really good at sourcing goods very cheaply in a way that may overcome it. So I remains to be seen but my suspicion from having analyzed a few of these and working with them is that the companies will keep, keep going and just have to pay the duties.

Ryan Peterson (31:34)

Yeah. And bigger picture, tech has been hit hardest out of everyone here. We have like the entire Magnificent Seven is in correction territory. No bear market territory, 20% down or more. Why do you think tech has been penalized like this?

Adam Parker (31:49)

I don't know. I'm not, I'm certainly no Wall street analyst. I only own one one stock and that's okay.

Ryan Peterson (31:56)

But I'll break it down for you. I mean, so we talked a little bit about shipping. Right. So that's probably going to hit Amazon as well. They import like the increased cost of goods coming in from China. Then you have advertising, right. I mean meta, Google, Amazon, they all make a lot of money for company from companies advertising Chinese goods. So that will take a hit. Data center construction. Right. I guess everywhere you look, somewhere in tech there's, there's a risk. And then what we talked about previously, just like the EU potentially saying okay, we'll let your stuff come in but we're going to tax your or continue to regulate your tech services highly. Like is that the vibe that you get in Silicon valley from tech CEOs that just everywhere you look there's, there's a challenge?

Adam Parker (32:40)

I don't know you know, I mean, I feel, it's feels a little misguided to me. I think the tech sector is one that's going to keep dominating, keep growing. It shouldn't be that affected by, by tariffs. But yeah, maybe the retaliation is that bad from other countries or, or something else that, that I don't quite understand. But I would expect things like Walmart to go way down more than, than the tech sector.

Ryan Peterson (33:00)

Yeah. So, okay, let's just talk before we leave. Big picture. What do you think the big picture and what's going to come next? It is going to be. And then again, just like let's talk about what are the long term impacts that this is going to happen. Like what are some things you can't put back in the bottle once this gets going?

Adam Parker (33:20)

Short term is going to be a lot a goods recession for sure. I mean there'll be less goods sold because prices will be higher. There will be in the ocean freight markets. I predict that the price of ocean freight is going to fall, fall really sharply to levels we haven't seen since probably a decade. 2016, it was very, very cheap.

Ryan Peterson (33:42)

We were talking last time 2000 per container.

Adam Parker (33:45)

2000 is like the long run historical average. 2016, it went down to about 900. And I think we might get there around the marginal cost of shipping an extra container. And the marginal cost is really low. I mean the only reason it's not 200 is because of the labor cost, the union cost to unload the containers at the port. But so I think it would, I think it would drop really, really far. There's that to look forward to, but it won't. You know, there's 100,000 of goods in a container. So you know, you're saving 1,000 bucks on the ocean freight, but you're spending $46,000 on the duties it's not going to save. You're not going to help your business that much. But I think that's very relevant for our business obviously. And we've got to have a strategy to go take market share by passing through low cost of ocean freight. So if you're out there, you're buying ocean freight. Come to Flexport later this year for cheap ocean freight. I expect we'll have it. I think longer term, you know, I take the really long view is if you look at the graph of global trade for the last 800 years you've had 4% annual growth that goes back to the Mongol invasions which disrupted things a little bit. But then after that it was just like up into the right. But there are definitely blips in that period. You had the Black Death, you had the 30 years war. You've had wars between the Ottomans and the Venetians. You've had the Age of Discovery, you had World War I and 2. All of those things look like little blips that you barely notice when you look at what 4% exponential growth does. It looks like a vertical line going straight up. And so you fast forward 10 years from now. I think there'll be more trade. I have pretty strong conviction there'll be more trade, not less. Because it's just fundamentally both sides are made better off. People want to do it and there's always going to be governments that have reasons to restrict these things. But we live in a democracy and so governments maybe get voted out if they do things that people don't like.

Ryan Peterson (35:42)

Right. Okay, we start on globalization. Let's end on globalization again. Scott Bessant, just listening to what he was talking about over the weekend. He said last year more Americans went on European vacations than ever before. Also, more Americans went to breadlines than ever before. I think that this idea that when you have free trade, everybody wins maybe sometimes leaves out the fact that, you know, it can create bigger winners and bigger losers. And on certain sides when it plays out. I'm curious if I'm reading what you're saying, right, that that's a problem to address. But these set of policies in the big picture aren't going to get it done.

