Bireme Capital is a long-short value fund founded in 2016 by Ryan Ballentine (CEO) and Evan Tindell (CIO), based in Tampa, Florida. Its flagship Fundamental Value strategy runs bottom-up, contrarian deep-value investing that exploits behavioral biases and structural mispricings.
This report analyzes the market chaos caused by Trump's April 2025 'Liberation Day' tariffs. It argues the tariffs are a terrible idea because they act like a huge tax hike on consumers and businesses, hurting the economy. The report highlights how sloppy the policy is—for example, slapping a 50% tariff on a country whose people are too poor to buy much from the US. For regular investors, this means US stocks are risky due to high valuations and policy uncertainty. The report is worth reading because it uses data and history (like the 1930 Smoot-Hawley Tariff) to show why these tariffs probably won't last, but the uncertainty they create will linger.
This Bireme Capital report focuses on the market turmoil triggered by Trump’s “Liberation Day” tariff plan in April 2025. The core view is that the U.S. stock market was previously overvalued and emotionally overheated, making it highly susceptible to negative shocks. The broad, heavy tariffs are es
This chapter focuses on the market turmoil triggered by Trump's "Liberation Day" tariff plan in early April 2025. The report argues that prior to this, U.S. stock valuations were extreme and sentiment euphoric, reflecting a deeply unhealthy state that was highly vulnerable to negative shocks.
The author’s central argument is that broad, high, and indiscriminate tariffs are an "objectively terrible idea," effectively amounting to a massive tax increase on consumers and businesses that will harm the economy, squeeze profits, and reverse the prosperity brought by globalization. The report further contends that the Trump administration’s tariff plan is "extremely unserious" in both design and execution, with its simplistic formula yielding absurd results that do nothing to address real trade issues.
1. Market Reaction and Valuation Backdrop: The S&P 500 fell over 10% in two weeks, one of only four such episodes since World War II. While tariffs triggered the crash, the root cause was that the market had been "priced to perfection" with euphoric sentiment, and extreme valuations made it exceptionally fragile to any uncertainty.
2. Scale and Nature of Tariffs:
3. Specific Impact on Businesses and the Economy:
4. Historical Comparison and Absurd Examples:
5. Comparison of Policy Effectiveness: The report argues that targeted approaches aimed at specific issues (such as semiconductor supply chain security) would be more focused and less costly (e.g., subsidies under the CHIPS and Science Act) than blanket tariffs. Strangely, the new tariffs (including a 32% tariff on Taiwan) do not apply to semiconductors, a critical industry.
1. Avoid Overexposure to U.S. Market Risk: Against a backdrop of extreme U.S. stock valuations and significant policy risks (such as destructive tariffs), investors should consider reducing their allocation to U.S. equities.
2. Seek Opportunities in Overseas Markets: Other global regions (e.g., Japan) may offer more reasonable valuations and investment opportunities less directly affected by U.S. tariff policies.
3. Focus on Policy Specificity and Effectiveness: Investors should be wary of large-scale policies driven by political slogans that lack rigorous design and targeting; such policies are likely to create significant economic distortions and market volatility rather than solving underlying problems.
This chapter delves into the policy logic, potential impacts, and sustainability behind Trump's "Liberation Day" tariff plan. The report argues that the policy-making process was hasty, and the claimed benefits—such as boosting manufacturing reshoring and increasing tax revenue—are difficult to achieve in reality, instead bringing high uncertainty and economic harm.
The author's central argument: the currently announced tariff plan is extremely unlikely to be sustainable due to its excessive economic destructiveness, making it politically untenable. The report refutes the view that tariffs can effectively stimulate U.S. manufacturing investment, asserting that under conditions of high policy uncertainty, companies will not make long-term capital expenditures. Additionally, the decline in Treasury yields driven by risk aversion does not represent a fundamental benefit of tariffs.
1. Policy Haste: Citing the example of a 10% tariff on penguins from Heard Island near Antarctica as evidence of the policy's lack of professionalism.
