Ken Fisher Shares What You Need to Know About Tariffs and Manufacturing, Stop-Losses and More

Transcript

Ken Fisher:

Tariffs are always worse for the country that imposes them than the country that they're imposed upon. If we assume they're being done for economic reasons, which is what this question is about. So every month I get these questions that come in and I try to write them up on these little cards in bigger letters because of my aged eyesight. And I try to give you short answers, which is for me, nearly impossible to do. So the first one is, "What are your thoughts on technical analysis? Are there any principles you've adopted?" I believe technical analysis is nonfunctional, and there's really nothing from it that I've adopted.

Technical analysis logically started a long, long, long time ago. The grandfather of technical analysis was Charles Dow of Dow Jones and Company when he created the Dow Jones Indexes and used the three of them as a forecasting tool based on their price movements. That's why he was doing that. And that led to Dow Theory using the same concepts to forecast. In that day and age, you had no more than paper and pencil, and they would create the charts and they would try to read things into it. I believe that's all voodoo. I think there's been adequate documentation that price movement by itself tells you nothing at all about future price movement.

The technical jargon for that, I'm not going to bore you in it. I'm not going to point you to the studies, but I'm just going to say there's no there, there. "Are there any principles that I've adopted from this?" Yes! My principles are look for fundamental causality. And if you don't have fundamental causality, don't get carried away with anything that looks like it might be predictive somehow. Next one! Boy, we're going to start off where I'm on the negative side of everything here today. "Why don't you recommend stop losses?" That's pretty easy. I don't recommend stop losses because they don't actually stop losses.

You got the simplicity in that concept? Let me take you through that. You buy stock A, now a stop loss could be set at any given level. Like if it goes down 10%, I'll sell it. If it goes down 20%, I'll sell it. If it goes down 17.25%, I'll sell it. So you set the—and it's a discipline concept— you set the limit, when it goes down that low, you get out of it. And then on that stock, sure enough you don't have any more loss. Ain't that nice? What do you do with the rest of the of money? Now, let's say it's because of the bear market or correction or whatever, and it takes you out. When do you get back in?

Oh. Or maybe you just sell it and buy something else. Okay, so now you sell it and buy something else. What stops it from going down? Did it stop a loss if it goes down? No. The problem with the concept is, yes, it stops you from losing more money on that cash. If you're sitting in cash. But it has nothing to do with whether you're going to lose money on what you do with that cash next. It has nothing to do with how you participate longer-term. It tells you not at all if you're using it, as some do, to get out of the market as a whole.

When to get back into the market as a whole. And it again, like the prior question about technical analysis is something that a lot of people believe, because on paper they kind of see how it, in their mind, could work, except it doesn't. We're just going negative, negative, negative with these questions here today. "Would a wealth tax be a sustainable way for a government to raise taxes?" No. I mean I guess yes, effectively. The ultimate wealth tax is what a pure communist country does. It takes all your wealth. And they do that over and over and over and over. And that's how they sustain themselves. Is that a good way to run a railroad?

No. Let me just give you some of the problems with wealth tax, and I'll try to do this really fast. Take a private business. What's it worth? Not a right way to assess that. How do you tax something when there's not a right way to assess that? Oh, we get appraisal. Appraisals are wrong really often. I'll tell you they're wrong more than they're right. Right. Somebody's going to get hurt on that. Somebody's going to be wrong. And when government does things where they do a bunch of really wrong, it's bad for everybody else too. "Well, what about can we just apply it to Bill Gates?" "I mean, he's got all that wealth from Microsoft stock."

Well, the answer is yes he does. And you got a price on Microsoft at any given point in time. But if Bill Gates was to try to sell all his Microsoft stock at one moment in time, he'd drive the stock through the floor. How much through the floor? There's not a right way to know. So there's no right way to know what to set the wealth tax at. "But isn't it okay if we just do it kind of like at x percent a year forever?"

Well, let's think that one through two because that's also nonsense. What happens if the wealth keeps going down? How does that work if the wealth from the value of the business, whether public or private stock or real estate or this or that just keeps going down? Let's say it's real estate. If you do it in real estate, well, we have a real estate tax. But that's exactly why in California they created the system that limited what you could do in property taxes, so they wouldn't drive people to be forced to sell. Wealth taxes are not a great macro way to raise money, and particularly on the biggest assets that folks have, in the broader sense, which is businesses that they created, that they own, or businesses in general, it's a terribly destructive process.

