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Tariffs, Real Yield Watch, Rising Rents
Resal Money ^ | Peter Boockvar

Posted on 03/04/2025 7:47:25 AM PST by Miami Rebel

Real yield watch/For Powell, May '26 can't come soon enough/US$ action/Other good stuff

I'm sure you'll be seeing these stats all day but will mention it here just in case. In 2024, the US imported about $413b worth of goods from Canada, $505b from Mexico and $440b from China, including iPhone. From what I've seen so far, in terms of retaliation against the US, it looks like the American farmer has been specifically targeted again with tariffs on US soybeans, sorghum, pork, beef, chicken, wheat, corn and cotton too by China. The US farmer by the way also imports about 85% of their potash needs from Canada which just got 25% more expensive. They were targeted too in the Trump 1.0 tariffs in 2018 and 2019 that led to a financial package given to them. As the US consumer still has PTSD from the 2022 inflation spike, even higher food prices are going to come quickly as they are VERY short cycle items. In three weeks, Canadian tariffs will come on its imports of US cars, trucks, steel and aluminum.

I'm hopeful, as we all are, that these Canadian and Mexico tariffs are quickly removed in some sort of announced 'deal.'

The interest rate drop across the yield curve is, I believe, a stagflationary response to the tariffs and the expected slowing growth. And with regards to the Fed and the about-2 ½ 25 bps of rate cuts now priced in this year, how can they have any confidence on anything? Imagine if they start cutting but then tariffs are taken off right after? What happens if they start cutting as the tariffs stay on and the dollar weakens in response and no longer becomes a mitigating factor for US importers? What happens if they do nothing and economic growth continues to weaken? Will we just see a repeat of 2019 when they starting cutting rates because inflation was then tame? Jay Powell, I'm sure May 2026 can't come soon enough for you.

Now with respect to the dollar, which is now even more important to watch, especially against the countries we slap tariffs on. In the academic textbook, the country putting on the tariffs should see a stronger currency (on the belief that its trade deficit will shrink) that would offset the cost of the tariff which importers are logistically paying to the Customs Bureau. What happens if the dollar, after its post election rally, now starts to weaken because foreigners decide to take their money home? What if foreign ownership of the Mag 7 shrinks and that money is taken home, something I mentioned a few weeks ago? Then we end up eating more of the tariffs in terms of higher costs.

The US dollar index, heavy with euro and yen which regions have yet to be tariffed, is today trading at its weakest level since December 9th 2024. The Canadian dollar is still trading near its lowest level since the March 2020 Covid shutdowns however and 2016 before that but keep a watch on it from here as it's up today. The peso is weaker today at the lowest level since August 2022 vs the US dollar. The offshore Chinese yuan is stronger today by .4% and obviously something to watch too.

US vehicle sales in February totaled 16mm at a seasonally adjusted annualized rate. The estimate was 16.14mm and that compares with 15.81mm in February 2024 (which had the extra Leap Yr day) and vs 16.56mm in February 2020. That we are still selling less cars than 5 years ago I'll argue will continue to keep used car prices elevated.

Target slightly beat the comp estimates with a 1.5% gain. They said, "Comp sales trends in Apparel and Hardlines accelerated by nearly four percentage points as compared to the third quarter." They saw particular strength in toys and electronics, in addition to apparel and beauty too.

They had this warning for Q1 though, "In light of ongoing consumer uncertainty and a small decline in February Net Sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, the Company expects to see meaningful y/o/y profit pressure in its first quarter relative to the remainder of the year."

"During February, we saw record performance around Valentine's Day. However, our topline performance for the month was soft, as uncharacteristically cold weather across the US affected apparel sales, and declining consumer confidence impacted our discretionary assortment overall."

From Best Buy:

"As we enter FY26, we believe consumer behavior will be largely similar to last year - remaining resilient - but still dealing with high inflation that is driving expenses up across their lives, making them value focused and thoughtful about big ticket purchases. And, at the same time, we continue to see a consumer that is willing to spend on high price point products when they need to or when there is technology innovation." They forecast comp growth this fiscal year of 0-2%.

The visual and musical experience of a concert at the Sphere is unforgettable and I highly recommend making a trip to Las Vegas to see it. This was from their earnings call yesterday:

"In Las Vegas, the Sphere Experience saw improvements in sell through and stronger sequential results in the December quarter."

"We also continue to see interest from a diverse set of artists who want to play the Sphere. Our first country artist Kenny Chesney begins a 15 show run in May and the Backstreet Boys will start an 18 show residency this summer."

Apartment List released its February new lease data and rents rose .3% m/o/m after 6 straight months of declines. They are still down .4% y/o/y "but is slowly inching back toward positive territory." New rents are up 20% over the past 4 years.

The supply side continues to keep a lid on rents, particularly in the sunbelt where rents are falling the most in Austin and Raleigh but also in a non sunbelt state, Denver. The vacancy rate rose to 6.9%, the highest since at least this data was first kept in 2017.

As I've been arguing, enjoy the rent decline while it's here because it's not going to last. Apartment List agrees and said, "With the supply wave now getting past its peak, it appears that the era of declining rents could be nearing its end."

South Korea's February manufacturing PMI fell to 49.9 from 50.3. S&P Global said "The outlook for the coming months appears uncertain, as firms recorded the steepest decline in employment levels since July 2022, along with a renewed decrease in outstanding business. Confidence regarding the upcoming year was also relatively weak."

Also of note, "there was a further steep increase in input prices for South Korean manufacturers. Higher raw material prices were noted, and unfavorable exchange rate fluctuations also contributed to cost burdens."

