Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.324 million Annual Rate in March

A brief excerpt:

First, from Reuters: D.R. Horton cuts 2025 revenue forecast on weak demand for homes

U.S. homebuilder D.R. Horton lowered its full-year revenue forecast and missed second-quarter profit and revenue estimates on Thursday due to weak demand for homes. … It sees about 85,000 to 87,000 transaction closings from homebuilding operations, down from its earlier forecast of 90,000 to 92,000 homes.

I discussed weaker demand and higher costs last month in Policy and 2025 Housing Outlook

Housing Starts Decreased to 1.324 million Annual Rate in March
...
Total housing starts in March were well below expectations; however, starts in January and February were revised up slightly, combined.

The third graph shows the month-to-month comparison for total starts between 2024 (blue) and 2025 (red).

Total starts were up 1.9% in March compared to March 2024. Year-to-date (YTD) starts are down 1.5% compared to the same period in 2024. Single family starts are down 5.6% YTD and multi-family up 9.0% YTD.

There is much more in the article.

Philly Fed Surveys Screams Stagflation As 'Soft' Data Slump Continues

Another day, another sentiment survey collapsing into the abyss of Trump-Tariff-driven hell...

The Philly Fed Manufacturing Business Outlook survey crashed from +12.5 to -26.4 in April (+2.2 exp) - its weakest in two years. However, quietly, the 6-month forward outlook remained positive and actually improved...

The index for new orders also fell sharply, from 8.7 in March to -34.2 this month, its lowest reading since April 2020, and the prices paid index edged up from 48.3 to 51.0, its highest reading since July 2022

Smells a little stagflationary to us.

The future prices paid index climbed to 63.1, and the future prices received index jumped 28 points to 67.7, its highest reading since June 2021.

Finally, the gap between strengthening 'hard' data and collapsing 'soft' data continues to grow...

Will this be a replay of Q2 2024 - when the hard data 'caught down' to soft data? Or Q3 2023 where the sentiment surveys snapped higher as the hard data refused to fold?

Tyler Durden Thu, 04/17/2025 - 09:23

If A Trump-Tariff-Driven Depression Is Imminent, Why Aren't Scared CEOs Firing Anyone?

Another week, another bulletproof jobless claims print...

Just 221k Americans filed for jobless claims for the first time last week - a number that is the same level as it was in November of 2021...

Source: Bloomberg

Continuing Claims rose last week but remain in the same range as they have been in for the last year...

Source: Bloomberg

Initial Claims in the 'Deep TriState' fell last week...

But, Continuing Claims in the 'Deep TriState' are rising...

Virginia is starting to feel the DOGE pain...

So, while the 'Deep TriState' is starting to see some jobs lost, the rest of the nation continues to show absolutely no signs at all of this imminent recession that CEOs and talking heads keep proclaiming is right around the corner.

Perhaps it is simply jawboning to keep the pressure on Trump to reverse his actions - and keep the pressure on the market to go down - when they all realistically know the Trump plan is to negotiate these terrifying tariff levels back to some normalization that levels the playing field for 'Murica?

Or are these CEOs simply asleep at the wheel - if you were the most terrified since Lehman... wouldn't you be firing people?

 

Tyler Durden Thu, 04/17/2025 - 08:57

US Housing Starts Plunged Most Since COVID In March

With homebuilder confidence languishing near COVID lockdown lows...

...and mortgage rates rebounding higher - it should be no surprise that Housing Starts were expected to decline in March. However, the scale of the drop is dramatic, tumbling 11.4% MoM (vs -5.4% exp).

The monthly swings in Housing Starts recently have been wild to say the least. Building Permits rose 1.6% MoM (better than expected)...

Source: Bloomberg

On a SAAR basis,. Housing Starts are back near COVID lockdown lows...

Source: Bloomberg

The plunge in Housing Starts was dominated by a 14.2% MoM collapse in single-family home starts - the biggest drop since April 2020....

Source: Bloomberg

The more forward looking Building Permits continue to (roughly) track Fed rate cut expectations...

Prices have come off their peak somewhat as builders deploy incentives to try to clear excess inventory, which still stands at the highest since 2007. 

That’s also prompting builders to slow down on projects, with the number of single-family homes under construction falling to the lowest level in four years, continuing a steady decline back to mid-2022.

Will Fed rate cuts even help at this point?

Tyler Durden Thu, 04/17/2025 - 08:48

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,324,000. This is 11.4 percent below the revised February estimate of 1,494,000, but is 1.9 percent above the March 2024 rate of 1,299,000. Single-family housing starts in March were at a rate of 940,000; this is 14.2 percent below the revised February figure of 1,096,000. The March rate for units in buildings with five units or more was 371,000.

Building Permits:
Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,482,000. This is 1.6 percent above the revised February rate of 1,459,000, but is 0.2 percent below the March 2024 rate of 1,485,000. Single-family authorizations in March were at a rate of 978,000; this is 2.0 percent below the revised February figure of 998,000. Authorizations of units in buildings with five units or more were at a rate of 445,000 in March.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

Multi-family starts (blue, 2+ units) decreased month-over-month in March.   Multi-family starts were up sharply year-over-year (March 2024 was very weak).

Single-family starts (red) decreased in March and were down 9.7% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery - and the recent collapse and recovery in single-family starts.

Total housing starts in March were well below expectations; however, starts in January and February were revised up slightly, combined.

I'll have more later …

The DOL reported:

In the week ending April 12, the advance figure for seasonally adjusted initial claims was 215,000, a decrease of 9,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 223,000 to 224,000. The 4-week moving average was 220,750, a decrease of 2,500 from the previous week's revised average. The previous week's average was revised up by 250 from 223,000 to 223,250.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 220,750.

The previous week was revised up.

Weekly claims were lower than the consensus forecast.

ECB Cuts Rates For The 7th Time, Outlook Leans Dovish Amid "Exceptional Uncertainty"

As expected, the ECB cut its three main rates by 25bps for a 7th consecutive time (deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2.25%, 2.40% and 2.65% respectively). Of note, for the first time this easing cycle the central bank dropped the word "restrictive" from the statement. Reuters reported that the decision to cut rates was unanimous, as even some of the more hawkish rate setters agreed the global trade was has significantly altered the outlook.

The ECB also delivered a dovish outlook given “exceptional” uncertainty. The cut was based on the “updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission”, the Governing Council said in the statement. 

The ECB said the disinflation process is well on track but added the outlook for growth has deteriorated owing to rising trade tensions. Increased uncertainty “may further weigh on the economic outlook for the euro area”, it said. In addition, the ECB dropped the word "restrictive" in reference to monetary policy – a point of debate among policymakers in recent weeks.

Parsing the statement, here are the highlights

TRADE:

• The adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions.
• These factors may further weigh on the economic outlook for the euro area
• Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions

INFLATION:

• Inflation has continued to develop as staff expected
• Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target

WAGES:

• Wage growth is moderating

OUTLOOK:

• The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions
• Will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance

In kneejerk reaction, the EURUSD fell from 1.1361 to 1.334, a fresh session low, in 2 minutes, as the market viewed the statement more dovish than expected (to Trump's credit, who called the growing bifurcation between the ECB and the Fed as the basis for his anger). In line with the dovish response, the Jan 24 Bund future rose from 130.95 to 131.17, while the Stoxx 50 saw a modest move higher.

Overall, the decisions was largely as expected with the prior language around restrictiveness removed, given today's 25bps cut takes the ECB to the top-end of its 1.75-2.25% neutral rate estimate. Interestingly, the line around restrictiveness was removed and was not replaced with any reference to that neutral band or similar; not necessarily a signal or similar, but still a point to note. Elsewhere, forward guidance was unsurprisingly non-committal, though the statement does highlight increased uncertainty and an associated confidence impact is which ' likely to have a tightening impact on financing conditions'. Given this, we now look for any hint of an offsetting policy response (i.e. dovish action) to counter the "likely" tightening of financing conditions - a point which may have driven the slightly delayed dovish reaction.

Earlier:

Preview

OVERVIEW: Expectations are for the ECB to cut the deposit rate by 25bps to 2.25%. Despite the positive impulses from the German fiscal reform package and the Euro being at a record high on a trade-weighted basis, the expected negative growth shock from the global trade war is set to see policymakers ease monetary policy to the top of the estimated neutral range. Focus for the release will be on how the ECB is currently modelling the impact of the trade war on the Eurozone economy and how it could shape monetary policy in the coming months. That being said, the ECB will likely adopt a non-committal tone on account of the uncertainty surrounding the Trump administration's trade practices.

PRIOR MEETING: As expected, the ECB pulled the trigger on a 25bps reduction to the Deposit Rate. Greater attention fell upon the Governing Council’s decision to tweak its policy statement so that it reads "monetary policy is becoming meaningfully less restrictive" (prev. “monetary policy remains restrictive").

Elsewhere, the Bank opted to reiterate its data-dependent and meeting-by-meeting approach, whilst stating that it will not pre-commit to a specific policy path. For the accompanying macro projections, the headline 2025 inflation forecast was raised to 2.3% from 2.1%, 2026 held at 1.9% and 2027 trimmed to 2.0% from 2.1%. On the growth front, policymakers cut their 2025 and 2026 growth views whilst holding 2027 at 1.3%. At the follow-up press conference, President Lagarde remarked that the statement language tweak was not an innocuous change and word changes have meaning. She added that the ECB is now moving towards a more 'evolutionary approach'. With regard to the policy decision, all policymakers, with the exception of Austria’s Holzmann (who abstained), backed the announcement. Lagarde suggested that the GC could cut again or pause its cutting cycle depending on the data. The fact that Lagarde classified the policy discussion as “lively" and Intense" suggested upcoming decisions will become more contentious.

