Talking in traffic... Put some money in these foreign stocks... Three more assets you need to own... TACO and TINA... Why I flew to Washington... One dissenting voice you should hear... What successful investors do...
I flew to ground zero of the trade wars this week...
Of course, that's Washington, D.C.
After landing at Reagan National Airport on Wednesday, I was blessed with an interesting Lyft driver...
This guy knows how to hustle. He told me how he once made more than 7 times his money by reselling watches: A shop was selling them at a great price, but limited to one per customer. So he paid six of his friends $20 an hour to stand in line for a watch. He paid a total of $1,200 for his and his friends' watches... which he resold for $10,000.
But you can't be at ground zero without the conversation coming back to Donald Trump and his tariffs and their effect on markets...
So as we slogged through thick D.C. rush-hour traffic, my driver eventually asked me about good stocks to buy right now, given the circumstances.
I told him a few things...
First I repeated what I've said in the Digest and The Ferris Report a few times...
It's really hard to find attractively priced, high-quality companies in the U.S. stock market right now. But you can and should still pounce on the right opportunity whenever and wherever you might find it.
Lead analyst Mike Barrett and I feel like we got really lucky for the next issue of our Extreme Value newsletter (which comes out a week from today)...
We found a great business that we previously recommended a few months before it was acquired for a 70% gain over our original recommendation price. It's now a public company once again, and it's still a phenomenal business. And now it's trading at a very attractive valuation.
So like I said, we got lucky... But in a year or two, I suspect most folks won't feel so lucky to own the stocks they're buying right now. The reason is one you've heard me give before: At 28 times trailing earnings and with a cyclically adjusted price-to-earnings ("CAPE") ratio of 36, U.S. stocks just aren't that attractive overall.
Keep looking for great ones, by all means. Never give up the search for a great stock. But don't be surprised when the job turns out to be harder than usual. Unfortunately, it's also difficult to resist the temptation to overpay.
The other thing I told my driver is something most folks probably aren't doing...
I said that if you don't have a Japan fund or a Europe fund in your 401(k), you should buy them and forget about them for several years.
For decades now, the only desirable destination for capital was the U.S. It has led to the popular acronym TINA, which means "There Is No Alternative" to U.S. stocks. That sentiment has distorted markets out of all reasonable proportion, as I mentioned in last Friday's Digest...
Right now, the U.S. dominates global capital markets. It's 71% of the MSCI World Index, which accounts for 85% of developed countries' total market capitalization... despite that U.S. GDP is only 26% of global GDP.
Meanwhile, we are also still in a massive financial bubble, with the S&P 500 trading at a cyclically adjusted price-to-earnings ratio of about 36. Historically speaking, that's mega-bubble territory.
It's not hard for individual investors to fix this hyperfocus on U.S. stocks. In The Ferris Report, I've recommended Japan and Europe funds that include some of the world's greatest businesses – which are trading at absolutely massive discounts to the S&P 500 Index.
Research Affiliates analyst Alex Pickard recently sent an e-mail around to investors titled "Developed Ex-U.S. Equities: A Valuation Opportunity Hiding in Plain Sight." Pickard notes:
While the strength and resilience of U.S. large caps continue to dominate the global equity conversation, our current research suggests that developed markets outside the United States are quietly reasserting themselves as a fertile ground for return-seeking allocators.
Despite strong year-to-date performance, developed ex-U.S. large-cap equities continue to trade at far more attractive valuations than their U.S. counterparts... Developed ex-U.S. large caps have a CAPE ratio of 18.7 compared to 33.9 for U.S. large caps... U.S. large caps hover in the 96th percentile (nearly as expensive as they've ever been) while developed ex-U.S. equities quietly sit in the 40th percentile, modestly cheaper than their long-term median.
(Research Affiliates calculates CAPE differently from my standard reference, but Pickard and I are on the same page.)
So again, when I said good stocks were harder to find, I definitely meant for the typical investor with a sole focus on U.S. securities. There are bargains to be had. You just have to know where to look.
Otherwise, I told my driver, make sure you own three other key assets...
Gold, silver, and at least a little bitcoin.
As I told Ferris Report subscribers on April 25, Treasury Secretary Scott Bessent said in November that gold was his largest holding. When the keeper of the U.S. dollar says he owns more gold than anything else, take the hint... He owns it because he knows all about Trump's plans and knows they'll lead to a weaker dollar – and that'll help keep gold rising.
