The Retired Investor: Front running is alive and well in America
By Bill SchmickiBerkshires Columnist
On Friday, Oct. 10, just ninety minutes before President Trump took to social media threatening 100 percent tariffs on China, two anonymous accounts placed bets that cryptocurrencies would fall in the short term. By the end of the day, the cryptocurrency market had plunged $19 billion, resulting in a $160 million gain for those traders.
The plot thickens. Sunday night, before the futures market opened, the president took to the airways again, this time calming fears over a trade war with China. When markets opened on Monday and cryptocurrencies were skyrocketing higher, the same account placed a fresh short bet, this time for $160 million, that crypto would fall even further. Tuesday, after China upped the ante in its trade spat with the U.S., crypto crashed again.
Either someone is extraordinarily lucky or prescient. Traders were quick to accuse this anonymous account of insider trading. Is this just a case of bad feelings, envy, or is there something fishy going on in the markets? Obviously, there is no conclusive evidence of insider trading, and even if there were, it is harder to prove and prosecute in the lightly regulated cryptocurrency market.
This is not the first time this has happened. Front-running important news has become a lucrative pastime this year. A week before Liberation Day on April 2, a key official who shapes the Trump administration's trade policy sold off $30,000 worth of stock. Two days before that ill-fated day, a state department official sold $50,000 in stock. Readers may recall that the stock market plunged dramatically after President Trump's reciprocal tariff announcements. More than a dozen U.S. officials in total sold stocks before the announcement that sent stocks plunging that day.
Democrats were quick to accuse the White House of insider trading, demanding an investigation into all the transactions by staffers leading up to April 2. Kush Desai, a spokesperson for the administration, argued that they should instead investigate their own Nanci Pelosi if they were interested in an insider trading probe.
The Democrats' accusations are a proverbial case of the pot calling the kettle black. Members of Congress of both parties are permitted to trade stocks, and almost all of them own shares in publicly traded companies. Congressional lawmakers have access to nonpublic information that has been shown to move markets, individual stocks, and sectors. A New York Times investigation found that 18% of congressional members trade stocks in industries related to the work of the congressional committees on which they serve. Talk about a conflict of interest!
There are laws in place that prevent front-running and insider trading. The Securities Exchange Act of 1934 aimed to prevent insider trading on the stock market by mandating disclosures; however, this requirement did not apply to members of Congress. The STOCK Act, passed in 2012, partially closed that loophole. It requires Congress to disclose stock trades of more than $1,000 within 30 days. Penalties for failing to do so are a mere $200 for a first-time violation.
And guess who investigates legislators' violations—Congress. The proceedings are private, and enforcement is inconsistent at best. Insider abuse is so well-known that there are at least six internet services that track congressional stock trading, and at least one that tracks Nanci Pelosi's stock picks daily. If you ever wondered how elected officials manage to acquire vast fortunes on their congressional salary, now you know.
Regarding the accusations against the Trump administration, a research paper by Paul Odin, Assistant Professor of Law, published in the Oxford Business Law Blog, argues that, under the definition of market manipulation as outlined in the 1934 Act, neither Trump nor his team violated the law. As for insider trading under the Stock Act, "theoretically," Trump may have been in breach of its provisions. That would be difficult to prove, and in any case, he is protected by presidential immunity.
The facts are that no sanction for insider trading has ever been imposed under the Stock Act, and given Congress's track record, it is unlikely that it ever will. The president has stated publicly that he has not engaged in insider trading, but he admitted that he cannot definitively claim that members of his administration have not.
A recent poll found that 7 in 10 Americans hold unfavorable views of Congress, and a majority of both Republican and Democratic voters support a ban on congressional stock trading. Leaders from both parties, including President Trump and President Biden, House Speaker Mike Johnson, Minority Leader Hakeem Jeffries, Congresswoman Nanci Pelosi, and Treasury Secretary Scott Bessent, support some form of a ban on congressional stock trading. So far, no legislation has crossed the finish line.