RECENT ECONOMIC DEVELOPMENTS: March's flash HICP report saw Y/Y inflation slip to 2.4% from 2.6%, super-core decline to 2.4% from 2.6% and services inflation fall to 3.4% from 3.7%. The February ECB Consumer Expectations Survey saw the 12-month and 3-year forecasts hold steady at 2.6% and 2.4% respectively. In terms of market gauges, the 5y5y inflation forward has declined to around 2.07% from the 2.22% seen at the time of the March meeting. On the growth front, 01 GDP data is not released until April 30th. However, more timely survey data from S&P global showed the EZ-wide manufacturing print tick higher to 48.7 from 47.6, services rose to 51.0 from 50.6, leaving the composite at 50.9 vs. prev. 50.2. In the labour market, the unemployment rate in the Eurozone remains at its historic low of 6.1%. It's also worth noting that the trade-weighted EUR is currently at a record high.

RECENT COMMUNICATIONS: Given the fluidity of the trade situation, a bulk of the comments since the prior meeting have been viewed as somewhat stale. However, in recent sessions. President Lagarde (11th April) noted that the Bank is ready to use the instruments it has to procure price stability if needed. France's Villeroy (10th April) said US President Trump's pause decision was less bad news but bad news elements remain. He also remarked (9th April) that a trade war will lower EZ growth by 0.25pp in 2025; shock will not be negligible but will not be a recession. Austria's Holzmann (9th April) said he does not see the reason for a rate cut for now, adding that waiting is the best strategy when uncertainty is this high. He added that considering an outsized 50bps cut is "ludicrous". Elsewhere at the hawkish end of the spectrum, Netherlands' Knot (9th April) is of the view that the impact of the trade war is likely inflationary in the long term. Finland's Rehn (9th April) stated that the case for continuing rate cuts at the April meeting is supported by downside risks materialising. Typically a dove, Stournaras of Greece (8th April) has conceded that the potential increase in inflation may delay the normalisation of monetary policy.

RATES: Expectations are for the ECB to cut the deposit rate by 25bps to 2.25%, according to 61/71 economists surveyed by Reuters (note, some of these forecasts may be considered out of date given the fluidity of the trade war). Financial markets have greater conviction over a 25bps rate cut and price such an outcome at 99%. The backdrop to the meeting has been dominated by US President Trump's trade agenda. At the time of writing, US President Trump announced a 90-day pause in tariff actions and cut reciprocals to 10% for nations that asked for talks. The EU responded by delaying its countermeasures (due on April 15th) to the US. Overall, the outlook for trade has improved over the past few sessions, however, it remains highly uncertain and therefore continues to suppress the growth outlook for the region. Accordingly, policymakers are set to take action by loosening monetary policy further. Note, an outsized move of 50bps is unlikely with ECB's Simkus stating that he sees no need to talk about such an increment. Markets will also be looking to see if Holzmann (or any others) abstains from the decision. ING writes that given expectations of a cut, "the ECB will also have to change its communication. Instead of ’monetary policy is becoming meaningfully less restrictive', the ECB is likely to flag that at 2.25%, the deposit rate would now be within the range of neutral interest rates”. It remains to be seen whether the Bank will insert any additional language in lieu of the ongoing trade war. Beyond the upcoming meeting, market pricing has been particularly choppy given the volatility in markets. However, the next 25bps reduction is fully priced by July with 80bps of easing implied by year-end.

Tyler Durden Thu, 04/17/2025 - 08:30

"Termination Cannot Come Fast Enough!" - Trump Pummels "Always Too Late & Wrong" Powell

As US equity markets continue to fall - and recession calls mount from establishment elites, despite strong 'hard' data' - President Trump lashed out at Fed Chair Powell via TruthSocial this morning exclaiming that Powell's termination from his position can’t come quickly enough, arguing that the US central bank should have lowered interest rates already this year, and in any case should do so now.

The ECB is expected to cut interest rates for the 7th time, and yet, "Too Late” Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete "mess!”

Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. 

Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. 

Powell's termination cannot come fast enough!

In Europe, trade wars are dovish: 

Reuters reports that the ECB decision to cut rates for a 7th time was unanimous as even some of the more hawkish rate setters agreed the global trade was has significantly altered the outlook.

In a news conference in November, Powell was asked whether he would step down if Trump asked him to resign. 

Powell gave an unusually blunt answer: "No."

He later added that the removal or demotion of top Fed officials was "not permitted under the law."

The President of the United States cannot unilaterally fire the Chairman of the Federal Reserve before the end of their term, except under specific legal conditions. Here’s a structured breakdown:

Appointment Process:
The Fed Chair is nominated by the President and confirmed by the Senate for a 4-year term, which is renewable. The Chair also serves as a member of the Federal Reserve Board of Governors, who have 14-year terms.

Legal Framework:
The Federal Reserve Act allows the President to remove a Board member (including the Chair) only “for cause” (e.g., misconduct, neglect of duty). This does not include policy disagreements or political differences.
This provision ensures the Fed’s operational independence from short-term political pressures, safeguarding its role in managing monetary policy.

Historical Context:
Past presidents (e.g., Nixon with Arthur Burns, Reagan with Paul Volcker) have faced limitations in influencing Fed Chairs. While they could apply political pressure or decline reappointment, outright removal was not legally feasible without just cause.
Courts have historically upheld the Fed’s independence, reinforcing that “for cause” requires a high threshold, such as ethical violations or incapacity.

Practical Implications:
A President can indirectly influence the Fed by shaping its leadership through appointments (when terms expire) or public persuasion. However, abrupt removal to impose preferred policies would face legal challenges and undermine institutional credibility.

Treasury Secretary Scott Bessent earlier this week indicated that the administration’s timeline for considering Powell’s successor was roughly six months away. 

Speaking in a Bloomberg Television interview, Bessent said that the timing for interviewing candidates to replace Powell was “sometime in the fall.”

Bessent also said that Fed independence in deciding on monetary policy was a “jewel box that has got to be preserved.”

We suspect some of Trump's frustration comes from the fact that China's PBOC is doing 'whatever it takes' to prop up their economy/market (take your pick)...

China PPT: propping up Chinese stocks literally every day

Fed's Powell: fuck your calls pic.twitter.com/VGXMNNwccv

— zerohedge (@zerohedge) April 17, 2025

Furthermore, Trump does have grounds for thinking that the so-called 'Independent' Fed is far from it following the comments from Bill Dudley in 2019...

The day is August 27, 2019. Former NY Fed president Bill Dudley writes a Bloomberg oped saying "the Fed shouldn't enable Donald Trump" and urged the central bank not to "provide offsetting stimulus" in Trump's trade war with China.

Six years later, here we are pic.twitter.com/H6WT5O0cMD

— zerohedge (@zerohedge) April 11, 2025

Doesn't sound like an 'apolitical' entity to us?

One more thing - for mathematically gifted among you - why did The Fed slash rates by 50bps just ahead of the election when financial conditions were already 'easy' but refuses to do so now that financial conditions are drastically tighter?

Fed reaction function pic.twitter.com/80AzJlZo3h

— zerohedge (@zerohedge) April 9, 2025

At least Trump hasn't got physical with Powell... yet!

Here is LBJ literally slamming Fed chair William McChesney Martin against a wall to "print money" pic.twitter.com/qbxqOyuPQe

— zerohedge (@zerohedge) April 17, 2025

However, Trump’s ability to remove top officials at agencies that had long been viewed as having a measure of independence from the White House has come into acute focus in recent months, after the administration dismissed senior officials at the Federal Trade Commission, the National Labor Relations Board and Merit Systems Protection Board.

As Bloomberg reports, the firings are the most direct challenge yet to a 1935 Supreme Court decision that paved the way for agency independence. 

Powell made reference Wednesday to a current Supreme Court case with regard to the removal of the NLRB and MSPB officials.

“There’s a Supreme Court case. People will have read probably” about it, Powell said in answering questions at the Economic Club of Chicago. 

“That’s a case that people are talking about a lot. I don’t think that decision will apply to the Fed but I don’t know,” he said.

“It’s a situation that we’re monitoring carefully.”

Powell’s term as chair runs into May 2026, while his term as a governor lasts until February 2028.

Tyler Durden Thu, 04/17/2025 - 08:26

Futures Trim Gains From "Big Progress" In Japan Trade Talks After UnitedHealth Plummets

US equity futures have bounced back from yesterday's rout, following positive signals from initial US-Japan trade talks after President Donald Trump said there was “big progress” to strike a deal fueling optimism over trade negotiations. Still, as of 8:00am they are well off their highs after DJIA heavyweight member UnitedHealthcare plunged 20% after slashing outlook on care costs and after President Donald Trump berated Federal Reserve Chair Jerome Powell for being slow to cut interest rates; S&P 500 futures rising 0.4% having earlier risen as much as 1.2%, while Nasdaq futures gained 0.8% with Mag7 names mostly higher as US-listed shares of TSMC rose 3.8% in premarket after forecasting sales for the second quarter that topped estimates. European stock fell and Asian markets rose. Volatility is becoming less extreme as the VIX retreated to around 30, down from last week’s peak of about 52. The dollar edged higher while the yen drops, lagging G-10 currencies. Gold dipped from record highs but was still trading above $3300 while oil rose for a second day after the US vowed to reduce Iran’s energy exports to zero. 

