On February 21, the Bank of Canada made a quantitative deduction report based on the specific content of Trump’s tariff threat. The conclusion was very pessimistic: If the threat becomes a reality, Canada’s economy will collapse and it will be difficult to rebound like after the epidemic; even if the threat does not materialize, the long-term tariff threat will bring great uncertainty to the Canadian economy. March 4 is the deadline for Trump’s tariff threats, and potential uncertainty is turning into reality.
In 2025, and even in the next three years, the biggest question mark in the world is Trump. Various social media outlets interpreting Trump's intentions either say that he is making a big move or that he is plotting a big pie. I think Trump is someone who draws a bullseye after firing a gun. His words and deeds are unpredictable and do not need to be analyzed because they change too quickly. The people who help him draw targets are just looking for traffic passwords and cannot be trusted. When we plan our lives, if we regard Trump as a variable, the best thing to do is to lie down, do nothing, and sleep for 4 years. I actually know someone who postponed his plan to buy a house from 2016 to 2020. He didn’t dare to buy a house during Trump’s last term.
Uncertainty is a part of life, like air, everywhere and at all times. At the same time, uncertainty is also the driving force for human development and progress. Everyone lives in it. The complete elimination of uncertainty is equivalent to death. Uncertainty changes its name every year. Sometimes it is called "epidemic", sometimes it is called "inflation", sometimes it is called "recession", sometimes it is called "high interest rates", sometimes it is called "election", sometimes it is called "trade war". Although the names are different, the essence is uncertainty.Uncertainty about some events is false because the outcome is known. Recognizing real uncertainty is an essential skill for our survival. Looking for certainty within uncertainty is looking for a compass for action. The way to maximize certainty in our lives is to build personal wealth.
01 Identifying false uncertainty
Beginning at the end of 2021, inflation rates in Canada and the United States increased. Data at that time showed that inflationary pressure came from insufficient supply caused by the reorganization of supply chains after the epidemic. Central bank governors at the time considered this to be "temporary inflation" and did not take any steps to raise interest rates. By March 2022, inflation had spread to most commodities, at which time the central bank began to raise interest rates, a process that continued until July 2023. Inflation, along with interest rate hikes, has brought huge uncertainty to the economic environment. In an environment of interest rate hikes, we don't know how high interest rates will rise before they stop raising interest rates. Everyone is in a strong state of anxiety, especially households with large debts. How high interest rates will be raised is the biggest uncertainty during that period. However, the essence of this uncertainty is false uncertainty. Because interest rates have no upper limit but only a lower limit, if interest rates are high enough to inhibit consumption and borrowing, inflation will be controlled. As long as the CPI stops rising, interest rate increases will stop. From historical experience,Only raising interest rates can curb inflation, Therefore, as long as the central bank insists on raising interest rates, inflation will definitely be suppressed.Inflation is an "acne" among economic problems, and deflation is an "old age disease" in the economy.We have never seen anyone with acne on their face for a lifetime, so the inflation problem will definitely be suppressed and interest rate hikes will definitely stop. People with common sense do not regard inflation and interest rate increases as real uncertainties, but as certainty, that is, as long as interest rates continue to be raised, inflation can stop. During the period of interest rate hikes, I kept seeing people in my circle of friends saying, "Interest rate hikes have nothing to do with inflation, and we should find other ways to curb price increases." It can be seen that people without common sense regard inflation as a real uncertainty, and these people lost the ability and direction to act during that period of interest rate hikes. Some people not only lack common sense, but are also misled by fragmented knowledge and conclude that the epidemic will cause deflation. If people with wrong knowledge and concepts put their ideas into action, the results will be completely different. It is very important to identify false uncertainty, otherwise correct action decisions cannot be made.
So is the threat of tariffs, trade war, acne or a geriatric disease? Is it false uncertainty or true uncertainty? Common sense tells us that increasing tariffs will trigger retaliation. A trade war is about opening fire on each other and bombarding each other's weak links. When will the bombardment stop? The trade war stopped when both sides could no longer bear the losses and were willing to sit down at the negotiating table. This is a game process, starting from threatening each other, to punching and kicking each other, and then to finding equilibrium through negotiation.For many immediate uncertainties, the result is certain, but when the result will arrive is uncertain. We can call this kind of event with a certain result false uncertainty. Use common sense to identify false uncertainty, see clearly the worst consequences, and make plans to survive the period of harm caused by false uncertainty. Don't let false uncertainty ruin our lives.
02 Identify true uncertainty
The uncertainties we face every day are both true and false. Crises that we know we can survive are false uncertainties, but behind these false uncertainties are some real uncertainties.
Former Bank of Canada Governor Stephen Poloz has written a book, The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future, which is now available in Chinese.《The Next Age of Uncertainty—How to Prepare for a Riskier Future.” I recorded a 2 hour video"How to use more effective investments to deal with the uncertainty faced by Canadians Henry Wang March 25, 2023"Interpreted the content of this book. The author Poloz proposed in the book5 Real Uncertainties: Aging Populations, Accumulating Debt, Income Inequality, Technological Advances, and Climate Change。The author believes that all uncertainties, whether true or false, come from these five uncertainty factors and the interaction between these factors. I very much agree with the author's point of view. In practice, the author's point of view has been verified repeatedly. Why did Trump take the initiative to undermine the international trade order created by the United States after World War II? The fundamental reason is that the United States is currently heavily in debt, with a national debt of 36 trillion yuan, an annual bond interest of 1 trillion yuan, and an income of only 5 trillion yuan. If it does not reduce its debt, it will be difficult to even pay interest. Trump and Musk, both inside and outside the United States, are looking for money to fill this hole. Neither of them knew whether they would be able to find money, but finding money to fill the hole was an urgent matter. Among the uncertainties Poloz raised was debt accumulation.