As for the mysterious whale that cleaned up in the crypto market, it is doubtful any action will be pursued. The truth is that leaking information to players in the financial markets and other insider trading schemes have been in existence for longer than anyone can remember. Have you ever noticed that markets sometimes rise or fall substantially in the hours leading up to the announcement of a significant economic data point? The same can be said for stocks, and lately, even sectors, more often than I would like to see. It is hard to imagine, given this golden age of grift, that curbs on these illegal practices will be forthcoming anytime soon.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: Government Shutdown Keeps Farmers in Limbo
By Bill SchmickiBerkshires Columnist
American farmers are set to receive another bailout from Trump's tariffs. The holdup is due to the lack of any additional money that lawmakers can deliver, as well as furloughed administration staffers to finalize and implement the aid package.
Readers may recall that during Donald Trump's first tariff war, which occurred in 2018-2019, farmers were devastated as China retaliated by suspending purchases of U.S. agricultural imports. It took $20 billion of taxpayer money to stop the bleeding. Once again, the same scenario is unfolding as the administration prepares another multibillion-dollar bailout.
Under the first bailout, farmers who earned less than $900,000 a year and produced one of the agricultural products affected by the U.S.-China trade war could apply for relief. The bailout's limit of support for a single farmer was $125,000 per person of a legal entity.
This time around, we are still unclear about the details or how the government will fund it. That is because the government shutdown has removed the administration’s ability to determine if they can use tariff money to pay for it or the need to ask Congress for the funds. Last time around, Trump used funds from an Agriculture Department entity called the Commodity Credit Corp. That avenue is no longer viable since the CCC has depleted its cash.
I still recall the televised announcement when the President claimed he had made a significant trade deal with China, promising to purchase $200 billion of U.S. agricultural products over two years. It turned out that, through 2021, China had only managed to buy 83 percent of that commitment.
While some argue that China deliberately reneged on that promise, I suspect the COVID-19 pandemic had a much more significant impact on the shortfall in purchases, as China struggled to contain the epidemic. Through the Biden years, China continued to purchase farm products. It was only after President Trump restarted the trade war in his second term by increasing tariffs on China by 100 percent that purchases ceased.
Last year, China accounted for more than half of the 24.5 billion of U.S. exports of soybeans. Currently, thanks to Trump's tariffs, China has ceased buying American soybeans since May and increased its purchases from producers in South America. Since the 1950s, the U.S., Brazil, and Argentina have accounted for 80 percent of global soybean production. Soybeans are the second-largest crop in the U.S., with 85 million planted acres over the past five years. That is about the size of the entire Northeast.
That crop contributes, on average, about $124 billion per year to the economy. There are approximately 280,000 soybean farmers in the country, primarily located in the Midwest, with four out of the five largest producers based in states that supported the president in the last election. However, just two multinational corporations, Corteva and Bayer, control more than half of all soybeans (as well as corn and cottonseed) production in America.
Farmers' incomes have been sucking wind for years. Most have lost money over the past two years, and thanks to several different variables, losses will likely mount this year and into 2026. Costs for fertilizer, machinery, and seeds have increased at a rate higher than inflation, while prices for almost every row crop are below the cost of production. Interest rates and climate change have also taken their toll.
The Biden administration and Congress passed a $10 billion bailout for farmers in December 2025, but that is just a drop in the bucket. Republican lawmakers estimate that farmers will need as much as $50 billion in economic support today. Right now the talk centers around another $10 to $14 billion in aid. The American Soybean Association president, Caleb Ragland, called that "putting a Band-aid on an open wound."
While my heart goes out to America's farming community, I cannot help but wonder why farmers have been singled out for relief once again. At the same time, the rest of us continue to suffer from the same fallout from tariffs, including higher food prices that exceed the inflation rate, and increased health care costs as the Republican-controlled Congress continues to reduce benefits.