In premarket trading, Mag 7 stocks are mostly higher (Nvidia is about flat, Tesla +0.3%, Meta +0.4%, Apple +0.7%, Amazon +0.5%, Alphabet +0.7% and Microsoft +0.2%). TSMC’s US-listed shares rose 3% after the main chipmaker for Nvidia and Apple forecast sales for the second quarter that beat analyst estimates and kept its bullish outlook for growth in 2025, suggesting the world’s biggest chipmaker is confident it can ride out a US-China trade war. Alcoa dropped 1.5% after the the largest US aluminum producer said President Donald Trump’s 25% tariff on metal imports has cost the company $20 million since the duties went into effect. Here are some other notable premarket movers:

• DR Horton Inc. (DHI) declines 3% as the builder scaled back its expectations for home sales in its full fiscal year as high mortgage rates and growing economic uncertainty pressure buyers.
• Eli Lilly (LLY) soars 11% after the drugmaker said a late-stage trial of its oral GLP-1 drug, orforglipron, met key efficacy goals — showing promise it could become the first approved oral diabetes and weight-loss treatment
• Other obesity drug developers slumped on the news: Viking Therapeutics (VKTX) -5%
• Hertz Global Holdings Inc. (HTZ) shares rise 15%, extending gains from a 56% rally on Wednesday, after CNBC’s Scott Wapner reported on air that Bill Ackman’s Pershing Square holds about a 19.8% stake in the rental-car company, citing a person familiar with the matter.
• UnitedHealth (UNH) slumps 20% after the company cut its earnings outlook for the year and reported first-quarter earnings below estimates, citing heightened care needs in Medicare that were “far above” what it had planned for.
• Health insurers are tumbling after the news from bellwether UnitedHealth: Humana (HUM) -16%, Centene (CNC) -8%, CVS Health Corp. (CVS), which owns insurer Aetna, -6%

Futures had climbed earlier as positive signals from initial US-Japan trade talks stirred optimism agreements can be reached to avoid higher levies on American trading partners. But gains fizzled after the biggest heavyweight in the Dow Jones, UnitedHealth, plunged 20% after the company cut its earnings outlook for the year and reported first-quarter earnings below estimates, citing heightened care needs in Medicare that were “far above” what it had planned for. Sentiment was also dented after Trump said in a TruthSocial post that Powell’s termination from his position can’t come quickly enough, arguing that the US central bank should have lowered interest rates already this year, and in any case should do so now. Powell is “always TOO LATE AND WRONG." Reaction to Trump’s comments in the bond market were muted, with Treasury yields ticking higher across the curve. A gauge of the dollar edged up. 

Earlier, Trump said there was “big progress” in talks to strike a deal for Japan. The yen weakened after the country’s chief trade negotiator said currencies weren’t discussed, allaying concerns the US would push for a stronger exchange rate. Treasury yields climbed after Federal Reserve Chair Jerome Powell reiterated his commitment to keeping inflation in check. A gauge of the dollar climbed.

Following the turmoil triggered by the announcement of broad US levies earlier this month, investors are focusing more on developments in country-specific trade negotiations. Key questions surround China, after Beijing indicated Wednesday it has several conditions for agreeing to talks with the Trump administration.

“Hopes for good trade talks between the US and other countries after initial progress with Japan is one of the main drivers for US equity futures turning to green territory,” said Mathieu Racheter, Julius Baer head of equity strategy. “But that comes after quite a drop yesterday, so I wouldn’t read too much into the daily price action. The path of least resistance still remains to the downside.”

The ECB is expected to cut rates for the seventh time later Thursday, after Trump’s tariffs darkened the economic outlook. With trade negotiations still in flux, President Christine Lagarde is unlikely offer clear indications on where rates will go next. 

Meanwhile, Powell on Wednesday signaled a wait-and-see approach to tariffs, pushing back on hopes the central bank would act quickly to soothe investor fears. His comments, along with concerns over the impact of tariffs on the tech sector, helped end a two-day consolidation in stocks.

“The only ‘Fed put’ that the Fed could envisage is if there was a risk of market dislocation, which is not the case at the moment,” said Enguerrand Artaz, a fund manager at La Financière de l’Echiquier. “When you look at the data, there is no need to intervene. Markets going down is not a reason in itself to intervene, especially not at these levels of valuation.”

Europe's Stoxx 600 falls 0.5%. Construction, health care and telecommunication shares underperform, while energy leads peers after solid results from Siemens Energy. Here are the biggest movers Thursday:

• Siemens Energy shares surge as much as 14%, touching a record high, after the German firm significantly lifted its full-year revenue, margin and free cash flow guidance
• ABB shares rise as much as 5.1% after the company said it is planning to spin off its robotics unit and confirmed its full-year guidance. Analysts welcome the firm’s move to become a pure electrification and automation player
• J Sainsbury shares rise as much as 4.3%, hitting a one-month high, after the UK’s second-largest supermarket chain posted annual adjusted profits ahead of expectations
• Hermes falls as much as 4.2%, after its first-quarter sales slightly undershot analyst estimates, stoking worries that even companies exposed to the wealthiest clients could be susceptible to a slowdown in demand for high-end items
• Biomerieux shares fall as much as 7.5%, after French biotech firm reported earnings. Morgan Stanley and RBC flagged FX headwinds and patchy division performance, though noted strong growth in the molecular business
• Man Group shares fall as much as 4.2%, as the UK money manager’s assets under management were dragged down by $5.6 billion in the first half of April due to market turmoil caused by President Donald Trump’s tariff plans
• Sartorius AG shares fall as much as 5.6%, the most since April 9, after the German health-care group was flagged by JPMorgan as potentially vulnerable to US federal funding cuts
• Moncler’s shares slipped as much as 3.4% after the top-performing luxury stock’s muted growth in the first quarter, with analysts noting the Italian maker of high-end puffer jackets faces a tough backdrop
• Pernod Ricard shares fall as much as 1.6% after the spirits maker’s third-quarter sales fell short of estimates amid sluggish demand in China
• VAT Group falls as much as 4.5%, with analysts disappointed by the results and outlook despite the company saying it expects another year of growth

Earlier in the session, Asian stocks rose, amid optimism surrounding the progress of trade negotiations between the US and its trading partners. The MSCI Asia Pacific Index climbed as much as 0.9%, with Tencent, Alibaba and Sony among the biggest contributors. Benchmarks in Hong Kong and India led gains, with notable advances also in Japan and South Korea. After the recent turbulence sparked by President Donald Trump’s tariffs, investor focus is shifting to potential US deals with a flood of nations looking to avoid hefty duties. Trump said there was “big progress” in talks with Japan’s lead tariff negotiator, while China has signaled an openness for discussions. Meanwhile, the Bank of Korea kept its benchmark interest rate steady while citing a significant increase in downside risks to growth. Many Asian markets will be closed for holidays on Friday, including Hong Kong, Australia and India.

In FX, the euro drops 0.3% versus the dollar ahead of the ECB decision where policymakers are widely expected to lower the deposit rate 25 bps to 2.25%.EUR/USD down 0.2% to 1.1379, versus 1.1344 day’s low; one-week risk reversals at 121bps, calls over puts There is some profit taking on dollar shorts ahead of the long weekend, a Europe-based trader says. The ECB is about to cut interest rates for the seventh time, and overnight volatility is elevated yet that reflects cycle highs in realized vol more than positioning for a surprise from the central bank. The yen slumped after it emerged that the currency was not a topic in the ongoing trade talks.

In rates, Treasuries are flat, erasing an earlier decline, with US 10-year yields trading 2 bps to 4.30%, down from 4.32% earlier. With yields higher by 2bp-3bp across maturities, curve spreads are little changed, however a slight flattening move briefly faded after President Trump said Fed Chair Powell’s termination “cannot come fast enough.” ECB policymakers are expected to cut interest rates for the seventh time in policy decision at 8:15am New York time. German and UK bonds are also down across the curve.

In commodities, oil prices rise for a second day, with WTI up 1% at $63.10 a barrel. Spot gold drops $20 to $3,323/oz. Bitcoin is steady above $84,000.

US economic calendar includes March housing starts/building permits, weekly jobless claims and April Philadelphia Fed business outlook (8:30am). Fed speaker slate includes Barr at 11:45am

Market Snapshot

• S&P 500 mini +0.5
• Nasdaq 100 mini +0.8%
• Russell 2000 mini +0.4%
• Stoxx Europe 600 -0.5%
• DAX -0.2%
• CAC 40 -0.5%
• 10-year Treasury yield +4 basis points at 4.32%
• VIX -2 points at 30.62
• Bloomberg Dollar Index +0.1% at 1227.01
• euro -0.2% at $1.1378
• WTI crude +0.9% at $63.06/barrel

Top Overnight news

• Trump again criticized Jerome Powell, saying the Fed chair should also lower rates and adding, “Powell’s termination cannot come fast enough!” BBG
• Trump made bullish remarks about Japanese trade talks (“Big Progress!”) after meeting w/officials from Tokyo at the White House on Wed, although there was very little detail, and it doesn’t appear that an agreement is imminent. Nikkei
• US House Energy and Commerce Committee is targeting May 7th, for a markup of its portion of the Republican reconciliation package: Punchbowl
• The Internal Revenue Service is making plans to rescind the tax-exempt status of Harvard University. CNN
• White House seeks to cut USD 40bln in funding for the Department of Health and Human Services: WaPo
• Fed's Schmid (2025 voter) said there is a lot of nervousness in the agricultural sector from tariffs but noted he's an optimist and they need to be patient to see how it plays out, while he said they will react to disruptions that might affect mandates.
• Nvidia CEO Jensen Huang arrived in Beijing days after the US barred the company from selling H20 AI chips to China. Huang held talks with Vice-Premier He Lifeng and met with DeepSeek founder. FT
• TSMC’s US-listed shares gained premarket after it reaffirmed 2025 revenue and spending forecasts and issued a stronger-than-expected second-quarter sales guidance. BBG
• Japan’s fin min expressed “deep concern” over the economic fallout from Trump’s trade policies. RTRS
• The ECB is expected to cut its key rate for a seventh time today — to 2.25% from 2.5% — as the trade war darkens the economic outlook. Investors see at least two more reductions by year-end. BBG
• Israel had planned to strike Iran’s nuclear facilities as soon as May, but was dissuaded from doing so by the White House as Washington holds negotiations w/Tehran about a deal. NYT
• The Chamber of Commerce has decided not to file a lawsuit against the Trump tariffs and will instead lobby the White House directly to dial back the duties. Politico  
• BofA Week-April 12th Total Card Spending +2.3% Y/Y (vs +1.1% on avg. in March); notes that the increase could be due to a dual boost from the upcoming easter and front-loading due to tariff uncertainty.