Adam Parker (36:22)

Yeah, like I'm glad that they're looking out for working people and the bottom 50%. And I mean, I kind of agree with the diagnosis. I just don't agree with the solution. I think access to low cost goods is very good for poor people. Like the idea that, you know and you're going to centrally plan their way into something else is a little crazy. I shouldn't say crazy. I just think their strategies are off. But he also admits they don't exactly know they're going to try some things. And what was happening before doesn't work. I basically agree with that. You can't have $2 trillion of debt in perpetuity. It just compounds and escalates. And at some point you declare bankruptcy. And the reserve currency status of the United States is perhaps the biggest problem. The biggest cause of these problems is also the biggest beneficiary to the biggest cause of this or the great wealth of this country is the fact that we're the reserve currency. But kind of makes you rich. Makes people like maybe too Rich without having to work hard. You just get to be extremely wealthy because everybody needs your currency. And so you look at the US we forget how rich we are. The US GDP per capita is like double of most of the countries that we think of as rich, like Japan and France. Like we're twice as rich per person as they are. And some of that's caused by the currency rather than just how productive we are and how great our geography is.

Ryan Peterson (37:53)

Yeah. Well, Ryan, appreciate you coming on and explaining all this, taking a look at the actual policies, giving an explanation of what they might do, what the intent is, where you see the problems and then the long term potential consequences for our economy. You did a great webinar like you mentioned, and I will link that in the show notes for anyone that wants to go take a little bit deeper look. It's called Liberation Day. Tariffs and Trade impacts what we know and where we go from here. It's a really great session. I recommend everybody check it out. And Ryan, it's always great to see you. Thank you for coming on the show.

Adam Parker (38:27)

Yeah, I appreciate that. Thanks for having me back.

Ryan Peterson (38:29)

All right, thanks everybody for listening. We're gonna take a quick break and be back right after this with Adam Parker from Trivarit Research to talk about the stock implications on Big Tech. Back right after this. So you heard Ryan Peterson, the CEO of Flexport, talk about what is going to happen and why we're seeing these tariffs. What comes next? We talked briefly about the equity picture. Let's speak a little bit more deeply about what is going to happen to Big Tech after these tariffs and after the entire market collapse with someone who knows about it just about better than anybody else. We're joined right now by Adam Parker, the CEO of Trivarit Research, here to break down all of what's going on with the big tech trade. Adam, great to see you. Welcome to the show.

Leah Smart (39:16)

Great to see you too. Thanks for having me. I'm looking forward to the conversation.

Ryan Peterson (39:19)

Yeah. So I should say that you showed up in my LinkedIn inbox on Tuesday last week being like, hey, should we do a podcast sometime? And I was like, yeah, yeah, we should do a podcast sometime. And then all of a sudden we see the tariffs go into effect, stock market crash. And yesterday I'm at the gym and I'm like, we need to do an emergency show. And Adam is the perfect person for this. So great to have you here.

Leah Smart (39:39)

Thanks. Yeah. Timing sometimes, you know, lucky. Rather be lucky than good, you know, I think.

Ryan Peterson (39:43)

I know. I think there was some good to that as well. So I want to talk a little bit in the beginning about what's driving this tariff policy, because if you look at the common discussion of the tariff policy, a lot of people are scratching their head. There's seemingly no logic to it, no plan. Obviously, the equations they used to figure out the tariff amount, I think everybody can agree. Kind of funny math. But I want to do my best job right now putting out the at least strategy behind this. And I think if we understand the strategy, we might be able to figure out where it's going to go and whether Trump will blink, whether it will work. So I was reading a great post on this website called Fin Shots that does its best job to explain it. So let's just go through it real quick. So the post says past economic policies favored the top 10% of Americans or those wealthy enough to fuel spending and drive consumption. But the bottom 50% haven't gained much. So everything might look. While everything might look great on paper, in reality, half of America could still be struggling and indeed, like we know, they are. So the American consumer has kept the economy afloat for decades, but this dependence has also led to high debt, dangerous economic bubbles, and rising inflation. Look at the U. S. Debt. It's currently at a staggering $34 trillion. And 7 trillion of that needs refinancing soon at interest rates that recently hit alarming highs of around 4.8%. It's like refinancing your home loan at peak interest rates, except now it's trillions at stake. That's why the US Keeps pushing its debt limit ceilings or debt ceiling limits. So that is why Trump might prefer a falling stock market. Now, a falling market triggers investor panic who then pull out of risky stocks and pour money into safer bonds. More demand for bonds pushes their price up, which in turn brings their yields or interest rates down. And that is exactly what Trump wants. So that is one explanation I've seen for why we're seeing the tariffs here and why Trump doesn't seem to care very much about the stock market. Adam, what's your perspective on that?