Is it because the farmers are mainly from states where Trump voters are prevalent? Is it because our Secretary of the Treasury Scott Bessent owns thousands of acres of soybean farmland? Will half the spending end up in the pockets of the two major corporations that control the soybean market?
The last bailout was limited to those who earned less than $900,000 per year. There are many small businesses throughout the country that earn less than that. Where is their bailout? What is the solution to turning around our farmers' plight? It is simple. Drop the irrational tariffs on China.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: Rising Coffee Prices Bitter Brew for Consumers
By Bill SchmickiBerkshires Columnist
Sept. 19 was National Coffee Day. Starbucks, Dunkin', Dutch Bros., and other coffee chains offered discounts on coffee. That did little to relieve the sticker shock most consumers are feeling now. The 20 percent price hike year over year for their morning brew has been hard to swallow.
In the futures market, Arabica coffee has traded as high as $4.18 per pound in September, the highest price in almost a year. In grocery aisles, ground roast coffee prices recently reached $8.41 per pound before falling back over the last two weeks. Overall, the cost of coffee imports to the United States has increased by more than 300 percent since the lows of 2020. Five years ago, a bag of coffee was fetching roughly $80 per standard bag (132-154 pounds or so). Today, that same quantity is approaching $368.
More than 99 percent of the coffee Americans drink is imported, as only Puerto Rico and Hawaii grow significant quantities of the crop. Coffee is the second most popular beverage in the U.S., after bottled water, with 63 percent of Americans drinking it daily.
Like most commodities, the prices of soft commodities fluctuate according to supply and demand. Last year, for example, I discussed the skyrocketing cost of cocoa and its impact on chocolate prices. Since then, cocoa prices have dropped from a high of $12,626 per ton to $6,759 today. Coffee prices react similarly.
Consumers may also notice a price differential depending on whether they purchase their caffeine fix from a grocery store, a restaurant, or a coffee chain. Supermarket prices fluctuate more than a cup of coffee at Starbucks or other coffee chains. That is because grocers are quick to raise store prices as coffee prices rise and reverse just as quickly when they fall. Coffee chains, on the other hand, prefer to draw down on their existing coffee inventories rather than buy expensive beans on the open market.
The primary factor underlying the price of coffee (like cocoa) is climate change. Coffee cultivation and yield are highly sensitive to the environment. Extreme weather in both Brazil and Vietnam, major coffee-producing countries, has damaged the coffee crop frequently in the past few years. A severe drought in Brazil during last summer season decimated the coffee crop. Given that Brazil supplies 40 percent of the world's coffee, the shortfall had a significant impact on import prices for the U.S., which accounts for 32 percent of Brazilian coffee exports.
The number two producer, Vietnam, also suffered a drought, resulting in a 20 percent reduction in coffee production last year. Making matters worse, the nation experienced precipitation whiplash (an increasingly common occurrence in climate change). That is where drought is followed by heavy rainstorms, wiping out even further production. Supply chain disruptions are also contributing to the rising cost of coffee, as are global inflation and trade policies. The price of coffee reached a near-50-year high in February of this year.
In the last two weeks, prices in the futures market for coffee have declined slightly, trading around $376 per pound. Traders are hedging their bets ahead of a meeting between U.S. President Trump and his Brazilian counterpart, President Lula da Silva. After bumping into each other during the U.N. General Assembly last Tuesday, the president said that "we agreed to meet next week."
A deal could provide some price relief. What do presidential politics have to do with the price of coffee? Plenty. The president has levied a 50 percent tariff on Brazilian imports, including coffee. Once one of our strongest allies in South America, Brazil is now at odds with the president. The country refused to drop charges against its former President Jair Bolsonaro, a friend and ally of Donald Trump.