Tariffs/Trade

• US President Trump posted on Truth Social "A Great Honor to have just met with the Japanese Delegation on Trade. Big Progress!".
• Japanese Economy Minister Akazawa said he told US negotiation counterparts that Japan wants the best solution as soon as possible for both nations and strongly requested the revocation of tariffs on Japan. Akazawa said they agreed to hold a second meeting this month and he believes the US wants a deal within the 90-day window but added that he has no idea how talks will progress going forward.
• Japanese PM Ishiba said the Economy Minister reported to him that constructive talks were held with the US, while Ishiba added that of course talks will not be easy going forward and he will visit the US at an appropriate time to meet with US President Trump.
• Intel (INTC) told Chinese clients last week that chips would require a licence for exporting to China if the chips met certain requirements, according to FT.
• UK officials are said to be tightening security when handling sensitive trade documents to shield them from the US amid the tariff war, according to Guardian sources.
• White House officials believe a trade deal with Britain can be finalised within three weeks, according to Telegraph sources.
• China's MOFCOM says it is willing to expand a mutual opening up with Europe, maintaining normal communication with US counterparts, China is open to negotiations with the US in economic and trade areas.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks shrugged off the negative handover from Wall St. but with gains capped amid a lack of bullish drivers and as trade uncertainty lingered. ASX 200 was led higher by strength in energy and mining stocks following recent gains in underlying commodity prices and as participants digest quarterly updates from the likes of BHP, South32 and Santos. Nikkei 225 reclaimed the 34,000 status amid favourable currency moves and with US President Trump suggesting big progress was made in US-Japan trade talks. Hang Seng and Shanghai Comp conformed to the positive mood but with the gains in the mainland limited by the ongoing US-China trade frictions, while officials from MOFCOM, MIIT and the PBoC are set to hold a briefing on Monday where China will announce an expansion plan for its service sector.

Top Asian News

• China is to announce an expansion plan for its service sector at a briefing on Monday with officials from MOFCOM, MIIT and the PBoC to attend the briefing, while the Finance Ministry held a meeting with experts on international economic conditions.
• US House panel is probing whether DeepSeek used restricted NVIDIA (NVDA) chips, according to FT
• BoJ Governor Ueda said Japan's economy is recovering moderately albeit with some weak signs, while he added that Japan's economy and prices moving roughly in line with their forecasts but they must be vigilant to heightening uncertainty including from each country's trade policy. Ueda also stated that Japan's real interest rates remain very low and the BoJ is expected to keep raising interest rates if the economy and prices move in line with projections made in the quarterly report. Furthermore, he said when the BoJ raised rates in January, the US economy was in solid shape and markets had been stable but added that uncertainty surrounding US policy, particularly on tariffs, has heightened sharply recently, as well as noted that US tariffs could exert downward pressure on the economy and reiterated that keeping low rates even when underlying inflation is accelerating could result in a situation where we would be forced to hike rapidly.
• BoJ's Nakagawa said US tariff policy, as well as overseas economic and market developments, are among risks to Japan's economic outlook, while uncertainty over US tariffs could affect household and corporate sentiment, and Japan's economy and prices.
• Bank of Korea kept its base rate unchanged at 2.75%, as expected, with the rate decision not unanimous as board member Shin Sung-Hwan dissented and saw a need to respond to the worsening economic outlook. BoK said uncertainties to the growth path are higher and headwinds to economic growth are seen bigger than previously expected, while it will determine the timing and pace of any further base rate cuts and noted that monetary easing policy stance is to continue. BoK Governor Rhee said most board members saw lower interest rates in the three months ahead and they will factor in the interest rate differential with the US for the next rate decision. Furthermore, Rhee said they will assess in May whether the policy rate needs to go below 2.25% by year-end.

European bourses (STOXX 600 -0.5%) opened mixed, but have gradually succumbed to selling pressure to display a negative picture in Europe. Positive updates related to US-Japan trade and strong TSMC results have failed to lift sentiment. European sectors hold a negative bias, in-fitting with the broader risk tone. Consumer Products is towards the top of the pile, as traders digest the latest Luxury updates. There have been earnings releases from three high-fashion brands today; Moncler (-1.8%, Q1 topped expectations amid strong Asia demand), Brunello Cucinelli (U/C, in-line figures and maintained guidance), Hermes (-1.9%, Q1 beat but said will implement price hikes in US to offset tariffs).

Top European News

• TSMC (2330 TT / TSM) Q1 (TWD) Net Profit 361.6bln (exp. 354.6bln), Op. Profit 407.1bln (prev. 249bln Y/Y), Revenue 839.3bln (prev. 592.6bln Y/Y). Forecasts Q2 revenue between USD 28.4-29.2bln (exp. 26.4bln); sees Q2 gross margin 57-59% (prev. 58.8% in Q1); sees Q2 operating margin 47-49% (prev. 48.5% in Q1); says overseas fabs will impact TSMC margins. Not seen any change in customer behaviour because of US tariffs. FY Guidance maintained. Notes of very strong AI demand from US customers like Apple (AAPL), need to expand capacity in the US.
• NVIDIA (NVDA) CEO Huang says China is a very important market for NVIDIA, hope to continue to cooperate with China, via CCTV. Elsewhere, CEO Huang reportedly met clients in Beijing, including DeepSeek founder, to discuss new chip designs for Chinese customers, according to FT sources; he then held separate talks with Chinese Vice Premier Li. CEO says US tightening of chip export controls has a significant impact on the company's business, via Chinese State media; will resolutely provide services to the Chinese market.
• LVMH (MC FP) CEO says 2025 started well but worsened from March amid economic turmoil linked to tariffs

FX

• DXY is attempting to claw back some of Wednesday's lost ground. Markets continue to digest Wednesday's remarks by Fed Chair Powell who noted that the Fed wishes to wait for greater clarity before considering any change to its policy stance. For today's docket, weekly claims data will be eyed for signs of labour market weakening. DXY sits towards the bottom-end of Wednesday's 99.17-100.104 range.
• EUR softer vs. the USD in the run-up to the ECB policy announcement which is widely expected to see policymakers pull the trigger on a 25bps reduction in the Deposit Rate to the upper end of its neutral rate at 2.25%. EUR/USD sits towards the top end of yesterday's 1.1281-1.1412 range.
• USD/JPY has re-emerged from beneath the 142.00 level after dipping to a fresh seven-month low overnight at 141.62 with the rebound supported by the positive APAC risk appetite and after weaker-than-expected Japanese exports and imports data. Overnight, BoJ Governor Ueda stated that Japan's real interest rates remain very low and the BoJ is expected to keep raising interest rates if the economy and prices move in line with projections made in the quarterly report.
• GBP is flat vs. the USD and more resilient than peers. Fresh macro drivers for the UK are on the light side asides from a report in The Telegraph that UK PM Starmer is reportedly closing in on a new partnership with the EU that could put a trade deal with the White House at risk. GBP/USD is currently steady on a 1.32 handle and in a 1.3204-56 range.
• Antipodeans are both softer vs. the broadly stronger USD after a solid showing yesterday. AUD saw little follow-through from a mixed Australian labour market report in which employment change fell short of expectations and the unemployment rate came in below consensus.
• PBoC set USD/CNY mid-point at 7.2085 vs exp. 7.3083 (Prev. 7.2133).

Fixed Income

• USTs are softer, with benchmarks coming under pressure early doors as the general risk tone improved after strong TSMC numbers. Prior to this, a bearish bias was already in-play as APAC shrugged off the Wall St. lead and climbed, with focus on Trump’s positive commentary on trade with Japan. The US-Japan progress weighed on JGBs, resulting in them briefly underperforming overnight alongside a long-dated JGB liquidity auction. Currently at a 111-02+ low and around 15 ticks from the overnight high. Ahead, Weekly Claims, Philly Fed, Building Permits/Housing Starts & Baker Hughes.
• Bunds are directionally in-fitting with the above. EGBs await the ECB where a 25bps cut is expected and entirely priced. Focus for the meeting will be on how Lagarde and Co. approach the tariff uncertainty, and the two-way impulses on growth and inflation. Bunds are at a 130.91 base, around 30 ticks from overnight highs and just below Wednesday’s 131.02 low. To the downside, support factors at 130.75, 130.24 and 129.92 from the three sessions prior.
• Gilts are tracking the above, UK specifics and the docket ahead on the lighter side as markets focus on events within Europe and the US. On the trade front, the only update for the UK has been a piece in The Telegraph whose sources report that the White House believes a trade deal with Britain can be finalised within around three weeks.
• France sells EUR 12bln vs exp. EUR 10-12bln 2.40% 2028, 2.70% 2031, 2.00% 2032 OAT

Crude

• Crude is firmer with prices extending on Wednesday's gains after the US issued fresh Iran-related sanctions targeting oil tankers, while Treasury Secretary Bessent noted that the Trump administration has made it clear that they will apply maximum pressure on Iran and disrupt the regime’s oil supply chain and exports. WTI resides in a USD 62.61-63.51/bbl range while Brent sits in a USD 65.95-66.77/bbl parameter.
• Softer price action across precious metals following yesterday's run higher. Spot gold mildly pulled back after recently printing a fresh record high with the precious metal above the USD 3,300/oz level in a current 3,314.30-3,357.77/oz range - the top end being another record high.
• Copper futures are choppy but ultimately faded some of the recent gains as risk sentiment in its largest buyer lagged overnight. 3M LME copper resides in a 9,134.00-9,237.85/t range.

Geopolitics

• "Lebanese media: Low flight of Israeli drones in the airspace of the capital Beirut and the southern suburbs", according to Sky News Arabia.
• "Iranian media: Saudi defense minister arrives today in Tehran for talks with senior Iranian officials", according to Sky News Arabia.
• "The response to the Israeli proposal will confirm the rejection of any partial agreement to stop the war", via Asharq News.
• US President Trump waved off a planned Israeli strike on Iranian nuclear sites in favour of negotiating a deal with Iran to limit its nuclear program, according to the New York Times.

US Event Calendar

• 8:30 am: Mar Housing Starts, est. 1420k, prior 1501k
• 8:30 am: Mar P Building Permits, est. 1450k, prior 1459k
• 8:30 am: Apr 12 Initial Jobless Claims, est. 225k, prior 223k
• 8:30 am: Apr 5 Continuing Claims, est. 1870k, prior 1850k
• 8:30 am: Apr Philadelphia Fed Business Outlook, est. 2.2, prior 12.5

Central Banks

• 11:45 am: Fed’s Barr Speaks in Fireside Chat

DB's Jim Reid concludes the overnight wrap

Here in the UK, we’re about to have two public holidays, so the EMR will be taking a break as well until Tuesday. Wishing a Happy Easter to you and your families, and many thanks for all your interactions over recent months.