2. Flaws in the Manufacturing Reshoring Logic:
3. Rebuttal to Other Justifications:
4. Potential Pressure on U.S. Treasuries: A shrinking trade deficit means fewer dollars flow to foreign countries, and foreign investors hold about 25% of U.S. public debt. Fewer dollars available for investment in U.S. assets (including Treasuries) would put upward pressure on Treasury yields. This pressure would intensify if the U.S. decouples from the global economy and is seen as an unreliable partner.
5. Possible Outcomes of the Tariff Plan: The report envisions three possibilities:
6. Markets and Valuations: Even if tariff repeal triggers a market rally, it may be short-lived. The report's pessimistic forecast for long-term U.S. stock returns is not based on the trade war but on already high valuations. The S&P 500's current price-to-earnings (P/E) ratio remains around 25x, at the top of the market's historical range. If tariffs are implemented and sustained, corporate revenues and profits would plunge.
7. Long-term Impact of Uncertainty: Regardless of whether tariffs are reversed, the political and economic uncertainty generated by this episode will be more enduring. Trump's "transactional" and casual governing style—altering the fate of individual companies and global markets via social media posts or impromptu media calls—differs markedly from previous administrations' deliberate, principle- and rule-based approaches. Such policies can be nullified with a single stroke, making them more volatile than congressional legislation.
1. Skepticism Toward Policy Permanence: Investors should not view the currently announced tariff plan as a long-term settled policy; the likelihood of significant revision or repeal is high.
2. Beware of the "Uncertainty Premium": Regardless of the tariff outcome, the higher political and economic uncertainty from policy arbitrariness may become the new normal for markets, requiring a higher risk premium to be priced into assets.
3. Don't Mistake Short-Term Risk-Off Rallies for Trend Reversals: A potential market rally from blocking the tariff plan may be short-lived. Given still-elevated U.S. equity valuations and the severe impact of tariffs on corporate earnings if implemented, the sustainability of such a rally is questionable. Long-term investors should still focus on valuation risk.
4. Watch for Potential Upward Risk in U.S. Treasury Yields: From both capital flow and sovereign credit perspectives, tariff policy could exert structural upward pressure on Treasury yields from two directions.
This section explores the negative impact of persistently high economic policy uncertainty on long-term investment and corporate capital expenditure under the Trump administration's "policy transaction" model. The report notes that current economic uncertainty indicators stand at historically elevated levels.
The author's central thesis is that a highly uncertain policy environment will suppress long-term corporate capital expenditure and lead to a contraction in stock valuation multiples (e.g., price-to-earnings ratios). This presents a counterintuitive contrast to the market's previously widespread optimism about the sustainability of high U.S. equity valuations.
1. Policy risk: The report argues that the "policy transaction" model is inherently more volatile and less predictable than a rule-of-law-based policy-making process.
2. Uncertainty level: Quantitative indicators of current economic uncertainty have reached record highs.
3. Impact on corporate behavior: The author fears that under such uncertainty, companies will be reluctant to undertake large-scale, long-term capital expenditures necessary for growth.
4. Impact on valuation: High uncertainty demands a higher discount rate, thereby leading to lower valuation multiples. The report uses a 25x P/E ratio as an example: investing at that valuation implies recovering only 4% of principal annually through earnings, requiring a clearly visible forecast of the company's earnings over the next decades. In an environment of instability — or even a potential global trade collapse — such investments would be difficult to justify.
This section does not mention specific companies, but it expresses an overall bearish view on the U.S. equity market valuation environment.
For investors, this means:
1. Avoid high-valuation U.S. equities: Given expectations of valuation contraction driven by policy uncertainty, investors should be wary of and avoid stocks of U.S. companies that rely on high P/E multiples.
2. Seek relative returns: The report explicitly states that its investment strategy (Fundamental Value L/S) will benefit from market turbulence, particularly through relative performance (i.e., outperforming a declining market). Investors may consider managers that adopt similarly prudent, value-focused long-term investment strategies.
3. Focus on overseas markets: The report reiterates that the majority of its current investments are in overseas markets, providing a directional reference for investors seeking to diversify U.S. policy risk.