Bolsonaro was subsequently tried and convicted of plotting a coup and sentenced to 27 years in prison. As a result, an angry Trump slapped tariffs on the country. He justified these levies by claiming that Bolsonaro's conviction somehow created an economic emergency for the U.S. America has a $6.8 billion trade surplus with Brazil, meaning it imports more than it exports from the U.S.
A bipartisan group in Congress is well aware of that. They claim the tariffs put a new tax on coffee every morning and have recently introduced the "No Coffee Tax Act." The legislation would repeal the Trump-era tariffs on coffee imports from Brazil, Vietnam, India, Mexico, and Indonesia. Good luck with that. I wouldn't count on Congress for much of anything without the president's approval.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: U.S. Gov.'s Buying Binge Continues Unabated Toward State Capitalism
By Bill SchmickiBerkshires Staff
The latest rumored acquisition will be a 10 percent stake in Canada-based Lithium Americas. The Trump administration is considering the stake as part of negotiations over a $2.26 billion Department of Energy loan for the company's lithium project in Nevada. Expect more of the same as Washington intervenes in industries that it considers critical to national security.
Many would have you believe that today's shift toward state capitalism is sudden, unwarranted, and autocratic. However, for countless decades, this country has had a long and varied history of intervening in the American economy when it deems necessary.
The difference this time around is that Donald Trump is running roughshod over the consensus-building process that the country has historically required to legislate this kind of interference in the economy. For better or worse, depending on your affiliation, he is ignoring the rules and regulations that have both acted as guardrails and barriers to the kind of rapid-fire change we are experiencing today.
Others believe that the constant stream of executive orders occurring now is long overdue. To many, the U.S. is simply recognizing and responding to the fundamental transformation that has happened and is ongoing in this ever-changing world. We have exited a past that no longer applies, in exchange for what many hope is a promising new future.
At the same time, the role of government, in the view of a large segment of the population, has also undergone significant changes. According to numerous polls, many in the younger American generation believe that the economic and political systems in the U.S. no longer serve their interests in this rapidly changing set of circumstances. These are the victims of globalization, the 2008 Financial Crisis, the COVID pandemic, and the widening income inequality.
I suspect that if asked, they might want their government to do even more in the years ahead. Many would like to replace what they see as the "Deep State" with government programs that will narrow income inequality, while at the same time preserving private ownership.
The downside of state capitalism is well known. Centrally planned economies of the Chinese variety usually get it wrong. Granted, we are still a long way from that particular model of control, but we are certainly moving in that direction. In many instances, government control reduces economic efficiency. That often leads to slower economic growth. Innovation and entrepreneurship suffer, replaced mainly by cronyism and corruption. Long-term results give way to short-term fixes.
Just last week, for example, the government invoked its golden share ownership of U.S. Steel (a condition of Nippon Steel's purchase of the company) to block the closing of the company's Granite City plant in Illinois. According to management, the work done at the plant should be transferred to more efficient locations; however, the government disagreed.
The 10 percent stake in Intel, engineered by the administration (after threatening to fire its CEO), has set into motion several interesting transactions involving other companies with ties to the government. Some question why Nvidia, the premier global semiconductor giant, suddenly decided to invest $5 billion in this troubled semiconductor company, when other companies might make more business sense. This deal occurred after Nvidia and Advanced Micro Devices agreed to pay the Trump administration a portion of their sales from artificial intelligence to China.
This week, the government announced a U.S.-based joint venture with investors to take control of TikTok, a Chinese-owned platform with 170 million American users. The deal coveted by nearly every media company in the U.S. ultimately fell into the hands of Oracle, among others. Oracle, run by its billionaire founder, Larry Ellison, is a close personal friend of the president. Over the weekend, the administration also announced sudden changes to the H-1B visa program that will directly impact many of the nation's largest technology companies.
The H-1B allows immigrants with highly specialized skills to work in the U.S. when companies cannot find U.S. citizens to perform the same job. The government, citing concerns that many companies abuse this program, is considering a one-time charge of $100,000 (up from $2,000) to obtain such a visa. This has thrown many companies, especially in the tech sector, into turmoil.