Then I told my driver about silver. It tends to skyrocket in the late stages of a bull market in precious metals. You can see it in the chart of silver and gold in the run from 2001 to 2011.
You can see how silver is more volatile than gold throughout the bull market. It spikes up more sharply than gold, then corrects more sharply. Silver peaked at a gain of nearly 900% (from the start of 1999), while gold's highest rise during this period was 560%.
I expect something like that will happen again this time around... Gold will soar, then silver will soar even higher.
But I also suspect the ultimate top is several years in the future. As I told my Lyft driver, you should buy some of each precious metal and forget you own them until they're rising every day in a late-bull-market frenzy.
And yes, I mentioned bitcoin...
Gold is good at its job, which is to preserve your purchasing power as fiat currencies decline in value over time. Gold cost $35 an ounce before Richard Nixon cut the cord between the dollar and gold on August 15, 1971. Today, it's nearly 100 times that amount at about $3,300 an ounce.
Silver is more speculative, and you need to be an even more judicious seller (when the time comes) than buyer.
Bitcoin might have a bit of both those characteristics someday. It already has the ability to spike up in a speculative frenzy like silver. And someday, it might have the ability to preserve your purchasing power like gold. Many have called bitcoin "digital gold."
So far, bitcoin has not behaved like gold. It has behaved like the Nasdaq on nuclear steroids. But I did notice that it went up during part of the tariff-tantrum market that prevailed in early April. So maybe the world is starting to see it as a store of value. We'll see.
Whatever bitcoin is, you can buy as little of it as you want. If you want to buy $100 worth, you can. So you can take a small amount of risk to own a potentially highly valuable put option on the U.S. dollar, quite possibly providing a hedge against monetary chaos.
And even if it's essentially a tech speculation on steroids, it'll probably do great whenever the Federal Reserve decides that it has to lower interest rates... like most other speculative tech bets.
Of course, at least in the markets, nobody seems to be worried about tariffs anymore...
Folks have bought the dip with both hands, pushing the S&P 500 to within just 4% of a new all-time high.
Markets are propelled in part by a new acronym: TACO, which stands for "Trump Always Chickens Out." It refers to the way Trump backed off on tariffs when he saw the bond market reacting to his policies on April 8. Most recently, Trump put a new 50% tariff on the European Union, then delayed it two days later.
The implication is that Trump won't really punish markets with tariffs... The idea is that he'll talk big but won't follow through, so every tariff-related decline is just another buyable dip.
I doubt that's true. TACO is no different from TINA. They're both ways of justifying endless, mindless buying of U.S. stocks, with absolutely zero reference to valuation or fundamental measures of any kind.
I've even heard reference to a "Trump put," meaning whenever markets fall as he lays on a new round of tariffs, you can always buy the dip because he'll get scared and relent. As if the president were adding and subtracting value from the $50 trillion-plus U.S. equities market at will.
Trump might seem unpredictable, or even like he's chickening out now and then. But I wouldn't count on him backing down. I think he's following a playbook put together by his treasury secretary and Stephen Miran, the Harvard economist on his Council of Economic Advisers.
Trump is determined to reset global trade to make it fairer to the United States, and Miran and Bessent share that vision with the president.
Trump knows neither his presidency nor the Republican majority in Congress will last forever. He'll keep talking big, taking drastic actions, backing off, then reapplying pressure, negotiating... whatever he thinks he needs to do as events unfold. As we've said in previous Digests, trying to predict what'll happen next is folly.
And fortunately for investors, it's totally unnecessary. All you need to do is prepare for a weaker dollar with gold, silver, and bitcoin... and for mediocre-to-poor returns in U.S. stocks by diversifying your holdings into high-quality stocks from developed countries outside the U.S.
If you do just that much, you'll be miles ahead of most investors.
I went to D.C. to film a new video presentation that'll be out in a couple weeks...
It's all about how a little-known 41-page government plan behind the trade wars also has strong implications for the U.S. dollar... virtually guaranteeing the dollar will fall in value. (We'll provide a link to the presentation once it's edited and ready to view.)
On camera, with the White House and Washington Monument right behind me, I acknowledged that some of what Trump and his team are doing could be good for the U.S. For example, who doesn't want to see lots of high-paying manufacturing jobs return to American shores?