Leah Smart (41:51)

I mean, there's a ton of things to unpack there. And I think some of, there's some kernels of truth to what's written there. But I also think there's some things that are being conflated or would have happened anyway. Right. You know, so as I go through what you said, I mean, look, I think we need. I think the consumer's slowing before the tariff announcements were really brought out in a big way. If you looked at almost all the corporate data points and the conferences, you know, go back to tech. You know, Morgan Stanley has a big tech conference in early March. I mean definitely things were slowing priority to the last couple weeks. The consumer was in good shape but slowing also like consumer spending was slow consumer spending. You had kind of Walmart take their, their revenue down. Like there were some enough data points out there that think not falling off a cliff but things were slowing broadly, you know from, from highs and so the sugar high post the red sweep. Right. So, so I'd say I'd start with that and then, and then I'd say look like government debt and consumer debt are different. I don't, I don't think if you look at a broad swath of consumer data that the US consumer has a ton of debt. If you look at 90 day credit card delinquency or other things, you're not seeing things that stressed yet we could get there. But you're kind of even below average on some of those major kind of consumer metrics. So I think there's a bit of a, maybe a bit of a histrionic around how bad the consumer is on that point. I also would say like the top 10 versus the average, that's been a problem for a really long time and in fact isn't worse now than it was eight or 12 years ago. You know, in terms of the. Obviously if you look at the top 50 people they've got disproportionately rich. But if you look like the top 10% versus average, I think it was actually kind of peaked during the Obama administration depending on what data you look at. So again I think there's some things that are true. There's a divide between the very rich and the average for sure, but I don't think that's intensified nor do I think the consumer is in particularly terrible shape at the current moment. But, but I think the main part that I agree with or would sink into is that you can't, you can't really have rates back up a ton and be able to finance the government debt. And I do think the administration broadly needs to have lower yields and that accomplishes a bunch of things eventually. Right? Maybe gets housing going again. If 30 year fixed comes down, which is obviously an important economic metric. It helps us refinance the debt. And usually lower rates are good for equity multiples. Right. So when you look at tech stocks and they had their peak EV to sales, it was when we had zero interest rates like so that that part of the cocktail I think makes makes the most sense to me.

Ryan Peterson (44:26)

All right, let's talk a little bit about the impacts on big tech. I feel like this is the important stuff that we're here for. What's going to happen to big tech after this? So just let's talk a little bit about what Dan Ives had to say. He said this could become a black swan event. You're playing with the third rail. He cut his Tesla target to 315 from 550 and he says that Nvidia numbers could come down 10 to 15%. What do you think about that, Adam? I mean, do you think that this is a black swan event for tech?

Leah Smart (44:57)

First of all, I'm jealous of Dan Ives fashion game. As I wear the white, the white shirt and the blue blazer and the red and blue tie, I know he would be doing something a little more interesting. Look, I don't know what Tesla is worth. I have no idea. I think it's impregnable to analysis. So I don't know if it's worth 300, 500, 1,000 or zero. It's been trading so disconnected from what I understand the core businesses for so long that I more power to people who can price that. My view for a really long time had been for all the Mag 7, we published this dozens of times is you should be market weight the group. And the reason you should be is they're not particularly syncretic. They're really well covered. You don't know anything about them that nobody else knows. That's not in the price yet. You can't replicate them. I can't find 30 stocks that trade just like Tesla 3.3% position each and I mirror its performance with less risk. Like you can't do that, so just why let it hurt you or help you? And that had generally been my view of that cohort really for years and until early February when the Beta got high, the Capex got high and all that stuff. So when we went underweight so broadly, that's been my generic view of the Mag 7. I think for Tesla, I really have no idea what it's worth and I don't know how anyone can have confidence in, in saying its value. When I worked on the buy side, we were short the thing a ton on its way up. So maybe there's a little bit of bitter, bitter scar tissue from trying to value it and being wrong in the past, you know, I worked at, when I worked at a big fund. So I don't see the Tesla I don't have a differential view on Tesla. I think it's hard to value. The second one was about Apple, right? Is that what he said?

