It froze the start of my post this morning, so I decided to publish and then add on.

My observation is that the apparently non-stop lack of any rational economic planning in Washington, which has made major US stock market indices the worst place to be since the inauguration, no longer has the negative shock value for either the US dollar or the S&P 500 that it had, say, this time last year.

As damaging as Trump has been for the US economy, his Iran misadventure seems to be having much more severe negative effects on the rest of the world, Europe in particular, since it is much more dependent on oil coming through the Straits of Hormuz than the US is.

My sense is that the strategy that worked so well last year–finding companies with costs in the weakening US dollar and revenues from abroad, is pretty much played out. It seems to me that, in the eternal war between concept and valuation, we’re now in a period where relative valuation will count for more than the “Big Picture.” I’d been thinking that, given the sharp decline in the $US over the past five quarters, American brand names might have a price-based appeal to foreign acquirers. While this may eventually happen, the contractionary economic policies of Washington coupled with the reputational black eye from ICE et. al., argue that this is the wrong place to be, I now think, for all but the most deep value investors.

In short, I think we’re in a pure stock picking market.

Europe is constrained to some degree by the oil shock as well as the relatively limited selection of publicly traded companies. This leaves Asia, I think, with Hong Kong as an entrance point to China, and Japan, as possible areas of interest.

As to the Magnificent Seven (not my favorite name, but a great movie), I’m not sure there was ever a coherent economic story behind it. Nvidia (which I don’t hold now) is the only one I’d consider buying. I do own a small amount of MSFT, which I’d sold in early 2000 and bought back when the Ballmer era ended. I’ve been putting it in a charitable trust rather than selling, because my cost basis is so low.

Something has been bothering me about Pete Hegseth for some time. It isn’t just that although he talks about physical strength being a key attribute of military leaders, he doesn’t know how the army does pullups. It isn’t that although his army career has been in the “Follow Me” branch, he appears to have no motivational skills. Or that he seems not to have been savvy enough to know how bad a thing it is to run out of ammunition in a war. This morning I realized that what I find most off-putting is that, intentionally or not, he dresses like a villain in a Batman movie, which makes a hard job even more difficult.

If newspaper reports are correct, the Trump administration has summoned the Vatican representative in order to threaten the pope, a US citizen born in Chicago, with dire consequences if he does not stop criticizing the US attack on Iran. Unclear whether he will be arrested and imprisoned if he set foot in the US or that Trump is planning to sever the US church from Rome, Henry VIII style. …this even though US Catholics are by and large Trump supporters. Although fake news is always an issue in today’s world, Trump also appears to have subsequently represented himself online as being the reincarnation of Jesus.

J D Vance went to Hungary to show Trump administration support for Viktor Orban just in advance of Orban’s epic defeat/rejection by Hungarian voters. Why get involved on the wrong side of this mess? Didn’t they know this was a lost cause? …just to show dictator-to-dictator support? …orders from Moscow?

Now the US is going to blockade the Straits of Hormuz, which in investment terms would seem to be throwing good money after bad.

What’s interesting about all this is that there have been fewer recent negative effects on Wall Street from the administration’s dysfunction. The currency is flattening out, and the S&P has recently been more or less keeping pace with the EAFE index of major non-US markets.

I like to think of stocks I own in two general ways, on conceptual level apart from detailed spreadsheet analyis of earnings growth prospects. Both are important:

–concept, which in its simplest form is the two-minute elevator speech you’d use to explain to someone else why you own a given stock–what the company does, why that’s a profitable thing to do and what you think the market doesn’t fully understand–and therefore substantially underestimates the company’s potential earnings growth. The conclusion here will presumably be that as earnings reports reveal this superior growth the stock will move significantly higher

–valuation, or the price you’re willing to pay for expected earnings. This is especially important for “value” stocks, whose main attraction is that the company possesses a hoard of assets–land, factories, distribution networks, brand names–that are currently being misused/mismanaged. The general idea is that you’re being paid to wait for some catalyst for change–like new management or acquisition by a rival.

In today’s market as I see it, AI-related stocks are the ultimate in conceptual attractiveness. The biggest issue with them is that they’re all well-known, they’re expensive and there’s already been a significant rotation away from the central players like Nvidia to more peripheral issues like Broadcom or Oracle, and from them to component makers like Sandisk and Micron (I own shares of MU right now, but not the others).