With tariffs and the possibility of more flying all around the world's manufacturers, I don't see how anyone has much visibility right now for 2025.


TOPICS: Business/Economy
KEYWORDS: economy; tariffs
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To: b4me

“Didn’t Biden void or change it when he got in?”

No. the trade agreement that President Trump signed on July 1, 2020, was passed by an act of Congress. It isn’t subject to tinkering by the executive branch.

If Mexico or Canada were violating it, either (a) there are arbitration provisions for resolving disagreements, or (b) it should never have been enacted.


21 posted on 03/04/2025 8:14:03 AM PST by Miami Rebel (pro-)
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To: central_va

“Our peaceful trading partners are not our enemies; they are our allies. We should beware of the demagogs who are ready to declare a trade war against our friends—weakening our economy, our national security, and the entire free world—all while cynically waving the American flag. The expansion of the international economy is not a foreign invasion; it is an American triumph, one we worked hard to achieve, and something central to our vision of a peaceful and prosperous world of freedom.”

Guess who said this.


22 posted on 03/04/2025 8:16:45 AM PST by Miami Rebel (pro-)
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To: Miami Rebel
We are already in a trade war started by Free Traitors™ 30 years ago. We are just now fighting back.

PS: Are you an "Adam Smithian" chump?

23 posted on 03/04/2025 8:20:23 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel
Are you just obsessed, or a paid troll?
24 posted on 03/04/2025 8:21:29 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel

Look for food prices to come down around Thanksgiving. As soon as the energy production ramps up all prices will start down.


25 posted on 03/04/2025 8:25:04 AM PST by Georgia Girl 2 (The only purpose of a pistol is to fight your way back to the rifle you should never have dropped)
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To: central_va

We are already in a trade war started by Free Traitors™ 30 years ago. We are just now fighting back.

PS: Are you an “Adam Smithian” chump?

___________________________________________________

Free Traitors™??? You really trademarked that? Good for you!

(Also, Adam Smith is a bad guy now?)

____________________________________________________

Are you just obsessed, or a paid troll?

_______________________________________________

You forgot to add that to your immediate prior post and thought it so insightful that you had to make yet another post for that gem?


26 posted on 03/04/2025 8:27:29 AM PST by Miami Rebel (pro-)
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To: central_va
No nation ever imported, retailed and borrowed their way to prosperity.

True. Also, the service industry does not create wealth, it redistributes it.

The way to create wealth is to have something to sell to another country for a profit, thus bringing in more money. That was how we became so rich after WWII. We were the only industrial nation not bombed and wiped out, When the other countries started to rebuild, we were able to produce things they needed which created our wealth.

27 posted on 03/04/2025 8:29:31 AM PST by Dan Zachary
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To: central_va

“Tariffs are only bad if we do it.”

Reading the Dinosaur Media, it is nothing but schizophrenic stories:
“Tariffs on American goods sold to foreigners is bad for Americans!”
“Tariffs on foreign goods sold to Americans is bad for Americans!”

Apparently, tariffs never hurt the citizens of all the countries that have and continue to take advantage of us. At least that has been the theory about to be tested in the real world. Let’s see what happens when our agricultural products are no longer on the shelves feeding their citizens. Regime change, anyone?


28 posted on 03/04/2025 8:30:43 AM PST by anonsquared
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To: Dan Zachary

Wealth is tangible. There are three ways to create weath: By mining it, growing it or manufacturing it.


29 posted on 03/04/2025 8:30:59 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Georgia Girl 2

“Look for food prices to come down around Thanksgiving.”

Why?

“As soon as the energy production ramps up all prices will start down.”

Energy costs make up between 5-10% of food costs. Energy prices should weaken as US and other economies slow down. But it won’t have a dramatic effect. Moreover, oil production isn’t going anywhere in the short term. That’s not how the industry works.


30 posted on 03/04/2025 8:32:33 AM PST by Miami Rebel (pro-)
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To: Miami Rebel

Adam Smith was a jerk and the first globalist free traitor. Marx was a free traitor too.


31 posted on 03/04/2025 8:34:23 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel

I believe the USMCA involves manufactured products, and doesn’t necessarily cover raw materials and agricultural commodities. That’s why the U.S. was imposing tariffs on Canadian softwood lumber almost continuously even after the original NAFTA agreement was signed.


32 posted on 03/04/2025 8:50:58 AM PST by Alberta's Child ("Well, maybe I'm a little rough around the edges; inside a little hollow.” -- Tom Petty, “Rebels”)
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To: central_va

Ronald Reagan first proposed a free trade agreement between the U.S. and Mexico in his 1980 presidential campaign.

Globalist free traitor?


33 posted on 03/04/2025 9:03:12 AM PST by Miami Rebel (pro-)
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To: Alberta's Child

USMCA covers farm products and fuels.


34 posted on 03/04/2025 9:07:50 AM PST by Miami Rebel (pro-)
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To: Miami Rebel

Reagan could not have seen what was to come. He was wrong about that and a lot of other things too.


35 posted on 03/04/2025 9:10:57 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: central_va
mining it, growing it or manufacturing it.

Pretty much what I am trying to say. Sell your minerals, crop, product to another country and our country gets wealthier. You pay someone to clean your house and a little wealth gets redistributed from you to the person cleaning your house. An individual gets wealthier, but the country as a whole does not gain anything.

36 posted on 03/04/2025 10:43:28 AM PST by Dan Zachary
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To: Miami Rebel

Tariffs, Real Yield Watch, Rising Rents

Code for another excuse to gouge no matter how good the economy is few if any prices drop until sales do.


37 posted on 03/04/2025 12:24:31 PM PST by Vaduz
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