We are just continuing on the no, no, no path today. I've never seen so many questions where all I can say is, no, it's wrong, no, it's wrong, no It's wrong. Are we going to do this at the very end? No! We're not going to do it at the very end. But we got one more to go before we get to one where I don't do it. "Will tariffs bring more manufacturing back to the US and create new opportunities for investors?" No. I understand why a lot of people think they will.

They won't. We have a very long history of tariffs in this country and all over the world. They do not do this. I understand why a lot of people think they might. It's a little bit of a pipe dream. I know it's a kind of a lot of a pipe dream, but it's mostly just taking a pipe to America. The fact of the matter is, and the way they're being done is even stupider. But when you put the tariffs up in this country, or if you did it from any other country, tariffs are always worse for the country that imposes them than the country that they're imposed upon.

If we assume they're being done for economic reasons, which is what this question is about. And the reason that's the case is because we're—unlike what President Trump says— And mind you, I'm not not not been a Trump critic, but but he's wrong on this stuff. Unlike what President Trump says, we are not the biggest economy. I understand why he thinks we're the biggest economy. We're the biggest country economy. But for example, the eurozone is one economic bloc. It's got one set of policies, and it is bigger than we are. We, the land of the free, the home of the brave, the greatest country in the world, is 25% of global GDP.

The rest of it, therefore, is a 75% of global GDP. It's three times our size. Whatever we do in tariffs that other three quarters can trade amongst themselves. They will take away from us wherever they can to keep it cheaper to them trying to trade amongst themselves. And in the process it will hurt them less than it helps us. Now let me just go a different direction because people don't get this. We don't even have the mechanisms in this country to collect the tariffs that President Trump has been trying to impose. The Customs Border Protection Agency subset, that is the tariff collector.

It's processes, which you can read about in my upcoming New York Post column, are not set up to avoid what will become, if the current tariffs President Trump's talking about are maintained, particularly his universal tariffs, but otherwise anyway, the biggest black market in US history. And I'll be writing about that as to why it'll create a huge black market. But it doesn't pull manufacturing in because you wonder if after he puts the tariffs in. Just think about this. People don't think about this. I'm not giving you a short answer, but the tariff stuff is just about the stupidest stuff I've ever heard.

President Trump is going to get all these verbal agreements from people to build plants in America, and he's going to brag about those, but there's no assurance they can even build a plant. Let's say you want to put a plant, a greenfield plant, a new plant in America. Well, it's with all the help the federal government could possibly give you, you're still obligated to go and figure out where you're going to locate the plant. You got to apply to the municipality and state for permitting. You got to put up with all of their regs on all kinds of things. There's a lot of engineering and back and forthing with the government. All that takes time. Now you've seen this differently. When the government goes ahead to build a road, once they break ground on it, it still takes them a long time.

Nothing wrong with that. Just the way it is. If a company were to actually want to start today on a new major plant in America, if they were to want to, it's going to take them a good five years to get the plant up and running. And they all know that they're not stupid. They've built plants before. Now what else do they know? That five years from now there's a good chance that you don't have the Trump administration. In fact, it's certain that you won't have the Trump administration. Oh, that's right. President Trump's time is over after 2028, and then you might have a Republican administration with somebody that agrees with all this stuff, or Republican administration that doesn't. Or you might have a Democratic administration and a presidency that can impose the tariffs, can reverse the tariffs. You follow that? A president can put the tariff on another president, take the tariff off.

You've seen Trump saying this back and forth now you know almost daily about this category, that category or the other category, all of which creates uncertainty of course. So they know it'll take them five years to build a plant. But they know that before the five years is over, there's a good chance the tariffs might get reversed. Why would you want to do that? You follow the logic here when there's an economy three times bigger outside of America that you focus on. Let's say you make very expensive small things. The private sector has been really, really good for ever at dodging tariffs. The process for collecting by the CPB. You're not supposed to do this quickly, but I can't do it. I got to tell you, I got to tell you. You can read about this online as to the processes that they require.