Ahead of the Easter weekend, risk assets sold off again, as ongoing trade tensions and hawkish comments from Fed Chair Powell led to growing concern about the near-term outlook, particularly if the Fed would be reluctant to ease policy. That led to a widespread selloff, with the S&P 500 (-2.24%) slumping back, whilst the dollar index (-0.83%) fell to another three-year low, and this morning S&P 500 futures (+0.74%) have only seen a partial recovery from that decline. To be fair, we did get some decent US data, but given the tariffs, any data before this month is being discounted as old news, so that offered little relief for investors. And with the risk-off move spreading, gold prices (+3.48%) saw their biggest daily jump in two years, reaching another all-time high of $3,343/oz.

In terms of the latest on the trade front, investors were most concerned about chipmakers yesterday, which followed the new restrictions from the Trump administration on semiconductor exports to China. Moreover, that concern mounted after AMD said they could face up to $800m of charges because of the new export controls, which followed Nvidia’s announcement the previous day that it’d report $5.5bn in write downs. So that led to a major slump in chipmakers, with the Philadelphia semiconductor index down -4.10%, whilst Nvidia (-6.87%) and AMD (-7.35%) posted even bigger declines. Meanwhile in Europe, ASML (-5.19%) also lost ground after its earnings announcement, with Q1 orders coming in beneath expectations. For more on this theme, Marion Laboure has published a note this morning on the latest export restrictions.

Later in the session, risk assets then came under further pressure after Fed Chair Powell’s speech, which suggested that any ‘Fed put’ remains well out of the money. Powell stressed the need to “keep longer-term inflation expectations well anchored and to make certain” that a one-time price increase “does not become an ongoing inflation problem”. He also noted that the US labour market was still "in a really good place". His comments added to the sense that the Fed wouldn’t be in a rush to react to the weaker surveys of recent weeks, with Powell noting that “we are well positioned to wait for greater clarity before considering any adjustments to our policy stance”. Moreover, he downplayed the need for any Fed market intervention, noting that markets remained orderly even if they were “struggling with a lot of uncertainty”.
Earlier in the day, equity futures had actually moved higher after a Bloomberg report suggested that China was open to trade talks, if the US met various conditions, including showing more respect and holding a more consistent position. There were also some more positive noises around the US-Japan trade discussions, as President Trump posted that he would be attending the meeting, along with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick. After the meeting, Trump claimed that there was “Big Progress!” with the Japanese delegation. But despite these headlines, investors were ultimately sceptical given the lack of concrete results for now, especially between the US and China.

All-in-all, the trade news and Powell’s comments provided a tough backdrop for markets, which pushed the S&P 500 (-2.24%) to a large decline. Indeed, the index managed to avoid an even worse day after recovering by 1% in the final 30 minutes of trading. The decline was led by tech stocks, with the Magnificent 7 (-3.95%) posting a sharp loss led by a -6.87% slump for Nvidia. But even away from that group, there were broad losses, with the equal-weighted S&P 500 down -1.35%. And in further evidence of ongoing market stress, the VIX index (+2.52pts) ticked up again to 32.64pts. So it’s now closed above the 30 mark for 10 consecutive sessions, which is the first time that’s happened since October 2022, back when the S&P 500 hit its low-point in that year’s bear market.

The risk-off mood also saw Treasuries gain ground for a third consecutive session, with 10yr yields (-5.6bps) down to 4.28% and the 2yr yield (-7.5bps) down to 3.77%. And with yields moving lower, the dollar index (-0.83%) fell to a new three-year low. However, in the very near-term, Powell’s hawkish comments saw markets marginally dial back the probability of a Fed cut by the June meeting from 83% to 80%, and this morning that’s continued, falling back to 73%.
In energy markets, Brent crude oil rose +1.82% to $65.85/bbl, its highest level since April 3, and this morning it’s up another +0.91% to $66.45/bbl. The rise was initially supported by the news on China’s openness to talks and then was further boosted by news of additional US sanctions on Iranian oil, with Treasury Secretary Bessent posting that “we will apply maximum pressure on Iran and disrupt the regime’s oil supply chain and exports”.

Earlier in the day, we had actually got a decent set of US economic data, although given it covered March, it’s all being heavily discounted as old news by markets. Nevertheless, the period did include higher tariffs on China, and also coincided with a slump in various confidence measures, so it was interesting that the hard data was still resilient in spite of that, echoing the March payrolls number, which was still at +209k. In terms of yesterday’s releases, retail sales were up +1.4% as expected, and industrial production fell -0.3% (vs. -0.2% expected), so there wasn’t a huge alarm in those numbers.

But even as the hard data held up for now, the surveys continued to look a lot more negative. Yesterday we got the New York Fed’s Business Leaders Survey of service firms, where the expectations component fell back to -26.6 in April, the lowest since April 2020 at the height of the pandemic. One thing to look out for today will also be the weekly initial jobless claims, as those will cover the week ending April 12, entirely after the reciprocal tariff announcement.

Overnight in Asia, equity markets have put in a decent performance, with gains for the Nikkei (+0.8%), the Hang Seng (+1.62%) and the KOSPI (+0.69%). There’s been a bit more weakness in mainland China however, where the Shanghai Comp is only up +0.21%, whilst the CSI 300 is down -0.02%. Otherwise, the Japanese Yen has weakened overnight (-0.52% vs. USD), which comes after Japan’s trade negotiator said there wasn’t a discussion on currencies in the trade talks, so investors felt it was less likely that a stronger exchange rate would result.

Looking forward, attention will turn to the ECB’s latest policy decision today, which is at 13:15 London time. This is their first decision since the reciprocal tariff announcement, and it’s widely expected that they’ll cut their deposit rate by another 25bps, taking it down to 2.25%. Our economists have a full preview (link here), and their view is that the hit to growth from reciprocal tariffs, uncertainty and financial conditions likely exceeds what the ECB was expecting.

Ahead of that decision, European equities put in a better performance than their US counterparts, with the STOXX 600 (-0.19%) outpacing the S&P 500 for a third consecutive session. Meanwhile on the rates side, yields on 10yr bunds (-2.6bps), OATs (-2.4bps) and BTPs (-2.0bps) all moved lower. The biggest outperformance came from 10yr gilts (-4.9bps), which moved lower after the UK inflation data was softer than expected in March. It showed headline CPI falling to +2.6% (vs. +2.7% expected), whilst core CPI was in line with expectations at +3.4%. The release helped to cement investor conviction that the Bank of England would cut again at the May meeting, with a rate cut now fully priced in.

To the day ahead, and the ECB’s policy decision will be the most watched event. In terms of US data releases, there’s March housing starts and building permits, as well as the weekly initial jobless claims. We’ll also get Germany’s PPI reading for March. Finally, earnings announcements include UnitedHealth, Netflix, American Express, Blackstone, Charles Schwab and Truist Financial.

Tyler Durden Thu, 04/17/2025 - 08:11

Trump's "Big Progress!" Trade Talk With Japanese Delegation Boosted Asian Markets

Tokyo led Asian stocks overnight after President Trump shared optimism on social media about promising Japan-US trade talks. 

Main equity indexes 

Around 6 pm Wednesday, Trump wrote on Truth Social: "A Great Honor to have just met with the Japanese Delegation on Trade. Big Progress!" 

Then, as the clock neared 10 pm, the president posted this image:

The president's "big progress" trade talks with Japanese representatives did not immediately halt tariffs. Still, Japan's lead negotiator, Ryosei Akazawa, said preparations are underway for a second round of negotiations in the not-too-distant future.

Akazawa, who Bloomberg quoted, said he met with Trump for an hour and then with U.S. negotiators from the U.S. Treasury and Commerce Departments for about 75 minutes.

"Both sides will engage in frank and constructive discussions and aim to reach a swift agreement," Akazawa said, adding that the U.S. sought a deal before the 90-day reprieve of the reciprocal tariffs.

In markets, Goldman analysts Chloe Garber, Jonathan Hurvitz, and Matthew Kaplan told clients that "big progress" trade talks overnight lifted sentiment, with Asia closing higher...

SPX futures +40bps // NDX +75bps // RTY +55bps // UST10yr +2bps @ 4.3% (U.S. bond mkt closes 2pm) // WTI +1.25% @ $63.25 // Bitcoin unch @ $84,300 as U.S. futures rally while Europe trades lower/Asia closed higher following optimism from US-Japan tariff talks ("big progress" was made – Trump). Taiwan Semi (+3% pre mkt) reported better numbers helping sentiment as well after NVDA closed -6.8% yday (down over -10% at one point).

The White House said earlier this week that more than 75 countries have reached out to discuss new trade deals. This comes as China and the U.S. remain locked in a trade war — but there was some good news on Wednesday:

• Respect & Clarity: China Opens Door For Reengaging Trump In Trade Talks

• China's 'Surprise' New Trade Rep A Likely Effort At Backchanneling 'Breakthrough' With Trump

Goldman's latest effective tariff rate on Chinese and U.S. goods... 

Meanwhile, Blackstone President Jonathan Gray warned that the U.S. economy risks recession unless these trade deals can be quickly made. There are already rumblings of global trade disruption on major maritime routes between China and the U.S. (read: here & here).  

Tyler Durden Thu, 04/17/2025 - 08:05

 

 

Your Biggest, Most Avoidable, Unforced Investment Errors
Adapted from “How Not To Invest: The ideas, numbers, and behaviors that destroy wealth – and how to avoid them” (Harriman House, March 18, 2025)
By Barry Ritholtz

 

 

Tariffs, inflation, war, debt ceiling, profit warnings, geopolitics, market volatility – there’s always something happening to fuel your urge to make a decision – any decision! – right now. This is the perfect recipe for making an unforced error or easily avoidable mistake.

If only there were some ways to prevent investors from interfering with the market’s greatest strength – the incomparable and guaranteed ability to create wealth by compounding over time.

Decades as an investor and trader on Wall Street have taught me that panics come and go. Drawdowns, corrections, and crashes are not the problem – your behavior in response to market turmoil is what causes long-term financial harm.

