One day when we were looking for a home in the Appalachians, our real estate agent stood on the deck of a house talking on his phone. My wife and I looked at each other in surprise because neither of our phones had any bars. Within weeks of submitting an offer on another property, we changed our cellular carrier to the company our realtor used because it had superior coverage in the mountains.
That’s also the point at which I kicked my youngest daughter—who was at least 25 at the time and had a full-time job—off our family cell phone plan. I didn’t give her an option, I simply told her she had a two-week window in which to get a new phone plan if she wished to keep her number before I canceled “our” old plan. We also used the move to another state as a reason for her to get her own car insurance.
I think this is akin to what Trump is doing with tariffs. He is weaning the rest of the world from the United States’ tit. Or, as Vice President Vance said, “no more … being the world’s piggy bank.”
Our daughter understood she had been coasting on our coattails and graciously made the changes. She called it another step in “adulting,” something that in the 2020s apparently takes years longer than it did in the 1980s. Now we will have to see how many of our trading partners are going to act like adults and how many will act like crybabies.
So far, the world is not taking things as well as my daughter did.
Standing on Your own Two Feet
There comes a time when you have to stand on your own two feet. Mom and dad won’t always be there to protect you when someone kicks sand in your face or invades the country next door. Are you listing, Ukraine? Time to move out of your parent’s house, Germany. No more taking laundry home to mom, Italy. Sorry China, but the bank of Dad has closed your account.
After I graduated from college, I landed a job in New York City. My parents bought me a couple of cheap suits and a sofa bed for the tiny bedroom in an apartment I shared with two roommates. From that point on, everything I bought, I paid for with my own money, or lack thereof. Living in New York was expensive, even 40 years ago. I remember the first time I bought a drink in a bar and it was four times more than I paid in my college town. Sadly, it wasn’t just drinks that were more expensive.
Half my take-home pay went to rent, and I immediately ran up credit card debt, but struggling to pay your bills teaches you to budget and manage your money. If you can’t learn to do that when you make $16,000 a year, how can you expect to do it when earning $160,000? The higher salary does nothing to improve your financial expertise, but it multiplies your mistakes by ten.
Sounds like it is time for Japan (where they have a 700 percent tariff on rice from the U.S.), Europe (which Trump says charges a 39 percent tariff on U.S. made goods), Vietnam (96 percent tariff on the U.S.), and more than 175 other countries will have to make some quick adjustments to their budgets and way of doing business.
More Disruption
I’ve been warning for months that Trump is the great disruptor, and the tariffs have already and will continue to create disruption, uncertainty, fear, and doubt. The markets are shaken, alliances may be weakened, businesses are panicking, and the media is pumping up fear in Americans who don’t like Trump and can’t think for themselves.
I’m not fearful. I think we could use some disrupting, and I expect in a year or two, things will be better than ever.
When I got divorced, I swore I would never get married again. I was bitter and angry and had lost half my stuff. But after a couple of quick rebound relationships, I had a new “serious” girlfriend. Suddenly, losing half my stuff seemed like a pretty good trade. In time, we got married and have now been married almost twice as long as I was to the ex.
My point is, sometimes you need to break things and have a few bad months so you can rebuild on a firmer foundation. Like the phoenix, I think the U.S. will rise up from what some would have us believe are the ashes of our demise. What the pundits fail to mention is the Biden Administration was the low point from which we have to rebuild.
In short, don’t panic. Let the others run around like a chicken with their head cut off. If you are prepped, then you are prepared.
If you are not prepped, then what are you waiting for? Prices to increase?
Automobiles
I’m seeing panicky predictions of what this will do to the automobile market. I find the over blown. I expect there will be minimal price impact on cars made in the U.S. from parts made in the U.S., Canada, or Mexico. In fact, with the possibility the EPA and congress will relax environmental requirements, the cost of passenger vehicles and diesel trucks may drop over the next two model years.
The most popular Japanese cars and a few Korean brands are also made in the U.S. and these will see minimal impact. If, on the other hand, you want to buy a Mercedes, BMW, Porche, Audi, or VW made in Germany, or made in the U.S. with an engine and transmission from Germany, then your prices will go up. My guess is people who want a BMW or Mercedes that badly will still buy one.
Keep Your Powder Dry
“Keep your Powder Dry” was a phrase that was used when soldiers were armed with muskets and muzzle loaders. While it literally meant “don’t let your gunpowder get wet,” it also meant you should remain watchful and prepared for battle. Over time, it has earned an additional meaning: keeping some money available so you can snap up bargains during a recession or pull back. I expect we’ll see some opportunities of that nature during the next months as the aftereffects of the tariffs shake out.
I will not be buying up bargain basement stocks, but I still harbor some hope of buying a used or repossessed side-by-side at a good price. Especially after I hiked up the mountain to inspect our spring, which is a story for another day.
With any financial disruption, there are winners and losers. The smart money will identify the winners and flock towards them. Right now, the cautious money is in gold, driving its price up to more than $3,100, up 20 percent in Q1. Holding gold isn’t a poor strategy, but those who will win big are keeping their powder dry. Even if you don’t pull the trigger, that “powder” will be there for another day.
(This is probably a good time to mention that I am not a financial advisor or precious metals expert and while my comments reflect my personal beliefs, they are not financial advice.)
Should the economy deteriorate to where you need your savings to live on, then be happy you have some “dry powder”. If you have to act on the original meaning of the phrase, just keep in mind it is better to be armed and not need it than it is to need it and not be armed. That’s also a summary of my prepping philosophy.