Ryan Peterson (46:37)

No, he was talking about Nvidia.

Leah Smart (46:39)

Nvidia. Oh sorry, Nvidia. I do have a view a little bit now I think. You know, I used to be a semiconductor analyst for a long time and so kind of guilty as charged is always liking the semis a little bit more than everything else. But I kind of feel like if the capex is going to stay high from the hyperscalers, you're basically saying Nvidia's revenue is good and if I kind of mark to market where I am this year, you know, Nvidia is down a ton and I don't think they're going to miss their, their earnings in the short term. So I sort of think Nvidia is better positioned than the other mag 7 in the short term and I'm a believer big time in the longer term, you know, kind of AI playbook including in in particular healthcare where if you go to Nvidia's website and scroll to the healthcare section you'll get really enthusiastic about Nvidia's role. I think Jensen knows more about healthcare than most healthcare companies. Jensen, the CEO of Nvidia so I, I would say I like it particularly after this huge reset but you know you can't have capex be reduced a ton from the hyperscalers and not get a big miss from Nvidia. So there's that incongruity but I think in the near term it's risk scored better than the other, a lot of the other Max 7 but that leads.

Ryan Peterson (48:00)

Right into like what's going to happen with cloud and data centers. I mean there's a double edged sword here, right for cloud. First is it's not just so semiconductors I think are exempt from the tariffs. Although there was a 25% tariff on semiconductors coming in. Yeah, but they are exempt. But it's not just the chip, right? Everything you need to build a data center is going to be more expensive number one. So your capex is going to go up even higher to build this stuff. And the second is who's the users who are going to be the users of these cloud services? Is it going to be Nike? Right, because they need, they have, you know, needs to buy software and cloud hosting. They have a very large digital presence. If Nike's margins go down and Nike's business is hit by tariffs then all of a sudden are they going to do that? Optional AI program from Azure. Are they going to do that? You know, new build out and move to cloud like all of that starts to slow.

Leah Smart (49:00)

It's not, maybe it's non essential capex now but the way I'm thinking about that Alex is like look, Semis grew about 2% above GDP for 30 years. I think they're going to grow something like 5 to 7 to 8% above GDP. You know if you look at the last two years, say through the next eight, so that'll be a 10 year window. They're going to grow way more and so they're going to gain share of the global spending pie because they do things that aren't easy to replicate in a big chunk of it. And not all semis are the same as you well know. There's industrial and auto semis and other things that are, you know maybe the average selling prices are low but I don't think every company has to do their own build out to participate. Look at Trivariate, we have an Nvidia chip, it's out on eqix. We use it to search every earnings call transcript for certain words and tag stocks and do all the analysis we do. I have the Mercedes C Class or whatever, the Metros, I don't have the, I don't have the black wall but like we're still ten grand for the chip and it's massively efficient. So I think companies will find in a lot of cases that access to Nvidia products could really help them predict their employee behavior better, predict their customer behavior better and maybe not have to do any net hiring. And so as your revenue grows 3, 4, 5% a year over a 5 to 10 year period if you do that without any net hiring for a lot of companies that's margin expansion. And we've seen like if I've learned one thing analyzing equities in the last 25 to 30 years, it's you do not short stocks where the margins are going up.

Ryan Peterson (50:27)

So do you think that they're going to try to just replace people with AI more than ever now?

