Podcast Episode #15
Hello everyone and welcome to episode 15 of the Tax Free Millionaires podcast. I'm Reed Scott, and today we're going to talk about all the craziness that's gone on in the market in the last couple weeks. My idea of what it is and how you can address it and protect your investments. So bear with us.
We're going to get started in just a minute and talking about the stock market and how to protect your investments.
So as anyone who's been watching the news knows and watching the market, we've had a correction in most of the indexes. And the question is it going to get worse? Are we going into recession? Are we going to do bear market? And while no one knows for sure, everyone has an opinion, and I'll give you mine.
So I've been watching a lot of the prognosticators and YouTube geniuses and the financial talking heads talking about what they think is going on. And I'll give my 2 cents now. A couple of episodes ago, I was talking before this all happened, I said, Hey, we're in the stage two of the market where we still had markups happening and we hadn't hit a bear market yet.
And quite frankly, after what's happened with these tariffs, I'm changing my opinion. As anyone who's followed my podcast knows, you should never, ever not be using good risk management. So I watched one YouTuber this week, who, by the way has over 450,000 followers telling his followers that.
If you're not prepared to have a 30% to 40% correction in your portfolio, you shouldn't be investing in the market. Can you believe that he's telling his followers of which he has almost half a million, that they should be accepting of a 40% decline in their portfolio? I cannot believe this. It's incredible if you're not using risk management to get out of the market, if it dips by 10%.
You shouldn't be an investor and you certainly be shouldn't be giving advice to people that they should be accepting a 30 to 40% decline in their portfolio. At Tax-Free Millionaires on our courses, we teach how to use puts and hedging and stop losses to protect your investments. You should never accept that kind of a dip in your portfolio.
You shouldn't have to because there are millions of ways to protect yourself. And in every one of my episodes, in all of our courses. We talk about investing in the stock market, and you should protect each one of your positions. Whether you're investing in ETFs indexes, or individual equities, you should protect that position with either a stop-loss or put.
Now, if you've made profits on a position, then you can afford to use puts to hedge your investments, and you can use puts to protect your entire portfolio from a downturn in the market. So when the market crashed this past two weeks. If you were following the advice of tax free millionaires in our courses, you would've automatically gotten out.
You wouldn't have experienced a 20% loss in your portfolio because your stop losses and your puts would've protected you. You'd be setting in cash now. So if you are a follower of our courses, you're setting in cash right now. The question is what should you do? Should you jump back in? Should you buy the dip?
And my opinion is no. This is not a buy the dip market. And the reason for that is tariffs. Now, first of all, you should know I am not a Trump basher. I like a lot of what Trump is doing, but when it comes to tariffs, he's wrong. He's dead wrong. And I'm gonna tell you why. Because tariffs in the history of this country have never worked.
Going all the way back to President McKinley, when he put on tariffs, it raised prices, it caused recession, and two years later, the Republicans lost the house. Then under Hoover, president Hoover, it caused a depression and two years later, the Republicans lost the House and the Senate and it led to 16 or 20 years of democratic rule.
And Roosevelt , who was president for four terms, actually got a exception to our constitutional provision saying the president could only serve two terms. He was so popular that he served four terms and died in office.. So if President Trump doesn't want that same thing happening to him and going down in history as the worst president in the United States since President Hoover, he will quit this tariff fiasco.
Now, I originally thought before he put the tariffs on that it was a negotiating employee, as a lot of people did. But , since I've been reading about his first. Term.. President Trump apparently thought tariffs were good at that time.
But his Secretary of Treasury saved him and us, and convinced him not to put on tariffs as much as he wanted. Unfortunately, this time around, president Trump does not have that same good level of advice, and his current Secretary of the Treasury, he doesn't have the gravitas to convince President Trump that tariffs are a mistake, even though he knows better. And if you've read any of his statements before he was Secretary of Treasury, he says Tariffs are inflationary and he's right, but he's not stopping President Trump from doing this. And other advisors who were familiar with President Trump in his first term.
Have indicated the same thing that President Trump actually believes in tariffs. He thinks they're good, here's why they're not good. They might have been good before all of the companies in the United States changed their global supply chains and move manufacturing out of the country. So in the 1980s Japanese were dumping cars in the United States market.
They were dumping steel and Mii, which is the Japanese industry. And, company trade association made a concerted effort to buy market share in the United States automotive industry and in the steel industry. And the Japanese government subsidized Japanese companies like Toyota and.
And they allowed them to come in and buy market share, and they took market share away from Ford and GM and Chrysler, and those companies at the time begged the United States government to stop it. I actually worked for Ford, and I remember the price of a Ford vehicle in the late eighties had a $2,500 disadvantage against the Japanese.
Just because the healthcare was paid for by government, whereas Ford had to pay for the healthcare of its employees itself. Now, that was just on healthcare. And then the Japanese came in and actually lost money on each car they sold. And they did that for years because they were being subsidized by the Japanese government.
They did that for years. They lost money on each car. They sold. They lost money on steel that they imported into the United States so they could buy market share. And the companies, US Steel and Ford and GM begged the United States government to stop it with tariffs, but they didn't. So the companies, not just the automotive companies, , and not just the steel companies, but all the companies in the United States realized that the United States government was not gonna help them.
So they moved to a different model. And that's one where they outsourced a lot of their production so they could compete globally, and they moved some of their production offshore to Mexico, Canada. And then of course after the Japanese, we have the South Koreans with Hyundai and the other automotive manufacturers.