In “How Not to Invest,” I showcase extreme examples of “unforced errors” to illustrate these behavioral mistakes. I filled the book with my favorite errors made by ordinary investors, billionaires, and everyone in between (including myself) – and how to avoid them.

It does not require a monumental blunder to screw up – even modest mistakes can lead to bad outcomes. Five favorite examples reveal some of the mistakes we all make.

Excess fees: You may have missed this when it slipped by last August: “Secretive Dynasty Missed Out on Billions While Advisers Got Rich.” Two managers of a single-family office siphoned off so much money that each became a billionaire. As Bloomberg News reported, had their advisors followed a simpler, less “audacious” strategy, the family would have ended up $13-17 billion richer.

The reporters did not suggest wrongdoing, but allow me to point out that any advisor, let alone two, who became billionaires while wildly underperforming their benchmarks are obviously not fiduciaries. The article suggests they were more interested in their own financial well-being than that of their clients. The Latin phrase “Res ipsa loquitur” comes to mind: “The thing speaks for itself.”

All costs impact your returns, but high or excessive fees have an enormous impact as they compound – or, more accurately, lessen your portfolios’ compounding – over time. Fees of 2% plus 20% of the profits are a huge drag on performance. Other than a handful of superstar managers (most of whose funds you cannot get into), the vast majority of these managers fail to justify their costs.

Underperforming Your Own Holdings: The ARK Innovation ETF (ARKK), managed by Cathie Woods, had one of the best runs of any mutual fund or ETF manager—ever. For the 2020 calendar year, the fund gained 153%; from the March 2020 COVID lows to its peak 11 months later, ARKK’s returns were an eye-popping 359%. Woods was lauded with recognition—and huge inflows.

Therein lay the behavior gap: Most investors bought ARKK after its huge run.

Despite – or perhaps because of – having one of the greatest peak-to-trough runs in ETF history, ARKK investors have been wildly underperforming. Chris Bloomstran, chief investment officer of Semper Augustus Investments Group, has tracked this. In 2023, he tweeted a list of overlooked facts. The most devastating: 98% of all ARKK investors were underwater.

Why? Most ARKK ETF holders got in near the 2020 top after its surge. This was just before an 81% collapse that bottomed in December 2023. This is classic performance-chasing behavior. You see this all the time: After a huge run of spectacular gains, the media fetes a manager, and buyers pour in late. The inevitable mean-reversion soon follows.

The average ARKK investor has seen results far worse than the fund itself, according to data from Morningstar. Since its 2014 inception, the fund has returned 9.7% on average per year. That’s far below the triple-digit returns investors dreamt of, but in line with long-term stock returns. For [ARKK] investors, it’s even bleaker: Their average annual return, calculated by Morningstar, is -17 %.

Buy high, sell low, repeat until broke.

Your Lizard Brain: One of my favorite behavioral hacks is for you stock junkies: Manage your lizard brain via a Cowboy Account.

Love chatting about stocks at cocktail parties? Excited about FOMC meetings and Non-Farm Payroll releases? Do you hang on every word whenever a famous fund manager shows up on TV?  Then you are probably (like me) a dopamine fiend.

It’s not your fault, it’s just how you are built. Our lizard brain – the primitive part of the brainstem responsible for emotions, fear, aggression, pleasure, and the fight-or-flight response – has done a great job keeping us alive as a species.

But your limbic system, as it is more accurately called, fares poorly in capital markets. You must take steps to protect yourself from, well, yourself. Set up a mad-money account with less than 5% of your liquid capital. This will allow you to indulge your inner hedge fund manager safely. If it works out – great! You are more likely to let those winners run because it’s for fun and not your real money. If it’s a debacle, appreciate the terrific lesson that should remind you that this is not your forte.

Nobel laureate Paul Samuelson once said, “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” The cowboy account serves the same function.

Using 2% of my liquid net worth in my cowboy account, I play the dumbest game possible: market timing with out-of-the-money stock options. I have made some fortuitously timed buys, including Nasdaq 100 (QQQ) calls purchased during the October 2022 lows. I was up so much on that trade that my trading demons were emboldened. So I bought Silicon Valley Bank options (SVB) right after it got cut in half—but right before it went to zero. The SVB loss served me right; it was a reminder of how quickly I get cocky and arrogant after a score.

The value of my cowboy account is that it allows my inner dopamine fiend to leave my real capital unmolested by my big dumb lizard brain.

Manage a Windfall: What should you do when you are sitting on enormous, life-changing wealth? It doesn’t matter if it is Nvidia, Bitcoin, founder’s stock, or an employee stock option purchase plan (ESOP), sometimes the sheer size of a windfall is paralyzing.

An instructive war story: During the mid-1990s, a grad school buddy took a senior job at a tech startup that came with lots of stock. In late 1996, they were bought by Yahoo! Inc. The shares in the startup were replaced with Yahoo stock options that had a six-year vesting schedule, with 30% vesting after three years and the balance vesting in ~2% monthly increments in years four, five, and six.

I was on a trading desk then, and it was heady times. Tech stocks and dotcoms kept galloping higher, doubling and tripling. Every sale was a source of regret, as stocks kept going up, up, up.

Those YHOO options represented a great deal of wealth—not fun money, but life-altering amounts of capital. My buddy could pay off his mortgage and car loans, pre-pay the kids’ colleges, fully fund retirement accounts, and still have cash left over. He could take any job he wanted for the rest of his life—or none at all.

Torn about what to do, he asked my opinion.

My advice was not based on fear of a bubble or the (over)valuation of Yahoo; rather,

I suggested employing a regret minimization framework.2 All investments have a range of possible outcomes, but given how much money was at stake, I suggested focusing on two outlier tails at each end of the spectrum:

Scenario One: Hold, and Yahoo’s stock tumbles from $300 to $30.

Scenario Two: Sell, and the shares soar to $3,000.

How would you feel if either of these occurred?

If he sold his vested shares and the stock went higher, he would still own a lot of options. The probability of that outcome wasn’t the issue; what really mattered was the other tail, and a lifetime of regret if the stock collapsed but he didn’t sell.

It was an easy choice: He sold the 30%, and watched the stock rally for a few months, then collapse. He was thrilled, but not everyone at Yahoo was so fortunate. Stories abounded of paper decamillionaires (and billionaires!) who saw much of their paper wealth evaporate in the subsequent crash, never to recover.

If you are sitting on a massive windfall, recognize these facts: a) we have no idea where prices will be in the future, and b) selling some of the windfall can be a life-changing experience for you and your family.

It doesn’t have to be an all-or-nothing decision. The middle option is to sell enough —~25% to 50%— to become wealthy, and not just on paper. Doing this locks in sufficient wealth to eliminate a lot of life’s money-related worries. It still leaves you with plenty of upside if the best-case scenario turns out to come true. And third, it protects you from lifelong regret in case of a dotcom-like collapse (I know, impossible!).

Chasing Yield: In the low yield environment of the past quarter-century, there have been three common yield mistakes: 1) Buying longer-duration bonds; 2) Buying riskier, low-rated junk bonds; or 3) Using leverage to amplify your gains.

All of these strategies have been money-losers this century.

Duration and leverage issues are well known, but let’s discuss adding risk: In 2004, I walked into my office’s conference room to hear a rep from Lehman Brothers pitch a higher-yielding fixed income product: “AAA-rated, safe as Treasuries, but yielding 200-300 basis points more.” That was the pitch for securitized subprime mortgages (MBS).

This was impossible, and I said so: “Either you guys are either going to win the Nobel prize in economics or go to jail. There is nothing in between.” (I got called into our general counsel’s office for that one) Regardless, we know how that “Free lunch” worked out.

The key error was not understanding that risk and reward are two sides of the same coin. If you want more yield and you pursue riskier outcomes, you increase the chance that you not only won’t get the higher yield but may not get your principal back also.