Leah Smart (50:31)

Yeah, for sure, absolutely. I think if you get better at predicting your employee behavior and your customer behavior there's a lot of businesses that have lots of employees, low margins and lots of revenue dollars, right? Think about the whole health care sector, right? McKesson, Cartwhee's been a great ST Cardinals and core a bunch of healthcare stuff that you know. But the whole healthcare services sector, hospital like these, these companies are super inefficient where they can Use technology and get much better. Right? Like have you been to a doctor lately? You look young and healthy so you probably haven't. But like what do they do? They hand you a clipboard and a pen and you like circle stuff. Just think about how stupid that is like in terms of just like the ability to improve on, on their efficiency. So like I, I think you will see cyber, of course nobody cuts that. But then after that I think you're gonna constantly think like how can I replace employees with technology, how can I position myself to benefit from better analytics, et cetera, et cetera. So I'm bullish on the long term kind of compute trade and I'm bullish on semis and Nvidia has still got the best product with the best company in this kind of positioning and in this area. And it's stock's been reset a lot from the recent high.

Ryan Peterson (51:48)

Right, But I'm just going to ask it one more time. I mean let's say you are a customer of these cloud companies. You have a big plan, you have a big AI implementation. By the way, we know 15 of AI proof of concepts make it out into production 15% on a good day, right. You will have a lot of experimental spend that's going with the cloud companies to try to figure out this AI thing. All of a sudden every input that you have in your business goes up maybe 25, maybe 40%. You are scrambling just to make the numbers work. Doesn't that AI which AI spend which is discretionary, if it's not 100 going to production, doesn't that get cut for sure?

Leah Smart (52:30)

Look, the one thing that you know for sure is semis are a cyclical business. Okay. And so what you're, there's a combination of the cause the cyclicality one is you spend capex, you put the depreciation burden on your, on your cost of goods sold and then revenue slows and your margins get creamed. Right? And we've seen that for 40 years. What you're saying is in a recession or you know, kind of a growth pullback, will the revenue side be disappointing? It easily could be. And all I'm saying to you is like some of that has to be in the price given, you know Nvidia is down massively from the peak. So I guess you know we peaked at 149 on January 6th or at you know, 94 last. So like that's you know, kind of a garden variety semiconductor peak to trough stock correction already. If this gets really nefarious, could it Go in half.

Adam Parker (53:23)

Sure.

Leah Smart (53:23)

So I'm looking at, if I'm looking at this thing, I'm thinking, all right, Maybe it has 15 to 20% downside and 80 to 100% upside and a two to three year view for the best company with like a genius CEO in a product area that grows above gdp. So like it's, you definitely have to like it now more than you did three months ago.

Ryan Peterson (53:39)

Okay, all right, what about the ad based companies? And we're going to get to Apple in a second. I guess we're building up to the big one. Here's Ben Thompson on meta Google and Amazon. All the advertising based businesses, meta, Google and Amazon will also be negatively impacted. Lots of cheap products means lots of advertising and lots of products on Amazon specifically, much of which could disappear.

Leah Smart (54:03)

Yeah, that makes sense to me. I mean two things there. I mean one is advertising is economically sensitive and a GDP slowdown or a recession, if that's where we're headed, that business is going to slow. And then two, like Amazon, while it's a multifaceted company and AWS has been an amazing business, they still are like Walmart size now in terms of total revenue. Like they sell a lot of products to the consumer. They're not immune from a consumer correction. So when Walmart guides the revenue down, I sort of have to assume pro rata or closer pro rata that's going to slow down their consumers spend part of what they do. They're just, they're 2% of the US GDP or whatever alone in terms of revenue dollars. So they're not immune from that. So yeah, that makes sense to me. And I think again, not to be the ebullient stock American Buy Lunch kept growing, you know, but to me, like maybe some of that's in the price because Amazon stock has also fallen off a cliff. Right. So I'm not saying it's all in there, but, and I want to get to how I'm thinking about that, but Amazon was at 242 on February 5th. It's at 163. Now it's down a third. Is that a year to 2 of earnings for the company? Yeah, kind of. Right Now I'm not saying it started at the perfect valuation where it was in January because you had a lot of optimism after the election and all that. But it's kind of down to the lows of where it was in 2024. And maybe that's reasonable based on what we know so far, particularly if we're going to get less negative News on tariffs going forward. And we're going to start thinking more about taxes and regulation and those things being beneficial to companies and lower rates driving a more optimistic kind of view. So I think that's the debate, not whether, you know, ad spending slows and, and consumer spending slows when, you know, when the economy slows.