It is interesting to note that the Chinese, who followed this same path years ago, are now wrestling with the downside of many of the same issues today. As such, government officials over there are moving to liberalize many conditions and regulations. They are relinquishing more control to the private sector as a result. At some point in the future, it is entirely possible that the Chinese and American brands of state capitalism may converge.
The advent of artificial intelligence promises both great opportunities and significant challenges for the future. As time passes, government intervention might steadily increase to safeguard the labor market. Legislators could direct AI initiatives toward areas perceived as most productive. However, history indicates that, over time, in this country, the pendulum swings from right to left, and economic systems tend to oscillate between more and less government involvement. Intervention follows a crisis, which is then followed by liberalization. Inefficiencies become apparent and market forces reassert themselves. We have seen this happen repeatedly in this country. Exactly when and how long it will take is the real question.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: America's New Brand of Capitalism
By Bill SchmickiBerkshires Columnist
Over the last nine months, a 10 percent position in a huge semiconductor giant, a 15 percent stake in a materials company, plus a golden share in one of America's venerable steel producers have been swallowed up. No, the buyer isn't Warren Buffett; it is the United States government.
I am old enough to remember the opening of China a generation ago under President Richard Nixon. The nation was rabidly anti-communist, but the prevailing wisdom was that, given enough time, the Chinese government would become more liberal, and its economy would begin to resemble our own country's capitalism.
This "power of example" idea has worked, but in the opposite direction. As a recent Wall Street Journal article pointed out, the U.S. economy is moving ever closer toward state capitalism. Although it may differ from the Chinese version in certain areas, there is no question that this administration is intent on exerting more political control over the U.S. economy than their predecessors.
I find this trend neither surprising nor something to worry about. I have long maintained that the so-called U.S. free market economy, so many conservatives touted as the bedrock of capitalism and democracy, is a myth. One need look no further back than the 1930s to understand how the U.S. government has interceded time after time to assist the economy when things went wonky and even when it didn't.
The failing economy of the Great Depression led to a prolonged period of government intervention, culminating in the New Deal. During World War II, the government basically controlled production as it put the economy on a wartime footing. Fast forward to modern times, when the government commandeered the financial system during the Financial Crisis or the shutdown of the country's labor force, followed by massive fiscal and monetary stimulation of the economy during the COVID Pandemic.
Almost every administration, regardless of party, has worked to expand the government's role in the economy. Over the last few decades, as globalism became the leading form of economic growth, governments worldwide did what they could to ensure that their corporations came out on top. The U.S. did more. American corporations, aided and abetted by succeeding administrations, grew larger, succeeding in commanding an increasing market share of trade at the expense of foreign competitors. As a result, our financial markets became the go-to destination for investment.
Since then, the competition has increased. The lines between a country's economic and political systems have blurred worldwide. Increasingly, especially in autocratic societies such as China, military might is believed to come down to who has the best AI chip or strategic metal supplies. Here in the U.S., secure supply chains, safeguarding strategic industries, and reinvigorating critical industries weakened by globalization have all become significant economic and political concerns.
If one were to apply a check list of state capitalism characteristics here in the U.S., we would find in just the last six months: government ownership of private companies (Intel, MP metals), strategic control of key industries through golden shares (U.S. Steel), direct influence over corporate leadership appointments (demands Intel CEO be fired), targeted industrial policies (AI and semiconductors), revenue-sharing arrangements between private companies and government (Nvidia/AMD 15 percent revenue share, Japanese trade deal). Add to this list the upheaval in the federal regulatory area, and we see a government exerting its powers to achieve political and economic objectives at lightning speed.
Next week, we will examine the whys and wherefores of this trend, the downside of this trend toward state capitalism, and what, if anything, we can do about it.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
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