They don't inspect every darn package. They only have 2500 employees and an antiquated computer system. They can't possibly do that. They require the importer to declare what it is and what the tariff on it is according to the tariff rate. And then they spot check and whatever they find violations, they go back to impose a fine collect and or impose a fine depending on whether they think it's intentional or not like that. Now, a lot of this is done by freight forwarders,not by the manufacturer themselves. But if Toyota is shipping cars in, well, it's pretty hard to hide that. But if you're making little expensive things like electronic components, you make a gargantuan kid stuffy, and you stick them inside the kid's stuffy, you ship them to where you're saying to go to because the kid's stuffy is supposed to be worth $17 rather than the $5,000 of the stuff that's inside it.

Tariff rate on $17 instead of $5000. And you're going to see the biggest increase in the kid's stuffy market in history. It's called a black market—called smuggling. It's called sneaking. It's called cheating. But the world will do that near endlessly and always has on tariffs everywhere. Let's miss catalog it. Let's mischaracterize it. Let's change one little part. Let's—if he keeps the reciprocal tariffs let's ship it from the high tariff country into a low tariff country. Repackage it. Split the difference with that person and ship it into America. So I'm just telling you that no, they won't. Because the reality is, the rest of the world has no incentive to take something that takes five years to do and might not be in existence five years from now.

So this one I'm going to give you a little bit longer answer on too, but this one's the one where I'm positive instead of negative. Or not positive, but I've got other things to say to you. "What are your thoughts about life and long-term care insurance and is it a smart investment?" (A). First, I'm not a real super expert on this topic. (B). I don't need to be. (C). The answer really comes down more to features about you than it does about life or long-term care insurance. I got a piece of advice for you, however, that I don't think you can lose on. And it's this: If this is the kind of a question, not even this question necessarily, but the kind of a question that you often have in your head about investing or otherwise, there's a really nifty thing you can do, and you don't have to do it the way I'm going to tell you to do it. You can do it otherwise, but get a free fairly capable AI system, an app, that answers questions and asks the question, "What are the positives and negatives of long term care insurance?" Now I'm going to recommend an app to you. I have no investment in the app.

I've got nothing to do with it, but I know it works pretty darn well. And it's free. They got one you can pay for that's more advanced, but you don't need that. And this is a thing called Perplexity. And you can look it up online. You could get it at an app place like Apple app. And add it to your iPad or your computer or your iPhone or smartphone. And ask it the question, "What are the positives and negatives of, in this case, long-term care insurance?" And it will tell you a pretty good answer that will focus you back to what are the features about you that are the good ones and the bad ones? I'm going to give you one more piece of advice on this topic.

The insurance agents that sell long-term care and life insurance get paid pretty heavily for the products that make the insurance companies the most money. And you do not want to be getting your advice from the sales guy—from the insurance agent— because they've got every incentive to tell you all the positives about it for you, but every incentive not to tell you the negatives about it for you. And they'll say, "Oh, that's not true, that's not true, that's not true." But the the commissions they get on these things are big enough. Like on long-term care insurance, it's typically about 2/3, 3/4 of the first year's fees that you have to pay, which, you know, it's going to be thousands and thousands of dollars. And I'm not going to go through the positives and negatives of like long-term care insurance, because in fact, for some people it's very appropriate and for others it's not appropriate at all. And that's for you to decide.

But I think if you just took something like Perplexity or another AI system that you can ask a question to and get an answer back and ask, "What are the positives and negatives of category (X)?" On this one, I know that you'll get—I just know it— I know how Perplexity works, but there's other ones that work. You know do the same thing. You get the positives. You get the negatives. Think yourself through in that regard before you ever talk to an insurance agent, because that'll give you the full set of positives, the full set of negatives, and know you want the stuff more or less before you ever talk to anybody who's trying to sell it to you. And that's my answer to that. Thank you for listening. I babble too long today, but I do that most of the time. I appreciate your paying attention and your interest. I hope you'll be back next year when I cover—excuse me next month when I cover more of these as I do every month. Thank you.

Voice of Ken Fisher:

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