Inside today’s Daily Journal…

In the “Mailbag” below, a dear paid-up subscriber takes me to task about not treating our revered political leaders with more respect.

He objected to my “Ms. Boozy McMumbles” literary flourish. And, like all fanatics tend to do, accused me of being unfairly prejudiced against his “team.”

How did he miss my repeated use of the popular slur “Orange Man”? Or my invention of the moniker “Obama!” almost 20 years ago? Or my adoption of the retard-inspired nickname “The Decider” during our disastrous Iraqi war? Or any of my other notorious and disrespectful critiques of our bankrupt, corrupt, vile government, and the sociopaths who populate it?

About two weeks ago, I led my analysis of our latest foreign war with an essay inspired by Eric Hoffer’s book The True Believer (1951).

I didn’t realize most of my dear, paid-up subscribers had never heard of him.

Hoffer is the greatest American-born philosopher – a man whose entire understanding of human nature was formed by our country and its development. Hoffer lived through America’s transition from a limited republic to an all-powerful, mob-ruled democracy. And he tried to warn what would happen.

Hoffer was born in New York City in 1902. When he was five, he and his mother fell down a flight of stairs. She died. He went blind. For eight years, he couldn’t see. His vision inexplicably returned at age 15. Driven by the fear he would lose his sight again, he began to read voraciously and constantly – a practice he continued his entire life.

His father died in 1920, leaving Hoffer without a family. He began a life of itinerant labor, working as a migrant farmworker, doing odd jobs around Los Angeles, and, finally, in 1943, becoming a San Francisco longshoreman. Through these experiences he observed people from all walks of American life and developed hard-won insight into human nature. He authored 10 books and received the Presidential Medal of Freedom from Ronald Reagan in 1983. He led an incredible life.

If you’ve never read his books about how human nature can lead to fanatical political beliefs, I recommend The True Believer and The Passionate State of Mind (1955). These books, along with Hannah Arendt’s The Origins of Totalitarianism (1951) and Stanley Milgram’s Obedience to Authority (1961) offer a stark warning about the world we see unfolding today.

Arendt’s study of the Nazi movement uncovered a key insight that Hoffer’s work also described: the inherent human need to belong. As Arendt explained:

Think about how social media and the government’s response to COVID has increased social isolation. More Americans spend more time consistently alone than ever before. And for these people, the need to belong to something – to anything – becomes overwhelming. That’s why embracing even the most obvious and absurd lies becomes the gateway to belonging.

Arendt observed:

How many times in the past year have I heard otherwise very intelligent and sophisticated people say that U.S. President Donald Trump is playing “4-D chess” to magically wave off obvious lies and absurd economic claims?

As longtime readers know, I do not believe our latest military adventure in the Persian Gulf will end cheaply or easily – just as the others did not.

I know that our military capabilities are virtually unlimited. I don’t think it’s likely that Iran will be able to strike back in any strategically meaningful way. What I suspect will happen is a long period of increasing unrest in the region. It’s nothing that will threaten American sovereignty. But it will be a big enough problem to make trillions of dollars in profits for our largest defense contractors and our biggest energy companies.

The bigger, long-term risk lies in the Republican Party’s adoption of tariffs as a means of generating government revenue.

These lies are particularly insidious because they have conservatives – who typically oppose raising taxes – joyfully extolling the virtues of them!

And… when I explain (as I’ll do below) that tariffs are merely taxes and more government is never the answer? You see the true believers emerge. Contrary facts do not change their minds. They deepen their conviction.

Nevertheless, it’s only facts I have to offer.

So let me show you, in detail using specific companies, why tariffs are no panacea. In fact, it’s because America is the largest, free-trade economy that tariffs pose such a threat to our wealth. We can’t win a trade war because we have the most to lose.

Let’s start with Nike (NKE).

Nike’s global brand dominance pays huge dividends for America. It – along with Coke (KO), McDonald’s (MCD), Microsoft (MSFT), Disney (DIS), and Hollywood – demonstrates the sheer power and quality of our free-market economy to the entire world.

But Nike, like virtually every other major U.S. business, is not a traditional “American manufacturer” in the old sense. It doesn’t own factories – it orchestrates a global, multi‑country supply chain. Nike matches each task in its apparel business to the country that can do it best.

These country-specific advantages have been created over decades through heavy investments into distinct regional ecosystems.

Almost all of Nike’s shoes and a large chunk of its apparel are made in low‑cost Asian hubs like Vietnam, China, and Indonesia. These regions have built entire ecosystems – raw materials, specialized component suppliers, skilled line workers, and localized logistics – around footwear and textiles.

The U.S., meanwhile, specializes in the high-value, high-return work: design, intellectual property, marketing, finance, and e‑commerce.

By marrying these two advantages, Nike creates enormous value. Nike is monetizing these comparative advantages all across the global economy.

When you look at the cost of a typical Nike shoe, the labor component in Vietnam or Indonesia is only a few dollars per pair. The total factory production cost might be in the mid‑teens. That is what enables Nike to produce high-quality shoes for around $100.

Nike’s massive profit margin – and its massive global marketing budget – is created by the efficiency of this supply chain.