Ryan Peterson (56:01)

I mean, I just saw a tweet that Amazon is the cheapest it's been in the past decade. That's crazy.

Leah Smart (56:07)

Yeah, this has been a big, big correction. I mean, look, you know, you have to believe the forward estimates and I think right now nobody believes the forward estimates. I don't think this is a growth scare. I think that growth is actually slowing. So scare implies like you're wrong and you shouldn't be scared. Like things are slowing and they're going to slow and there's a soft patch for sure, if not something worse than that already based on what's happened. But so I think what reason that stock is down is because nobody believes Amazon's got 10% revenue growth in there for 2026. Nobody believes that. Right. People think there's a chance it's zero or negative. Yeah, right, right. Yeah. So I'm currently saying you're 27 number. You know, your 26 number is now your 27 number. Like you lost a year of growth. But it could be worse than that if we stay for, you know, a few months doing this. And I think that would make the reset not cheap, but just sort of like average on 27 or 28 earnings. And that's the debate. And the answer is I don't know. Okay.

Ryan Peterson (57:03)

Right.

Leah Smart (57:04)

So I feel like if I was lucky enough to be shorting a bunch of these lower quality companies, it's tempting to cover some because you know, you can get run over if, if you get some more positive commentary. On the flip side, I think there's certain consumer businesses that like, there's already going to be a ton of damage. So like the kind of research we're doing is looking at like China products you can buy at Target and Walmart and Costco today and then seeing what the price is going to be next week, later this week and see like how quickly if, if at all do the prices come up. Right. Like there's ways you can try to get at this. But I, I guess what I'm convinced of because of the fact that 19 last 20 times, when the market did recover tech work, because semis have sold off so much and because they ultimately are growing faster relative to the economy than they did previously that semis will work when the recoveries. And you just have to ask yourself, like, do I buy, you know, semicab equipment because it looks optimally cheaper, you know, or how do I, how do I play this? Right, that's, that's a good debate.

Ryan Peterson (57:59)

All right, let's quickly talk about Apple. And then the market has just opened as we're talking, so. And it looks ugly. So we'll talk about the market more broadly. But first, Apple. All right, here is what Apple is dealing with on tariffs. So in India, where Apple, this is from Mark Gurman at Bloomberg, where Apple is increasingly building iPhones and AirPods, there's a 26% tariff. Vietnam, the company now makes AirPods, Apple iPads, Apple watches and Macs. 46%. Malaysia, Apple's producing max 24%. Thailand, the company is also making max 37%. Ireland, which is within the EU, gets a 20% tariff. Apple produces some imacs there. Indonesia, where Apple is going to start making air tags and AirPods, max 32% tariff. We also know China, where it has a lot of production. I think it's a total of like a 54% tariff. What is going to happen to Apple? Yeah, well, let's, let's start, let's start there. What is going to happen, Apple?

Leah Smart (59:03)

Well, you know, again, I think Apple is more impaired than some of the other business models are. I certainly think it's more impaired than Nvidia. You know, with what I know now, the stock is also down 260 to 170. So it's also kind of in that one third correction. Look, Apple doesn't really grow its net income a ton. I think if you look back the last 10, 15 years, its net income dollars have grown less than around 10% per annum. So it's almost barely been a growth company. It's, you know, value's gone up because they've converted from hardware to software and bought back a ton of stock and other stuff. So, you know, I don't, you know, it's really hard to have a differential view on a company like this versus consensus. But, you know, but I think they, they appear more impaired. I could see the logic that look like it all comes down to like your Apple care and you're going to keep your phone a little bit longer. So maybe it just delays the phone, you know, replacement cycle a little bit, particularly because people weren't super excited about the SIRI AI enhancements or other things that would have stimulated. I think you and I were on the air once where you were being somewhat critical of those enhancements originally.

Ryan Peterson (60:10)

Like a few months ago, I remember that I had gotten like the initial beta rollout and you know, was like the first rollout of Apple Intelligence pretty bad.

