Well, wasn’t that quite the week we just experienced?

Donald J. Trump was sworn in on Monday and immediately set about signing a record-breaking round of executive orders.

Pardons were issued. Immigration policies were changed (and immediately challenged). National emergencies were declared. International pacts were withdrawn. Genders were defined. And TikTok was saved…

For now, that is. (Read my take on that here.)

Trump also used Week 1 to promote cryptocurrency, fire a bunch of people, and tell the global elite at Davos that:

My message to every business in the world is very simple: Come make your product in America, and we will give you among the lowest taxes of any nation on Earth. But if you don’t make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff.

I can’t say I went out and polled Davos participants about their thoughts on that message… but I think it’s pretty safe to say they weren’t all pleased.

Which means, of course, we should expect some international fireworks from here. All the same, Trump might already be winning his Made in America campaign considering our first story.

Let’s get right to it…

Whether Due to MAGA or Not, China Is Losing Out

The latest American Chamber of Commerce (AmCham) China survey was released last week. Meant to gauge business sentiment, including from international firms, it found that business enthusiasm there is waning.

Out of 368 members surveyed right around last year’s U.S. presidential elections – which Trump won with his MAGA campaign – 30% were accelerating their efforts to relocate. That’s up from the previous high of 24% in 2022, back when the Chinese Communist Party was raiding corporate offices.

AmCham China President Michael Hart told reporters that “one of the major impacts… we’ve seen in the last five years was Covid and how China closed itself off from the world” as a result. “That’s been one of the largest triggers as people realized they needed to diversify their supply chains.”

He doesn’t “see that trend slowing down” from here.

With all due respect to him though, sentiment did bounce back after 2022… only to plummet as it became clear that Trump was taking over, complete with his tariff threats and no-nonsense nationalist mentality.

Whether those 110-ish companies surveyed will all move operations to the U.S., of course, isn’t clear yet. But China’s still losing out one way or the other.

Colombia’s Petro Takes on President Trump

The Latin American nation of Colombia represents a much clearer win for Trump… unless there’s some drama that unfolds in the hours between me writing this and publishing it.

That’s a distinct possibility considering the drama that’s already gone down between the two countries.

It all started last week when Colombian President Gustavo Petro agreed to accept deportation flights from the U.S. So the Trump administration sent the first of two planes over, only to see them turned right back around again. Petro cited a news video of illegal immigrants being returned to Brazil in restraints as his rationale to refuse his own wayward citizens.

“A migrant is not a criminal,” he wrote. They “must be treated with the dignity that a human being deserves.” Therefore, he wouldn’t be taking anyone back until the U.S. established “a protocol for the dignified treatment of migrants.”

Trump responded exactly how you might expect, taking to Truth Social on Sunday with his own declaration: “We will not allow the Colombian Government to violate its legal obligations with regard to the acceptance and return of the Criminals they forced into the United States.” Then he slammed the country with across-the-board 25% tariffs. And if Petro didn’t back down after a week, he added, those tariffs would rise to 50%.

Financial sites erupted on the news, asking how this would affect U.S. consumers… with the consensus being that coffee drinkers would easily lose out since Colombia ships about 20% of the beans we brew.

But those concerns look like old news now. At last check, Petro had once again changed his mind (after a very long and not-completely-coherent rant on Twitter).

He’ll now accept the planes after all. And so the coffee-drinking world will continue to turn.

Boeing Keeps Losing Money Despite Its $20 Billion Capital Raise

There’s no such immediate fix to the Boeing (BA) situation. Not only has it not reported an annual profit since 2018 despite all its past “cost-cutting” initiatives…

It’s now expecting to report a $4 billion loss for the fourth quarter of 2024.

CEO Kelly Ortberg tried to sound factual but optimistic about it in his press release, saying that “near-term challenges” didn’t keep Boeing from taking “important steps to stabilize our business.” This included “a successful capital raise to improve our balance sheet” to the tune of $20 billion.

Yet that couldn’t cover up how Boeing’s commercial airplane operations likely brought in just $4.8 billion in revenue – with a near 48% negative operating margin. And other units continue to struggle as well.

Take its Starliner program, which transported astronauts back on June 5, 2024, for an eight- to 10-day trip out of this world. Due to ongoing technical issues, they won’t be back until March 2025. At least.

Why is the Gilligan’s Island theme song running through my head?

Home Prices Are Sky-High While Home Sales Crater

Then again, at least property was cheap on that island. Here in the U.S., the National Association of Realtors (“NAR”) reported that the median home price hit $407,500 in 2024 – a record high.

Yet existing home sales fell to their lowest level in nearly 30 years.

Most people can’t justify such a huge purchase when mortgage rates sit at around 7%. And with the Federal Reserve unlikely to lower larger interest rates anytime soon (more about that shortly), mortgages aren’t likely to decrease anytime soon.

In fact, they even rose during the Federal Reserve’s rate-cut spree last year.

So how are sellers able to charge such increasingly high prices with so few buyers on the market? That’s because inventory remains tight.

To quote NAR:

Total housing inventory registered at the end of December was 1.15 million units, down 13.5% from November but up 16.2% from one year ago (990,000). Unsold inventory sits at a 3.3-month supply at the current sales pace, down from 3.8 months in November but up from 3.1 months in December 2023.

Inventory needs to therefore increase by around 30% to return to pre-pandemic levels. But even if the U.S. market could achieve that kind of growth, there would still be high mortgage rates to contend with.

That’s why I’m going to be writing about homebuilders sometime soon. Stay tuned, as I’m getting all my research done on the subject even as you read this!

Donald J. Trump versus Jerome ‘Jay’ Powell – Round Unknown

Speaking of rates, Trump told the Davos crowd that he’ll “demand that interest rates drop immediately.” But that’s quite contrary to current Federal Reserve thinking.

Chair Jerome Powell cautioned last month that inflation was moving “sideways” and needed to be analyzed more cautiously. As such, nobody expects the central bank to cut rates this week – or for the next several months.

Some well-respected voices such as Pimco CIO Daniel Ivascyn are even wondering if we could see a hike. He doesn’t think that’s the most likely scenario, but “we’re not out of the woods yet from an inflation perspective.”

Certainly, Powell was criticized in some circles for going too easy on Joe Biden – both by refusing to raise rates right away and then by cutting them twice leading up to the election. So I’m sure there will be some who accuse him of now holding rates steady just to spite Trump.

Regardless, there’s no love lost between the two. During his first term in office, Trump called the whole slew of Federal Reserve leaders “boneheads.” He compared Powell specifically to “a golfer who can’t putt.” And he made comments last year about firing him altogether.

Powell’s response to that, when asked by reporters, was that it’s “not permitted under the law.” So he ain’t goin’ anywhere without a fight.

It’s stories like that – and the previous four – that make me think we’re going to have plenty more fascinating weeks to talk about from here.

Regards,

Brad Thomas
Editor, Wide Moat Daily