And a lot of the automotive manufacturers in the United States actually bought positions and bought into some of these companies. Ford owned 25% of Mazda and same with gm. They bought a lot of foreign companies. So now in the ensuing 40 years, the United States industry has set up.
Global supply change, and even if you kept these tariffs on, it is not going to create any jobs in the United States. There aren't any big manufacturing companies. US Steel doesn't even manufacture most of its steel here anymore. There are a few specialty steel companies that love what he's doing, and guess what?
That'll create a thousand jobs someplace in Pennsylvania. It's not going to change our economy. Our economy is global and that's what President Trump doesn't understand. Maybe he's appealing to a base of people in the Midwest in Michigan, Ohio, Indiana, and the Rust Belt states. But that isn't gonna work either because guess what?
I used to live in Michigan. I used to be involved in the automotive history in Michigan and Michigan hasn't changed its restrictive tax economic policy. So even , if the automotive manufacturers were going to come back in the United States, they wouldn't build plants in Michigan to save the jobs of the people there who never moved, or Ohio or Indiana.
Those companies have already built plants in the Sunbelt, in Tennessee, in North Carolina, South Carolina, and Georgia. So that's where there's jobs have moved. But some people in the Rust Belt, many Trump supporters think that they're gonna get their jobs back. No, if you didn't move to Tennessee 20 years ago when the jobs moved, you aren't gonna be able to get a job back in Michigan or Indiana or Ohio now.
So the concept of tariffs. Getting jobs back in the rust Belt of the United States is ignorance, pure ignorance of how the economy works. So I would give it to President Trump the way, the same way he talks to some of us as constituents. You have two choices, sir. You can have a beautiful economy and create a great market.
With low inflation. And all you have to do that is continue with your tax policies and remove tariffs. But if you continue with this tariff posturing that you're doing 'cause you actually believe in it, I would advise you first to go back and read the history books about McKinley and Hoover.
And if you still continue to do that, then your choice is yours. You'll go down in history as the worst president since President Hoover. And if you don't think he was considered as a bad president, you're not reading anything, not alone, the history books. So the choice is yours, go down in history as a great president who created great economy and jobs and wealth for everyone, or go down as the worst president in the history of the United States since now again.
I am not anti-Trump. I am not a woke person, and I was behind him a hundred percent until he started these tariffs. They are ridiculous. It's a bad event and it's going to cause recession, and the market is going to suffer as a result of that. So two weeks ago before these tariffs happened, I thought we were in stage two of the market.
I now think that we're heading into a bear market. I don't believe this is a bite , dip opportunity. I hope I'm wrong. I hope that President Trump decides to come to his census and stop this tariff of wars. It makes absolutely no sense. And by the way, if he makes Canada the 51st state, guess what? It's gonna be a blue state that's gonna vote against the Republicans.
I don't think he really wants to do that. A lot of these things are just not making sense. We need to stop this mercurial use of tariffs. , I don't believe it's negotiating. I believe he actually thinks it's going to help the economy. It won't , and he's talking about his short term suffering.
No, it's not gonna be short term. It's gonna be long term long-term suffering, increased consumer prices and in a horrible stock market. But it doesn't have to happen. Just quit doing it. By the way. We receive over 60% of our oil imports from Canada, over 4 million barrels a day. And by the way, they could increase that production to 8 million barrels a day without a problem.
And if they did that, we would eliminate the power. Of the Middle Eastern oil, we wouldn't need any of it. By the way, America produces it exports oil. That's true. But gasoline, we do not, extract the type of oil that we need for gasoline or for our refineries. So we can't use what we produce ourselves.
We have to get it from Canada or the Middle East to make gasoline. Just a 25% tariff on gasoline coming in from Canada will raise the prices at the pump about 40 to 50 cents per gallon, regardless of what state you're in. How are the American consumers gonna like that? And by the way, that's just gasoline, that's not clothes electronics and all these other things.
And food it's gonna ruin American farmers. It's going to ruin the American consumer. And even the businesses who make money no matter what, are going to be hurt, this is why I don't think this is a buy the dip opportunity. Unless things change and the tariffs are taken off the table, then it might be buy the dip.
Because by the way, we still have a great economy. We have businesses, we have AI revolution going on. Companies like Nvidia are still good companies. Dell lots of great companies out there. A MD. That are going to be able to continue to make products and make 'em, but nobody's going to care if they're making money because the stock market's going to be so suppressed from the recession that it's going to be a bear market.
Now how long that bear market last? I don't know. Maybe as long as we have tariffs or maybe until the Republicans are kicked outta office in the midterm elections. And I don't necessarily want that. I'm not a political creature. I don't even like to talk about politics on my podcast and try to stay away from it.
But it is having an impact on people's portfolios. So again, if you're a tax free millionaire investor, you followed our advice, you are already out of this market on the basis of your stop losses and puts, in my opinion, you should stay out of it until these tariffs come off. And if they don't, again, we're gonna have a recession.
So be careful. So that's it for the day. I normally give my stock pick of the week , but I'm going to be reevaluating , if we're in a bear market here we may have to start taking the bear market approach to making profits and we can still make money in a bear market, but it's different obviously, in a bull market.
So we'll be talking about new opportunities in the upcoming bear market if the tariffs continue. So have a great week. If you're setting on cash, which you should be, then keep setting. Don't be tempted to buy the dip because you won't believe how far down stock prices can go. If truly these tariffs stay on, we've already had a 10% correction in the s and p, you're gonna see at least a 20%.
So this is not the time to be buying into the market. Thanks. Have a great week and I'll talk to you on the next episode. Take care.