Few mistakes have been more costly than “chasing yield.” Ask the folks who loaded up on MBS for the extra yield how they did.

~~~

There is an endless assortment of ways to make mistakes that hurt your portfolio. Most fall into four broad categories: you believe things that are not true; you attempt to operate outside of your narrow skill set; you allow your behavior to be driven by emotions; last, you fail to let time work for you.

Instead of trying to score more wins, consider instead making fewer errors.  If investors could get out of their own ways, make fewer decisions, and less mistakes, they would be so much better off…

 

 

 

Click here to learn more about How NOT to Invest.

 

 

 

__________

1. “Secretive Dynasty Missed Out on Billions While Advisers Got Rich” The family would have done better if they’d put their wealth in a low-cost index fund.
By Devon Pendleton, Dasha Afanasieva, and Benjamin Stupples (With assistance from Karolina Sekula, Tom Maloney, Pui Gwen Yeung, and Marton Eder)
Bloomberg August 13, 2024

2. These two possibilities — a 10-fold increase versus a 90% drop — are roughly symmetrical in terms of math (but probably not probabilities). Both were possible; neither was analyst consensus at the time. The latter turned out to be what occurred.

 

The post Avoid the Unforced Investment Errors Even Billionaires Make appeared first on The Big Picture.

China Selling Seized Crypto To Top-Up Coffers As Economy Slows: Report

Authored by Martin Young via CoinTelegraph.com,

Local governments in China are reportedly seeking ways to offload seized crypto while facing challenges due to the country’s ban on crypto trading and exchanges.

The absence of clear rules on how authorities should manage seized cryptocurrency has led to “inconsistent and opaque approaches,” which some lawyers fear could open the door to corruption, according to an April 16 report by Reuters.

Chinese local governments are using private companies to sell seized cryptocurrencies in offshore markets in exchange for cash to replenish public coffers, Reuters reported, citing transaction and court documents. 

The local governments reportedly held approximately 15,000 Bitcoin worth $1.4 billion at the end of 2023, and the sales have been a significant source of income.

China holds an estimated 194,000 BTC worth approximately $16 billion and is the second largest nation Bitcoin holder behind the US, according to Bitbo. 

Zhongnan University of Economics and Law professor Chen Shi told Reuters that these sales are a “makeshift solution that, strictly speaking, is not fully in line with China’s current ban on crypto trading.”

Countries and governments that hold BTC. Source: Bitbo

The issue has been exacerbated by a rise in crypto-related crime in China, ranging from online fraud to money laundering to illegal gambling. Additionally, the state sued more than 3,000 people involved in crypto-related money laundering in 2024. 

China crypto reserve floated as solution

Shenzhen-based lawyer Guo Zhihao opined that the central bank is better positioned to deal with seized digital assets and should either sell them overseas or build a crypto reserve.

Ru Haiyang, co-CEO at Hong Kong crypto exchange HashKey, echoed the suggestion saying that China may want to keep forfeited Bitcoin as a strategic reserve as US President Donald Trump is doing. 

Creating a crypto sovereign fund in Hong Kong, where crypto trading is legal, has also been proposed.

This issue has gained attention amid rising US-China trade tensions and Trump’s plans to regulate stablecoins and foster growth and innovation in the crypto industry.

Several industry observers have suggested that China’s tariff response could result in a devaluation of the local currency, which may result in a flight to crypto. 

Tyler Durden Thu, 04/17/2025 - 07:45

The post Trump is Bringing the World Together and It’s a Beautiful Thing appeared first on CEPR.

The post Donald Trump’s Handout to the Pharmaceutical Industry appeared first on CEPR.

UnitedHealth Stock Dumps On Earnings Miss & Outlook Downgrade

UnitedHealth Group shares crashed in premarket trading after the company reported weaker-than-expected Q1 results and issued a significant downward revision to its full-year guidance, citing higher-than-expected Medicare needs.

Here's a summary of UHG's mixed first-quarter earnings report: 

Adjusted EPS came in at $7.20, up from $6.91 y/y, but missed the $7.27 Bloomberg Consensus estimate.

GAAP EPS was $6.85, compared to a loss of $1.53 per share y/y.

Revenue totaled $109.58B, up 9.8% y/y, but below the $111.56B estimate.

Highlights:

UnitedHealthcare revenue: $84.62B, up 12% y/y (beat est. $83.87B).

Optum revenue: $63.9B, up 4.7% y/y (missed est. $67.17B).

• OptumRx: $35.13B, +14% y/y (beat est. $34.29B).

• OptumHealth: $25.31B, down 5.3% y/y (missed est. $28.89B).

• OptumInsight: $4.63B, +2.8% y/y (missed est. $5.1B).

Margins & Ratios:

Medical Care Ratio: 84.8%, better than 85.8% est.

Operating Cost Ratio: 12.4%, down from 14.1% y/y (beat est. 12.5%).

Operating Margin: 8.3%, slightly below 8.45% est.

UHG CEO Andrew Witty stated in a press release: 

"UnitedHealth Group grew to serve more people more comprehensively but did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead, and return to our long-term earnings growth rate target of 13 to 16%." 

UHG slashed its full-year profit forecast...

• New Adjusted EPS guidance: $26.00–$26.50, slashed from prior $29.50–$30.00 vs. $29.73 est. 

• A sharp downside surprise: New EPS guidance: $24.65–$25.15

UHG wrote that these two factors drove its revised outlook: 

• Heightened care activity indications within UnitedHealthcare's Medicare Advantage businesses, which became visible as the quarter closed, far above the planned 2025 increase which was consistent with the elevated levels in 2024. This activity was most notable within physician and outpatient services

• Unanticipated changes in the profile of Optum Health members impacting planned 2025 reimbursement due to unexpectedly minimal 2024 beneficiary engagement by plans exiting markets. In addition, a greater-than-expected impact to current and new complex patients from the ongoing Medicare funding reductions enacted by the previous administration.

"The company believes these factors to be highly addressable over the course of this year as well as it looks ahead to 2026," the company noted.

Shares of UnitedHealth crashed 19% in premarket trading, wiping out most of the gains recorded since February's low of around $450 a share. 

UHG is the largest stock in the Dow Jones Industrial Average at 9.32%... DJIA futures are down around 1.5%. 

UHG has faced ongoing turmoil since the December killing of UnitedHealthcare CEO Brian Thompson. The company is now working to repair its image amid growing public outrage over the healthcare system.

Tyler Durden Thu, 04/17/2025 - 07:20

"Supply Towers Over Last Year": DC Listing Service Warns 

Listing service Bright MLS summed up Washington, D.C.'s housing market in one troubling line: "Supply is towering over last year." That's been the trend for the last few months, with active listings well above multi-year averages for this time of the year. Add in the latest surge in mortgage rates—on top of mounting DOGE-related layoffs, now numbering in the hundreds of thousands—and the D.C. metro area appears to be heading toward a combination of housing and labor market pains. 

Here are three key takeaways from MLS's weekly report (for the week ending April 13) on the housing markets in Northern Virginia, D.C., and Maryland. The common denominator across all three regions: supply—and a lot of it. Inventory has surged this spring, well above levels seen over the last three years:

• Contracts keeping pace with last year. The Bright MLS service area had 6,709 new purchase contracts for the week ending April 13. With contracts roughly flat, ticking up 0.8% from the same week in 2024, new contracts have now exceeded last year for five consecutive weeks. Market headwinds have not fully discouraged buyers as mortgage rates continue to see declines, but it may be a bumpy spring season depending on movement in the economy.

• List prices plateau at the record high. The Mid-Atlantic median list price has held at a record high of $449,900 for three consecutive weeks, marking a 4.6% increase over the same week last year. Last year's peak list price occurred in May. Whether this year's peak arrived earlier than usual, or will spring ahead in future weeks, is yet to be seen.

• Supply is towering over last year. There were 36,112 active listings at the end of the week, a 27.8% increase compared to the same time in 2024. While inventory is showing encouraging growth this year, buyers looking for specific price points or home types may find the market tight. Supply still has a long way to go before reaching pre-pandemic levels seen in years like 2019.

A snapshot of MLS' coverage area shows that active listings were up 27.8% for the week ending April 13 compared to the same period last year. Week-over-week, listings rose by 3.1%.

In Washington, DC, active listings were up 47.5% versus the same period one year ago. Week-over-week, listings rose 3.9.% 

Visualizing the data...

A growing number of homeowners in the D.C. area are listing their properties just as the average 30-year fixed mortgage rate climbed above 7% last week.

Coupled with news of 280,000 DOGE-related federal layoffs and declining consumer sentiment amid escalating trade war headlines, the outlook for the D.C. swamp has been darkening. 

Tyler Durden Thu, 04/17/2025 - 06:55

Russia Targets Major Surge In Natural Gas Exports By 2050

Authored by Charles Kennedy via ilPrice.com,

• Russia plans to double its natural gas exports by 2030 and triple them by 2050.

• The strategy focuses on expanding exports to "friendly countries" and developing Arctic energy resources.

• Russia faces economic risks due to global market volatility and Western sanctions.

Russia expects its natural gas exports, including via pipeline and LNG, to jump twofold by 2030 and threefold to 2050 under its new long-term energy strategy approved by the government on Monday.

Russia sees its pipeline and LNG overseas deliveries surge from 146 billion cubic meters (bcm) in 2023 to 293 bcm in 2030, and further up to 438 bcm by 2050.

Crude oil and condensate production is targeted to increase from 531 million metric tons per year, or 10.66 million barrels per day (bpd), in 2023 to 540 million tons, or 10.8 million bpd, by 2050.

However, oil exports are expected to remain flat throughout 2050, at around 235 million tons per year, or about 4.7 million bpd.

The new strategy, whose update was ordered by Vladimir Putin, includes measures to accelerate the development of oil and gas processing, expand the regional gas infrastructure development program, and ensure sufficient petroleum product supply on the domestic market at affordable prices.

Under the strategy, Russia will also continue to redirect oil and gas exports “to new markets in friendly countries,” to which Moscow has been exporting since the invasion of Ukraine and the Western embargoes and sanctions imposed in 2022.

Russia also aims to boost oil transshipment capacity in its Arctic and Far Eastern ports and actively utilize the Northern Sea Route's potential—these are key to delivering oil and LNG from its Arctic projects to markets in Asia.

While updating its long-term energy strategy, Russia faces lower oil and gas revenues in the short term.

For Russia, the oil market meltdown in recent days could pose risks to the economy, Russia’s Central Bank Governor Elvira Nabiullina said last week.

“If the escalation of the tariff wars continues, this usually leads to a decline in global trade and the global economy and, possibly, demand for our energy resources. Therefore, there are risks here,” Nabiullina was quoted as saying by Russia’s TASS news agency.

Tyler Durden Thu, 04/17/2025 - 06:30

"A Fluid Situation": Deutsche Bank On How Auto OEM's Are Responding To Tariffs

In a new note out this week, Deutsche Bank laid out how it believes auto OEMs are going to shift their businesses to adapt to tariffs. 

Deutsche Bank reports that automakers (OEMs) are adopting a wide range of strategies to navigate the uncertainty—adjusting pricing, incentives, and production plans on a rolling basis.

The situation remains highly fluid, with the Trump administration recently floating the possibility of temporarily suspending tariffs to allow more time for OEMs to adjust. However, Deutsche Bank emphasizes that the market should operate under the assumption that “all imported vehicles are currently subject to the 25% tariff,” with imported parts facing similar duties starting May 3.

In its April 15 update, Deutsche Bank observes, “Across OEMs, we continue to see a dispersion of reactions.”

For instance, Tesla has paused sales of U.S.-built Model X and S vehicles in China, while GM halted operations at its CAMI Assembly Plant. Mazda, Mitsubishi, and Subaru have also taken a variety of measures—ranging from absorbing price increases to stopping U.S. inventory shipments altogether.

