Price Is Your Only Hedge in Banks. Hope Gets You Killed. Analysts Are Always Late.

A quick bit on the tarriffs, everything that can go wrong in banks is about to, and where to look going forward.

Well that was a fun one wasn’t it?

An absolute sea of red almost everywhere.

What to make of the tarrifs? Well a random 7am thought sums up what I think they’re doing …

And you have to admit even if you think I’m wrong, The Toledo Toasters would be a banger minor league baseball team name.

Jokes aside, Trump’s new trade regime came hard in the paint lifting average tariffs to 24 percent. Which is not nothing. And we all know he’ll try to walk these back at some point, but for now it’s a structural regime shift. Asia takes the hit first. China slapped with 54 percent and now they’re slapping back. Vietnam, Korea, Japan all face 25 to 46 percent. Europe’s exposed too. The EU got tagged at 20 percent. Global multinationals just lost margin and visibility overnight. The MAG7 is getting absolutely reamed. And this is before an overly indexed retail 401k holder sat down to discuss their Q1 performance with their trusty “advisor” and saw big red numbers.

Across the globe bond markets got the memo. Curves steepened, cuts were repriced, inflation risks rose. But equities? The repricing down was fast and furious. But the move won’t be as fast as earnings estimates whic are heading south fast, especially in trade-linked names. US semis, autos, and discretionary are in the kill zone. Banks, my beloved banks will too be hit. Everything is being sold first, with questions to be asked later. And everything is now cyclical. And all things correlate once again to one.

Two notbable countries however “escaped” and they are Brazil and the UK. Both landed the lightest 10 percent tariff tier. Brazil brings resources and geopolitical neutrality. The UK avoids the EU’s penalty and quietly becomes a safe harbor for capital rotating out of Asia and the Continent. Oddly despite the tariffs and recent sell off China has been strong like bull. Almost like Xi knew all along these were coming and pre-emptively stimmy’d his economy and stock market. And while I did not predict any of the tariff hits by either country, I have allocated to them (as well as China) which have been remarkably resilient. If you umissed the flows article it’s below. As of this morning I’m getting a little nervous. I’m not a China expert but it feels like both parties are digging in for a long protracted fight. Maybe time to pare back.

Anything That Can Go Wrong, Will Go Wrong

Back to banks.

There’s a reason Buffett feels like banks are a place where leverage, stupidity, and optimism go to hang out. Every time it looks easy, rates up, earnings strong, multiples cheap, something breaks. Which is why the price you pay matters more than the story you’re told. Let me tattoo this on your forehead, the price you pay for banks matters the most.

Let’s start with the big things that can go wrong in banks. It’s a long list.