Hi everyone,
Yesterday I was joined by
, Daily Dirtnap editor, Jared Dillian Money founder, and Rule 62 author, on Talking Markets for a fantastic conversation… But while the audio was working just fine for us, a platform bug meant it not only had a bunch of static live, but the issues were in the source file, too. So sorry.Thank you , , , , , and many others for tuning in live, even with the damned audio issues…!
We’ll make sure to cover all the important stuff in the write-up below. Thanks for your patience…
The “Big, Beautiful Bill”
Jared had been thinking that the “big beautiful bill” would eventually lead to the deficit being blown out, 7% deficit to GDP, and “everything’s going to be terrible.”
But he’s kind of changed his mind. Basically, he said, the CBO is “scoring this bill with the assumption that we’re going to have 1.8% GDP for the next 10 years,” which is pretty conservative.
“So, on a static basis, if you look at the big beautiful bill it increases the deficit by trillions and trillions, but honestly, if growth comes in a little higher, [say at] 2.5% instead of 1.8%, then that’s going to make up a lot of revenue,” he said. “Also, the tariff revenue isn’t really being counted. [So] there is a possibility that it might not be as bad as we anticipate.”
JD also pointed out that if the BBB was as terrible as people thought it was, “then the bond market should be melting down, gold should be rallying, stocks should be going down, and you’re not seeing that kind of price action,” he said.
💡“So then you have to examine your priors and say ‘okay, if I’m not getting the price action I expect then maybe my interpretation of these events is incorrect.’”
That doesn’t mean Jared loves the bill: he would prefer “a mix of spending cuts and growth,” pointed out that “Republicans thinking they’re going to grow their way out of things is pretty common,” and said the bill is “inflationary.” “But if we’re just going to go with growth, it could be okay,” he said.
“One of the Dumbest Things I’ve Ever Seen in My Career”
The answer to that is…
Drumroll…
“The tariff on copper is one of the dumbest things I’ve ever seen in my career,” Jared said. “Trump announced a 50% tariff on copper. What is the motivation for that? Because if the motivation is to bring copper mines back to the US, that is a 20-year process. So really, it’s not about reshoring; it’s about revenue collection and screwing other countries.”
It’s not just copper, either, he thinks some of the other tariffs are “extraordinarily stupid,” too. “Small tariffs can collect revenue and be minimally disruptive,” he said. “A 10% across the board tariff can collect $200 billion in revenue. But when you’re talking about 50-100% tariffs, it causes problems.”
🪢That chimes with what
said on Monday - that the market would swallow 15-20% tariffs okay, but above that it will have to start reaching for the Tums.“No Position” in Bonds
Jared doesn’t have a position in bonds currently: “I can’t make sense of the price action.”
However, he does think that “people are overly pessimistic about rates.” “We still have almost the highest interest rates in the world,” he said. “We have bonds at like 4.9-5% - it’s tough to get 5% relatively risk free anywhere in the world. So if you get rates out to 5.5%, there’s going to be even more demand. There’s a lot of people on Wall Street who think the bond market is going to crash, but I don’t think that happens. There is demand for bonds at successively higher interest rates.”
Dollar: “Bullish Short Term, Bearish Long Term”
JD is bullish on the dollar short term. The “dollar is doomed” narrative is “a little out over its skis,” he said. “We are a really long way from the dollar losing its reserve currency status.”
Similar to Dale, Jared has support in the dollar index around 96.30, and thinks “it goes up to anywhere between 99 and 102 in the short term. I think we’re going to have a pretty big move, just based on technicals.”
Longer term is a different story though. “In terms of 1-3 years, I’m super bearish on the dollar,” he said.
The International Trade: “Top of the First Inning”
Back in March, Jared said everyone’s international allocation needed to be much higher than 10%. (A pretty great call.)
And he is definitely still on that train. Investing ex-US is “probably my number one idea over the next 5 years,” he said yesterday. “I think the dollar weakness rally kicked it off. Me personally, in terms of my equity portfolio, I am 90% overseas and 10% in US. The valuations are better, much better dividends.. I don’t think the rest of the world trade has even really started yet. This is the top of the first inning.”
As for what in the rest of the world he likes, he still likes Europe and LatAm and still doesn’t like Japan.
And because he’s bearish on the dollar over 1-3 years, he says “you want stuff in local currency.”
💡“There’s actually a super interesting ETF called EMLC, a VanEck ETF. It’s called Emerging Markets Local Currency Debt, so you can buy EM bonds issued in local currency.”
People are “Forgetting About” Gold
Jared still likes gold, and likes that people “forgetting about it.” “It’s in the middle of a 4-month consolidation. It hasn’t done much in the last couple of months, it’s actually been pretty resilient,” he said. “If the dollar rallies, you might see gold go down to 3,100 or 3,200… but ultimately, I think this consolidation resolves to the upside.”
What Kind of Trader Are You?
JD subscribes to the theory that the environment you start trading in shapes your outlook. “I started my career in November 1999, four months before the top of the dot-com bubble,” he said. “So I lived through that crash, and then I was at Lehman in July/August of 2007, when we put in the top before the financial crisis. So in the first decade of my career, I had two 50% drawdowns.”
With that history, “I tend to be a long volatility trader,” he said. “I like to trade from the short side - not because I’m a bear, or a pessimist, or because I think we’re doomed, but I just don’t like picking up nickels in front of a steamroller…”
Figuring out what kind of trader you are and how your early experiences trading/investing shaped you is probably one of the most important questions you could figure out the answer to.
Rule 62: Meditations on Success and Spirituality
Book number 6(!) for Jared is ‘Rule 62: Meditations on Success and Spirituality’ and it is now available to buy on Amazon here.
“This is a collection of 79 essays on success and spirituality,” he said. “The genesis of this was… If you knew me 20 years ago, I was a complete disaster. Emotionally, I was a wreck. And really, getting to where I am today has been a 20 year process of working on myself. And I like to share that wisdom with other people.”
As they say, happiness is a verb. In an era of social silos and the loneliness epidemic and all of that, I feel like Rule 62 is a pretty important read. You can get it here.
Enjoy,
Maggie
Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.
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