That leaves valuation–and traditional value stocks–as a potentially fruitful area to investigate. Also, the collapse in the US dollar since the inauguration would typically have foreign firms anxious to improve their US presence salivating over the bargains this presents. I’ve been fooling around in this area, on the idea that’s Warren Buffett’s claim to investment fame–that intangible assets like brand names and distribution networks are extremely valuable, but are reflected in a company’s financial statements only as expenses (a semi-geeky aside: if company A takes over company B because B has tons of intangibles, A is allowed to list what it has paid for on the balance sheet as assets. This is the only way they appear in the financials).

There is a big obstacle here, however–the significant, and continuing, black eye that the US brand has been sporting since the inauguration. This is partly pure economics, given the administration’s desire to reduce the value of Treasuries owned by foreigners by weakening the currency plus its eagerness to use the military to seize foreign oil. It’s also partly the current administration socioeconomics: ICE gun violence, Federal imprisonment and deportation of migrants, the failure to r elease the Epstein files to Congress…

All this argues, I think, for a sideways market domestically, with better prospects abroad. I find my tendency has been, oddly enough, toward Chinese companies listed in Hong Kong.

Retired general Stanley McChrystal, himself a curious character, commented, as I interpret his words, in a recent article that Pete Hegseth’s focus on physical conditioning shows a basic misunderstanding of what modern warfare is about. Brainpower is much more important. Logistics, intelligence information and planning, I think he’s saying, beat brawn and physical courage every day of the week. Not that the latter aren’t important, but if you have no minesweepers or rockets to intercept drones, or ammunition or food, or any idea what an enemy is up to, physical strength and courage aren’t going to get you very far. This makes the current Hegseth-induced military leadership brain drain a worry in the US for tomorrow as well as for now.

Hegseth doesn’t do military pullups, if the YouTube of his challenge with RFK Jr. is any indicator. His palms face toward him when he grips the bar rather than away, and he ends his downward motion before the final couple of inches (the hardest part). I wonder why.

Back in the last century, when I was an oil analyst, there was lots of discussion about “peak oil,” which at that time meant peak supply–the time when all the recoverable oil would have already been discovered, and when the oil price would begin a steady upward climb. Nowadays, we’re at peak oil, but in pretty much the opposite sense–the time when the available supply being brought to the surface is equal to or exceeds what the world demands. The administration is very much pro-fossil fuel. And the oil and gas sector in the US is +32% year-to-date, vs. -36% for the S&P as a whole. Nevertheless, it seems to me that the supply disruption the US is creating by attacking Iran will ultimately speed the change away from fossil fuels. Given that the US is the world’s largest oil and gas producer, and generally the industry has given strong support to Trump, this is a peculiar outcome.

I’m not sure there’s a consensus view of why we’re at war with Iran, but a leading contender seems to be that it shifts public attention away from the administration’s failure to obey the Congressional mandate to release the Epstein files, especially as regards conduct of Trump himself. On the other hand, we have tariffs, and they make very little economic sense. Nor does using ICE to shrink the working population (why would anyone want lower GDP?).

Where does all this lead us as stock market investors?

–the dollar continues to weaken, arguing that it continues to be better to have costs in $US and revenues elsewhere–and to avoid firms with foreign costs and $US revenues. So far this year, this hasn’t worked well, for me anyway. Tech fits the revenue/cost description, and that’s where I’m concentrated. But valuations are high after an extraordinarily good 2025.

–I think the domestic consumer is a tough place to be, since it’s being hit by tariffs and a weak currency. Last year was a time for trading down, but my guess is that most of the oomph this gives to lower-end retail is behind us.

–I’d also been thinking that domestic brand names might be targeted by foreign companies seeking to build their US exposure. But I’m not thinking this any longer. My guess is that the eagerness of Congresspeople of both parties to allow Trump free rein is too much of an obstacle.

This leaves: foreign markets, especially, I think, China through Hong Kong; domestic tech, and biotech (which I know pretty much nothing about); maybe consumer staples (?). Put another way, the US is likely going to remain an overall bottom-feeder while the current regime is in office.

I’ve just updated my Keeping Score page for March price action.