Objects in Motion

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Buenos Aires looks much the same as always. But there’s a new energy. Walking around the Palermo Soho neighborhood, we see more construction…more new shops…new restaurants…

“Things have gotten better since Milei took over,” was the judgment of our taxi driver. “Not everything… but people are not sitting around anymore.”

“He’s right,” said a business friend. “Before, I had a hard time finding people willing to work. Now, I guess they have been fired from the government…or are afraid their benefits will be cut off…but we get a lot more job applicants than we used to. The trouble is, they are more expensive.”

The disappointment for foreigners is that everything is more expensive. And not just in peso terms. A good dinner in a good restaurant will cost almost as much as it would in the US. Last night, at the popular Fervor restaurant, we had one of the best ribeye steaks we’ve ever had. The cost, for four people, with a good bottle of Malbec, was 300,000 pesos — or about $300.

Milei is opening Argentina to world markets. The financial economy is adjusting rapidly; prices are rising to world levels. But output and wages, in the real economy, will take years to catch up.

Oddly, Milei and Trump are said to be similar. It’s hard to figure out where that similarity begins. We know where it ends, however — at trade policy. Trump is a TV-watching, burger eating, knee-jerk protectionist. Milei — an Austrian economist and an intellectual — is a free trader. While Milei is opening up…Trump is closing down. The Wall Street Journal:

Argentina’s Milei, a MAGA Superstar, Is Bucking Trump on Trade

Libertarian leader’s slash-and-burn approach to tariffs, import restrictions puts him out of step with the U.S.

A big change. Normally, we would come to Argentina with wads of US dollars. This time, we were told not to bother; the dollar is actually falling against the Argentina peso.

Milei undertook a major reform effort with a clear objective. He aimed to reduce the power and spending of the government in order to let the private economy recover. So far, his approach seems to be working. Argentine stocks have more than doubled since he was elected.

Donald Trump on the other hand, seems to have an agenda all his own…or maybe none at all. The dollar is falling. And the Dow has lost 15%.

Elon Musk is more of a Milei kind of guy, rather than a Trump kind of guy. We expect the difference to result in a rupture sometime soon. Maybe it already has. Business Insider:

Elon Musk says he’s stepping back from DOGE

Meanwhile, the stock market doesn’t like Trump’s trade war. Cryptopolitan:

Wall Street’s Dow Jones on track for worst April since the Great Depression

The S&P 500’s performance under Donald Trump’s presidency is now the worst showing for any president this far into office, based on Bespoke Investment Group’s data going back to 1928.

Stocks rose yesterday, after the press reported the Trump team is backing away from its trade war. Fortune:

Stock market rallies after Treasury Secretary Bessent tells a closed-door investor summit that the tariff war with China is unsustainable

Many investors think Donald Trump has again flip-flopped. The Independent:

Trump admits China’s tariffs will drop ‘but it won’t be zero’

He might have been alarmed by China’s aggressive response. Just in the last couple of days, Beijing warned other nations not to cooperate with the US trade war. It imposed new tariffs of its own. And it cut off all imports of LNG.

On the Jerome Powell issue too…Trump has backed down. He threatened to fire Powell but may have panicked when he saw the market’s reaction. Now, Trump says he has ‘no plans to fire Powell.’

Instead, he’ll keep the ‘big loser’ at the Fed. Most likely, Trump won’t fire Powell because he lacks the authority…and needs someone to take the blame when his own policies backfire.

But let’s not be distracted by politics, headlines and short-term trading. It’s the Primary Trend that really counts. Which way is it going? Where does it lead?

America has $269 trillion worth of assets. But it has $145 trillion of debt and only $29 trillion of output (GDP). We know that asset prices change easily. Debt does not. And we also know, from our Conservation of Value principle, that Wall Street (asset values) and Main Street (output) can never get too far away from one another for too long.

Somehow, the financial economy and the real economy have to reckon up, one with another. And since, at today’s growth rates, it would take Main Street more than 10 years to catch up to Wall Street asset prices, we expect it is the financial economy that will do the adjusting. By our back-of-the-envelope estimate, $50 trillion worth of assets will disappear.

How? When? That is the big story for the years ahead.

Stay tuned.

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