By letting each area of the world do what it does best, America gets to keep all the highest-paid staff: the designers, R&D engineers, marketers, accountants, lawyers, and executives.

When new tariffs hit the countries where Nike shoes are made, the result is a massive, recurring tax bill that costs the company billions.

Nike cannot realistically avoid these tariffs by moving shoe production to the United States. The U.S. no longer has a full end‑to‑end athletic footwear ecosystem. The molds, tooling, and trained workforce are in Asia. Rebuilding that ecosystem here would consume an enormous amount of capital and take years – and even then, our factories likely couldn’t produce shoes as well or as cheaply. By the time that ecosystem was built, Nike would be bankrupt. This kind of work – stitching, gluing, finishing – simply doesn’t scale here. More importantly, Nike shouldn’t invest its capital into those kinds of factories, because the return on that capital would be extremely low.

Tariffs will not create an American comparative advantage in low‑margin, labor‑intensive manufacturing. That industry migrated offshore for good reasons: U.S. entrepreneurs found better, cheaper ways to make shoes that required less of their capital, resulting in cheaper products and bigger profits. That is good for America!

As a bonus, this globalized system allows U.S. trading partners to share in the bounty of capitalism, raising their standard of living and fostering global stability.

If you think Nike is an outlier, look at the rest of the American economy. The collateral damage of tariffs is visible across virtually every sector:

So, what happens when you slap a 25% tariff on a globally integrated U.S. company? They are forced into three bad choices:

All of these options are bad for America. They make our companies less efficient and less competitive internationally, and empower politicians. Most importantly, they act as a direct tax on the American consumer.

For a country like the U.S. – which is deeply specialized in the high‑value, wealth-generating pieces of the global supply chain – tariffs are the worst of all worlds. We bear the cost in higher prices and weaker multinational companies, without gaining a meaningful domestic manufacturing base in return.

But what about jobs?

America doesn’t lack for jobs. Unemployment is less than 5%. If you have a pulse, you can have a job in our economy. These tariffs will result in massive job losses, as our very best companies will have to lay off high-paying jobs in R&D, design, and marketing because the profit margins will all be reduced by these tariffs.

If you want America to have more wealth and to have more high-paying jobs, then you should insist that the government find a different way to raise revenue. Tariffs will destroy America’s economy.

Finally… My favorite true believer rebuttal to the tariff lie is that it’s not fair that Germany and Japan have tariffs but we don’t. To which I simply reply: why would we copy anything about their economic structures? Do we want those economies? America is vastly wealthier than all of the other major economies (and our lead is growing) because we have free trade.

Starting wars and enacting tariffs will not make us freer or richer.

Don’t be a true believer.

Tell me what you think… but please at least think first: [email protected]

Good investing,

Porter Stansberry
Stevenson, Maryland

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1. Oil execs warn the Iran energy crisis is likely to get worse. The CEOs of ExxonMobil (XOM), Chevron (CVX), and ConocoPhillips (COP) told White House officials last week that the Strait of Hormuz closure is creating a supply crisis with no quick fix. Crude oil prices are above $95 per barrel this morning, roughly 1,000 tankers remain stranded, and the International Energy Agency’s coordinated 400-million-barrel reserve release will cover just 26 days of the estimated 15-million-barrel-per-day shortfall. President Trump is now pressuring NATO, the UK, and China to send warships to reopen the strait – but so far, no country has committed forces. The administration says it wants the waterway reopened in weeks, not months, but that’s looking increasingly unlikely today.

2. An AI transformation for Credit Acceptance (CACC). New Credit Acceptance CEO Vinayak Hegde is repositioning the subprime auto lender (and Complete Investor recommendation) as an AI-powered lending platform – leveraging 30 years of data to achieve two-second loan approvals (10x faster), 70% faster tech deployment, and flat headcount despite growth. Citron Research has flipped its short position into a bullish $714 price target – a 60% bump from the current $445 per share.

3. Eli Lilly’s $3 billion China expansion. Eli Lilly (LLY) has announced a $3 billion, decade-long expansion into China aimed at localizing the production of orforglipron, its highly anticipated once-daily obesity pill. By shifting from complex injectables to a locally produced pill, Lilly aims to bypass global supply-chain logistics and critical syringe shortages to capture a GLP-1 market in China – where adult obesity rates are 50% – that could reach $14 billion by 2030.

Coupang (CPNG) board member and venture capitalist Neil Mehta purchased 7.35 million shares, worth roughly $136.5 million, of the South Korean e-commerce giant last week, following a 40% drop due to data breach.

Eric H. writes:

Porter Comment: Boot licker.

Doug W. writes:

Porter Comment: I don’t think you can look at Biden’s economic decisions or his open borders and claim he was good for our country. But either way, I don’t believe Harris would have made a good president. I think she would have been a national embarrassment, like Biden. At least Trump was promising (some of) the right things. But, because he dumped DOGE, started another war, and overseen an incredible expansion of government spending and deficits, the Dems will take back Congress and probably the presidency in 2028. I pray they will elect someone who understands economics and supports enforcing all the laws. But I’m certain they won’t. Countries don’t come back from these kinds of economic mistakes without massive consequences.

Glen G. writes:

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