Quick Notes – Reflections From This Week

Quick Notes – Reflections From This Week

Public + Private

The equity market is more or less unchanged from one week ago despite falling over -12% over a few days and recovering the entire drop in a single day. Yesterday was one of largest single day rallies in over 15 years. As enthralling as that was, it’s not a healthy thing for markets to go through that level of volatility. There are other issues to still be addressed. The 10 year is now higher at 4.25%, nowhere near where Powell and Trump want it.

The crash this past week was a panic liquidation event. We know this because quality assets that never go on sale were trading at discounted prices. In a panic everything goes on sale. Private market assets would “sell off” too if they had a daily price, but they don’t so you don’t see or experience it. This illiquidity can be psychologically and behaviorally valuable. People would not appreciate their home’s Zillow Zestimate ticking up and down during market hours.

There is a persistent and growing divide between what can be accessed in public vs private markets. The number of emerging diverse opportunities in private markets has increased faster than new companies have gone public.

In the end, Trump eased up on the tariffs once it was clear the financial system was on the brink of total collapse along with his presidency.

Domestic Manufacturing

The dangers of the declining US manufacturing base became apparent during Covid when global supply chains shut down. Free trade is great but so is maintaining the option of self reliance when there are no other options.

The US achieved energy independence in 2019 for the first time since 1952. I think it’s useful to think of US manufacturing independence in a similar way. When will the US be able to meet its own manufacturing needs, if needed? I’m not sure iPhones count as “needs” as much as critical pharmaceuticals. However, once an iPhone can be manufactured fully autonomously there really won’t be much of a barrier to building a portion of iPhones domestically, however complicated that development process may be. Apple has done many difficult and impressive things in the past and they can do it again.

Even if the goal is automation, there will be new jobs associated with fully automated domestic manufacturing. AI will help this tremendously. There will also be a sense of pride in a locally built product for those involved. Personally I’d rather pay $200 for a product made in the US over a $200 imported product that really cost just $20. It’s not always easy to tell and the latter always feels like a ripoff when you find out. You may or may not be shocked to learn how much companies are charging for cheap international goods.