Leah Smart (60:19)

I remember you saying that. I was like, huh, that's an interesting point. Yeah. So, you know, so, so I think, but you know, I think it's going to hurt some of the peripheral business. Like look, look, I, for people who, who aren't watching, like I'm holding up that, you know, the dental, the dental floss size, it's kind of a bad product. Okay. I mean so often when I'm talking to somebody, which basically means my head of sales or my wife, they, they can't, they can't hear me. Right. Or they seem to be, you know, so it's not a great product. They don't last very well. I think this is my seventh or eighth one. So I, I, you always got to.

Ryan Peterson (60:52)

Get the AppleCare on the AirPods.

Leah Smart (60:54)

I'll get it. I get the AppleCare and I think that helps their business model. But like I'm not sure, I'm not sure that the product, I'll get another one, you know, I may switch to something else. So I, I think it's going to be bad for their growth rate. And, and even if this stuff is, you know, removed or, or this is the, the peak of it, it gets worse. I, I could see this. Right. Clipping your long term growth assumption a little bit for the company, you know, structurally.

Ryan Peterson (61:21)

Yeah, yeah, it's, I think without a doubt. And they're going to have to raise prices. This is from Ben Thompson again.

Leah Smart (61:26)

It's expensive already too.

Ryan Peterson (61:28)

Yeah, it's a lot of money. And he says Apple will probably face little choice but to substantially raise prices. That has the direct problem of leading to fewer sales even if iPhone demand is probably fairly inelastic. And the secondary problem of decreasing the market for Apple's service business, which is its primary source of growth, that is an ugly picture for Apple.

Leah Smart (61:47)

Yeah, look, my kids who are all in college all have like Apple laptops and Apple phones and like I, at work like we obviously kind of go more in the Microsoft Kiritsu. But like you can buy like a decent Lenovo laptop for less than $1,000 and it's 3,000 for an Apple one. Like the price premium for their products is massive and I'm not sure people are going to look around and say I'm going to buy all these products at these prices, especially if they try to raise it I think they will bump up. I don't think the inelasticity is that ubiquitous. I know for me, like, with my own kids, when they are carrying their phones around, I'm like, you're holding. If I told you you were holding, like, eleven hundred dollars and one hundred dollars bills, would you be more careful, you know, dropping that thing on the sidewalk? Like, it's, it's, it's, you know, they're expensive. I think of them as, like, expensive. Computers are carrying around, definitely. Okay. I think I'm in, you know, better shape than the median American or whatever. I think it's a problem. I do. But you know what the problem with our logic right now is we're frothing up on negativity. And the Stock went from 160 to 260 from April to January. We could have said all the exact same things. So I think this tariff thing is just bad for their growth rate, and it definitely is going to cause, like, a. A delay to any cycle improvement. They need to. They need another leg up in technology. And that's why I pointed out your. Your impression comment a few months back of, like, it doesn't seem like there's anything enticing.

Ryan Peterson (63:11)

Right.

Leah Smart (63:11)

I already have three cameras on the back. Do I need five? Like, I don't know. You know, I don't know what's going to entice me to get a new one.

Ryan Peterson (63:17)

Yeah. So the S and P. The market just opened. The s and P500 dropped off the bat. I think it was down 5%. It's now come back up a little bit to 2.8% down. Adam, like, is there a put here? Like, is there a. Is there a place where we see the administration say, enough.

Leah Smart (63:33)

What we wrote in our note to our clients is I'm watching carefully the financial conditions index and the vix. If you take these back to, like, the more intense points that we've seen in prior cycles, and you kind of loosely say, how much are we down so far? If it gets back to those more severe points, how much more can we go down? This was before today's price action. It seemed like 6 to 7% more lower. So if we're kind of halfway there already, I think every investor is looking around saying, you know, all right, I got 3%, 4% downside, but maybe now I'm back to 2025 upside. And so all of a sudden, yeah, I think we're close to people kind of wanting to make a trade. I've been hesitant to look. There's Nothing better than being a contrarian bull and being right. I mean, that's the, that's the, you know, nirvana. The problem is we've seen no behavior where companies that guide down act well. And we're heading into an earnings season with maximum CEO uncertainty. So if you and I are running the company, you were the CEO of the cfo. We would be doing our pregame about what we're going to say. No way are we letting each other guide, you know, anything. But very conservatively for July numbers.