Poloz believes that the five uncertain factors of population aging, debt accumulation, income inequality, technological progress and climate change are like five floating continental plates. The direction of drift is difficult to determine, it is not known when the collision will occur, and the consequences of the collision are even more unpredictable. Therefore, looking for and identifying upcoming catastrophic events is like looking for black swans. If you can predict and think of it, it is not an accident or uncertainty. If you can estimate when and where the black swan will fly from, it is not a black swan event. Therefore,Predicting uncertainty is futile. What we can do is look for certainty and make the most of it to improve our situation.
03 Embrace certainty
"I once had lunch with an acquaintance of Warren Buffett. Let's call him Jim (pseudonym). One day at the end of 2009, Jim and Buffett were driving together in Omaha, Nebraska. At that time, the global economy was in a state of paralysis, and Omaha was no exception. Stores were closed and factories were closed. Jim asked Buffett: "The situation is so bad now, how can the economy recover? Buffett asked: "Jim, do you know which candy was the best-selling in 1962?" ""have no idea. "It's Snickers." "Buffett said, "Do you know which candy is the best-selling right now? "I don't know either." "Or Snickers." " Buffett said. Then the two fell silent and the conversation ended."
The above passage is the opening line of the book "As Always". Author Morgan Hauser said that he dedicated this opening sentence and the entire book "to rational optimists." You know, Buffett has experienced 14 stock market crashes and economic crises in his life, and it is unknown how many more he will experience. A large part of Buffett's investment performance is due to his grasp of certainty, while not being frightened by uncertain events to stop or run away in panic.
Certainty, like uncertainty, is everywhere and there is no need to look for it. It is certain that everyone will grow old; it is also certain that the current sources of income will sooner or later be replaced by pensions and investment returns. Currency depreciation will reduce the purchasing power of currency, which is certain; as long as the economy develops forward, currency depreciation is certain, because the money supply must exceed output to adapt to economic growth.
Finding certainty is not the goal, but the preparation before taking action. Whether the uncertainty at hand is real or not, we need to take action to change the status quo and pursue a better life. When inflation is high and the central bank begins to raise interest rates, we know that this uncertainty is false and will end one day. When Trump threatens to increase tariffs, we also know that although trade wars are inevitable, they will eventually cease. So what should we do in the process of raising interest rates and tariffs? I think,Only personal assets can help us tide over difficulties. The best and last weapon against uncertainty is personal assets.Accumulating personal assets, improving risk resistance, and leaving enough redundancy to prevent unexpected events are what we need to do at all times. At the same time, they are also our guide to action.
Accumulating wealth is easier said than done, and sometimes things can backfire. We usually pay close attention to the topic of investment and financial management, especially the choice of asset classes, investment return rate, investment timing, investment skills, etc. We have repeatedly weighed the trade-off between the investment return rate of 4% and 4.1%. Morgan Hauser makes a compelling point in another of his best-selling books, The Psychology of Money:Investment success or failure depends on mentality and behavioral habits.Morgan Hauser believes that investment knowledge and skills are far less important than mentality and behavioral habits. If you can overcome the 18 psychological misunderstandings mentioned in the book, you can still accumulate wealth without high income or investment knowledge. I read this book 3 times because I think I have these 18 weaknesses and I need to remind myself from time to time not to automatically fall into these misunderstandings. At present, for us who are in the whirlpool of uncertainty, the most urgent thing to solve is to find a correct, preferably immediate, method to accumulate personal wealth. "The Psychology of Money" should be able to help us a lot in this regard. I will make a video program to share with you my thoughts after reading this book.
What do you do to embrace certainty? I believe the best tool for embracing and holding on to certainty is your personal assets. People with perseverance have perseverance, and people with perseverance will not follow pessimists. People with perseverance will carefully identify all kinds of true and false uncertainties, stay awake, and continue to act, so as to resolve the impact of uncertainty on life. On the contrary, people without permanent assets are more likely to become pessimists, more likely to do nothing in the face of uncertainty, more likely to pull out flowers and plant weeds before identifying the real uncertainty, constantly switching between different investments because of worries about gains and losses, and busy becoming leeks in various markets.
Conclusion:
Interpreting Trump's words and deeds and speculating on his intentions will not help eliminate uncertainty, but will instead sell anxiety. I hope that my small public account can provide some certainty and rational analysis for serious readers.
Morgan Hauser said in Chapter 17 "The Temptation of Pessimism" in "The Psychology of Money": "Optimists are like smooth-talking salesmen, and pessimists are like well-meaning people who offer help. For some reason that I can't understand, people always like to hear others say that the world is going to end." Yes, pessimists always have to show themselves to be rational and objective, even wise, because doing so can attract attention. I have heard this sentence countless times in the past 16 years: "The really bad stage has not yet come." But I always believe that "the better stage has not yet come." Every day is important to everyone. Whether we live it pessimistically or optimistically, we have the final say. Uncertainty exists every day, but I will not lie down and do nothing all the time, and I believe that the same will be true for all readers. Don’t forget that we can find certainty and take action for a better life. Mentality and behavioral habits determine our future life and wealth level. I have no doubt about this.
Henry Wang February 25, 2025 in Toronto