But as I've been telling you here in the Digest and in The Ferris Report recently, the earth-shaking changes to global trade will come with equally earth-shaking changes for global capital markets. Without going into the nitty-gritty again, balancing global trade more equally will also make investments more balanced around the world.
So all those foreign stocks you're not buying because "TINA" are just what you need as part of your retirement portfolio. As TINA fades away, U.S. stocks will very likely not continue to trade at mega-bubble valuations all the time.
Not everybody is thrilled with Trump's plans...
And it's probably a good idea to keep a level head and listen to dissenting voices at a time like this.
Andy Kessler is such a voice. Before becoming a regular Wall Street Journal columnist, he designed chips at Bell Labs, worked on Wall Street, and founded the hedge fund Velocity Capital.
As he explains, Trump wants to weaken the dollar to make U.S. exports cheaper – and thus more competitive – on the global market. But Kessler sees more harm than good, since the flip side of that is costlier imports.
In a recent column, he wrote...
A potential scenario: The economy nose-dives, inflation rises, profits plummet, private credit implodes, interest rates fall, the dollar drops further, liquidity dries up, and dicey markets lead to more struggling times.
Kessler's solution is as radical as Trump's:
How do we avoid this messy doom loop? It doesn't take a degree from Harvard to figure it out. Zero tariffs. A Treasury secretary who promotes a strong dollar. Cut marginal tax rates to stimulate investment. And a push for deregulation (instead of tariffs) with real laws instead of executive orders.
Whatever happens, Kessler warns, "the next few months could be ugly," and how we come out of all these big changes "will define this era." I definitely agree with that.
I fear Kessler's potential scenario may come to pass... But I doubt the current administration will seriously consider his solutions (except maybe cutting taxes, but even that's not a slam dunk).
And as far as "real laws instead of executive orders," Trump is no different than anybody else with a lot of power. He won't be shy about using it in the most heavy-handed and possibly even illegal manner if it gets him what he wants.
At the risk of beating a dead horse...
You can't base portfolio decisions on predictions about whether or not Trump will chicken out, any more than you can mindlessly assert "TINA" as an excuse to load up to the gills on overvalued U.S. stocks.
Exercise judgment and make prudent decisions. Buying egregiously expensive U.S. stocks is a bad idea, no matter what the president does. Buying attractively priced, high-quality stocks from non-U.S. developed countries is a good idea no matter what he does.
And I appreciate that it's easy to give such common-sense advice, yet emotionally difficult to execute on it.
But that's what successful investors do. They buy stocks based on their fundamental attractiveness as long-term compounding vehicles. They don't let their emotions prevent them from making prudent portfolio decisions.
The world is changing, but the nature of sound investment has not. Buy high-quality assets at attractive valuations, even if they're not based in the U.S.
New 52-week highs (as of 5/29/25): Alpha Architect 1-3 Month Box Fund (BOXX), iShares U.S. Aerospace & Defense Fund (ITA), K+S (KPLUY), Rubrik (RBRK), and Veeva Systems (VEEV).
In today's mailbag, more feedback on Elon Musk and the Department of Government Efficiency ("DOGE")... and the legality of tariffs, which we covered in yesterday's Digest... Do you have a question or comment? As always, e-mail us at feedback@stansberryresearch.com.
"The fact is that Musk signed up to work on DOGE full time for 130 days [and] that time has ended. His DOGE team is still working on the fraud and abuse until July 4, 2026, and keeping him advised. They are saving our taxpayers billions of dollars. Also, they are extending the Social Security System by verifying that the 12 million people on the rolls over 110 years old are alive!! Let's use some common sense here." – Subscriber Harry W.
"On the tariff legal case, I think the judge's decision will be reversed, because the law does not extend unbounded powers to the President. Congress has the right, at any time, to overturn the emergency declaration. This means the President's actions are always subject to Congressional oversight. The issue of whether the declaration of an emergency adheres to the law's requirements could be considered a judgment that courts are unable to review, especially given the political oversight available to Congress. There is precedent from Justice [Felix] Frankfurter on this issue of judicial review." – Subscriber Chris H.
Good investing,
Dan Ferris
Washington, D.C.
May 30, 2025
Join for free. See how over a million people are taking control of their wealth…