Ryan Peterson (64:45)

Yeah, I mean, it's going to be ugly. I just saw a tweet from Joe Eisenthal at Bloomberg. This is now the worst three day performance for the S&P 500 since. Any guesses?

Leah Smart (64:56)

87.

Ryan Peterson (64:57)

October 1987. Nailed it.

Leah Smart (65:00)

Yeah. Yeah.

Ryan Peterson (65:01)

I mean, holy crap.

Leah Smart (65:03)

Yeah. No, but, but you know, because you had one or two, you had one huge day that was really bad there. But you know, I think we had like the limit. The limit issues there, you know, But I think that's because the starting valuations were kind of high and there's maximum uncertainty and you don't. It's back to your original questions about like, what's the administration doing? Like, I don't think people know. Reasonable people. I think you and I are like fairly reasonable. We're trying to think about it like we don't really know. Right. It's no idea that uncertainty is usually bad for price to earnings. Like, if I'm really confident, I pay a high price to earnings because I'm confident in the future growth and the stability of the growth. But if, if I'm not that confident, I should pay a lower price to earnings for. And I think that's, this is like case in point right now. And, and you know, we offered in our note to investors was like, look, there's some consumer companies now that like everybody loves that trade. A really high multiple still. Like, are you sure, Chipotle, they should trade at 37 times earnings because if they don't grow, like, it's not. So it's not just in tech, it's like across the market there's a lot of, you know, travel data is falling apart. Like there's a lot of stocks that could still go down a decent amount because their valuation despite the correction is still pretty high.

Ryan Peterson (66:09)

Yeah. All right, so this is not investment advice, just for informational purposes, but are you buying or selling at this point?

Leah Smart (66:16)

So what we told our investors is still a little bit too early, that I just need to see how much the numbers are Coming down in April earnings and, or any stocks that guide down where the stock does not go down. As a former semiconductor analyst, that was the, that was the go signal, baby. Like intel guides down and stocks flat, stacks, stocks unchanged. Then you're like okay, bad news is fine. Then you know, good news eventually is going to be good and, but so far like think about any company, I mean Micron a couple weeks ago it just got like eviscerated on their, on their, on their inventory. Right. Like so I'm looking, I'm focused a lot on inventory and Capex semis work on inventory to sales. So if the inventory peaks and comes down, I don't think that's going to happen. I mean look at Microns like a good example. Like you know the stock was over 100 bucks three weeks ago. It's at 61 now.

Ryan Peterson (67:05)

Right.

Leah Smart (67:07)

You know, so I, I need a company to miss and, and, and, and understand exactly what the management teams are thinking and then I need to see the market reaction for me to get in there. Sure. If we get some noon comment that where we're now going to take a pause, everything's going to reverse and rip higher. But I still think that the damage will be done on the earnings for the next quarter or two and I think that's what makes me still a little cautious. If somebody has a longer term horizon then yeah, I think you'll be fine.

Ryan Peterson (67:35)

Okay Adam, before we head out, I want you to shout out a little bit about what you do and where people can find your work.

Leah Smart (67:41)

Thanks Alex. Yeah, so for individuals or financial advisors you should just go to trivector research.com tribectoresearch.com we sell several times a month. We write insights, offer ETFs, ETF analysis. So if you, if you like an ETF, we decompose what you're exactly getting videos and also a monthly zooms where people ask me questions. It's 100 bucks a month, 1200 bucks a year. Just launched that business last month and then our core businesses for institutions called Tribaric Research which probably people can go to the site and check out. So we also on x and on LinkedIn and all that stuff. Appreciate it.

Ryan Peterson (68:17)

Well Adam, great to see you. It's always fun to see you on set and it's great to have you here on the show.

Leah Smart (68:21)

So yeah, let's do it again soon. All right, thanks, that'll be great. All right.

Ryan Peterson (68:24)

All right everybody. There you have it. The impact of the tariffs and where we're heading next, we'll see you on Wednesday for an interview with Google Cloud CEO Thomas Kurian. All right, that'll do it. We'll see you next time on Big Technology Podcast.