Among notable strategic shifts, Ford is offering broad employee pricing discounts and reshuffling production to its Fort Wayne facility and Honda has publicly stated it will not raise consumer prices as it evaluates its response.

Meanwhile, Infiniti has indefinitely paused production of two crossover models built in Mexico and Rivian and several other EV manufacturers have so far maintained operations but are assessing longer-term impacts.

While some OEMs are absorbing tariff costs temporarily—Mazda, for instance, will do so through April—others are preparing to pass the cost downstream. Deutsche Bank notes that despite a lack of sweeping public announcements, “the cost impact will not be trivial,” as one unnamed CEO warned.

Deutsche Bank continues to track weekly developments and offers updated data in spreadsheet form upon request, cautioning investors that policy developments could shift “overnight.”

We noted earlier this week Deutsche was still cautious on auto stocks. In a note on Monday it said that as Q1 2025 earnings approach, automakers still face significant uncertainty from new tariffs. They expect strong early-year demand as consumers buy ahead of price hikes, followed by a slowdown in the second half as tariffs bite—pushing 2025 U.S. auto sales to 15.4 million, down from 16.0 million in 2024.

Ford and GM could see gross costs rise by over $10 billion, while Tesla and Rivian face smaller impacts due to their supply chains, the note said. These estimates assume a 25% tariff on imported vehicles and parts starting May 3, with exemptions for USMCA-compliant content.

Deutsche said it believes automakers will share the cost burden with dealers and consumers and use various cost-offsetting strategies. Still, Ford and GM may see a $4–7 billion EBIT hit annually.

"In such a context, we think Rivian may have the cleanest set-up given its relatively small exposure to the tariffs and prospects for a strong R2 product cycle (naturally subject to execution risk though)," analysts wrote.

"We continue to view Tesla favorably longer term as an embodied AI secular winner but acknowledge it faces many cross currents for the next quarter or two.

Tyler Durden Thu, 04/17/2025 - 05:45

Ukraine Could Lose Kiev To Russia, Says Former French General

Via Remix News,

The imbalance between the Russian and Ukrainian militaries will deepen and may even lead to the fall of Kyiv, believes Dominique Delawarde, a retired French army general.

“Russia is certainly continuing to recruit more troops, at a rate of about 1,000 per day, which is more than it is losing on the battlefield. That is why it is becoming stronger,” Delawarde said.

At the same time, he said that Ukraine is losing more soldiers on the front line than it is able to recruit. “Since they have repeatedly mobilized their forces, they are increasingly short of reserves,” he argued.

According to him, “the visible imbalance between Russian and Ukrainian troops will deepen and may even lead to the fall of Kyiv.” As he emphasized, Russia has not yet used its full potential in the war against Ukraine.

In the opinion of the French general, time is on Moscow’s side, and not only in terms of the military aspect. 

In his opinion, Russia is in no hurry to achieve peace, further weakening Kyiv’s NATO allies, who “have pumped colossal amounts of money into the bottomless pit of Ukraine, while at the same time leading to financial ruin and falling into economic chaos.”

However, as the war in Ukraine has shown, the war is not purely a matter of who has the larger army and more soldiers. 

Ukraine has leaned heavily upon drones to wage its battles and has other advantages in terms of intelligence, communications, and certain weapons made available through its Western partners. 

Nevertheless, a lack of recruits has severely harmed Ukraine’s war efforts.

“Europe’s economic weakness will ultimately benefit Russia,” Delawarde said, as quoted on Wednesday, April 16, by the Russian news agency TASS.

On the same day, the Verkhovna Rada of Ukraine extended martial law and general military mobilization for 90 days – until August 6, 2025. 

This is the fifteenth such decision of the Ukrainian parliament since the beginning of the full-scale war.

Most analysts do not believe Russia has the resources to take Kyiv, as evidenced by the slow pace of Russia’s progress in retaking even a small share of the country’s territory in the east. However, if Ukraine were to lose military support from the West, then Putin may be able to do so.

The Russian invasion of Ukraine has been ongoing since February 24, 2022, and has turned into the largest armed conflict in Europe since the end of World War II and the fall of Nazi Germany in 1945.

Read more here...

Tyler Durden Thu, 04/17/2025 - 02:00

Trump Confronts Economic And Geopolitical Reality

Authored by Edward Ring via American Greatness,

By the time this is published, everything may have changed, and that is to be expected. Throughout his career, well before and since becoming a politician, Trump has explicitly stated that he does not think it is always a good strategy to be predictable. And while markets love predictability, sometimes markets, and the systems propping them up, need disruption. This is such a moment.

Nobody should deny that the anxiety is genuine. An older friend of mine, well into his 70s, still working but ready to retire, is wondering how he and his wife will survive if their savings are wiped out. That’s true for all of us, but it begs the question: What if the painful restructuring we may be about to endure, and which may last for many years, is necessary to avoid an even worse fate?

Trump’s abrupt escalation of import tariffs goes well beyond violating the principles of comparative advantage, but we can start there. “Comparative advantage” is not all it’s cracked up to be. Repeated in business schools as if it were gospel since the 1980s, it goes something like this: “Wool is cheaper in Scotland, and wine is cheaper in France, so France should sell their wine to Scotland, and Scotland should sell their wool to France.” Everybody wins. Period. That’s the extent of it. That is the essence of free trade theory.

In the real world, though, policies that rely on “comparative advantage” doctrine as their moral justification have gotten pretty ugly. While overall economic growth may be maximized when every nation exports products that it produces most cost-effectively, the local impacts are not always benign. Nations that produce coffee at competitive global prices, for example, end up with valuable cropland converted from food production to coffee plantations. These coffee plantations are typically owned by multinational corporations that repatriate profits to low-tax nations elsewhere while buying off a small local elite that streamlines the regulatory environment. Meanwhile, the nation becomes dependent on imports for everything except coffee, and even the coffee ends up priced out of reach for the average citizen. Replace “coffee” with any specialty product, and all too often, the “gains of trade” translate on the ground into nations with seething, destitute populations dependent on accumulating debt and foreign aid.

These examples aren’t restricted to foreign nations, nor are they restricted to commodities. While American multinationals moved manufacturing overseas, in the process destroying millions of jobs and thousands of communities in America, it wasn’t just cheap wool, cheap wine, and dirt-cheap flat-screen TVs that were pouring into the country in exchange. We offshored our production of steel, our chip manufacturers, our pharmaceutical industry, and much more.

And even that devastation was tolerated for decades because its effects were mostly felt in what we now call rust belt states. Our service economy and tech sectors boomed, along with what was left of manufacturing, satiating a majority of the population that loved buying cheaper foreign imports. But this whole scheme could never go on forever. America’s trade deficit in 2024 was up to $918 billion, a new record. America’s cumulative trade deficit, nearly all of it incurred since 2000, is now estimated in excess of $17 trillion.

To balance the trade deficit, there is what economists call the “current account.” If dollars flow overseas for us to purchase foreign imports in excess of foreign nations spending dollars to purchase our exports, the surplus dollars are repatriated in the form of foreigners bidding up the prices for assets they purchase in America. A slight oversimplification would be that trade deficits equate to cheap flat screens and unaffordable homes. But there is another reason America has huge trade deficits. It floods the world with dollar-denominated transactions, and by permitting foreigners to buy American assets, we effectively collateralize our currency. And so long as America is for sale in this manner, that helps sustain the dollar as a hard currency.

That comes in handy. For 46 out of the last 50 years, Americans have logged federal budget deficits. So far, the dollar’s status as the dominant transaction and reserve currency of the world gives America’s federal government the ability to borrow money by selling Treasury Notes.

This is all well known and rehashed beyond the need to elaborate further. So, why are people acting like this was sustainable? How long can the global economic model rest on American trade deficits funding the military and industrial development of nations that, in some cases, aren’t even allies, with all of it balanced through foreign purchases of American assets? And how long will international demand for dollars finance federal budget deficits?

To understand why this had to come to a head, consider federal budget trends in recent years. 

In 2019, the last year of Trump’s first term, the federal budget was $4.4 trillion, with interest payments of $400 billion. For 2025, the first year of Trump’s current term, the projected federal budget is $7.0 trillion, with interest of just under $1.0 trillion.

What changed? While the COVID pandemic was used to justify massive infusions of stimulative federal cash into the economy, much of it probably necessary, why hasn’t spending been reduced since the pandemic’s impact has been over for at least two years? Are we supposed to just expect massive federal budget deficits year after year? Is it sustainable to log a federal budget deficit that has grown from an alarming $900 billion in 2019 to $1.9 trillion in 2025, more than twice as much?

A roughly accurate summary of the economic reality we confront is federal budget deficits of $2 trillion per year and trade deficits of $1 trillion per year. Trade deficits translate into growing foreign ownership of American assets. Federal budget deficits add up in the form of accumulating, interest-bearing national debt. In 2019, the interest payments on what at the time was $22 trillion in national debt had already reached $575 billion, at an average interest rate of 2.5 percent. By 2024, the national debt had skyrocketed to $35 trillion, an increase of $13 trillion in just six years. Interest payments in 2024 were $1.1 trillion, and the average interest rate had risen to 3.3 percent.

“Average” interest rate requires explanation. Ten-year treasury notes currently pay 4.4 percent. Interest rates have risen over the past few years. Imagine if that continues, and $35 trillion (or more) in treasury notes mature and are reinvested at 4.4 percent. That would raise the annual federal interest payment on the national debt to $1.5 trillion.

At what point does this become a crisis? 

And if we wait until there is another financial crisis, will we be able to borrow our way out of it again? No wonder Trump’s team is cutting bureaucracy and hoping to eliminate massive entitlements fraud. By every metric that matters, the size and obligations of the federal government have exploded in the last six years, and it can’t go on.

Which brings us to the geopolitical reality we must confront: the rise of China. No other nation has done more to finance the rapid industrialization of China than the United States. But now, the United States depends on China for critical minerals, electronic equipment, machinery, iron, steel, medical apparatus, organic chemicals, pharmaceuticals, and much more. Every year, the biggest percentage of our trade deficit is with China, over $300 billion in 2024. The Chinese invest this surplus in Treasury Notes but also use it to purchase strategic assets in the United States. And how has China treated us as we finance the meteoric rise of its economy?

Here is a transcript of comments made by noted investor and businessman Kevin O’Leary on CNN last week.

“I do business with China; they don’t play by the rules. They’ve been in the WTO for decades, and they have never abided by any of the rules they agreed to when they came in. They cheat, they steal, they steal IP, I can’t litigate in their courts, they take product, technology, they steal it, they manufacture it and sell it back here. This is not about tariffs anymore. Nobody has taken on China yet, not the Europeans, no administration, for decades. As someone who actually does business there, I’ve had enough. I speak for millions of Americans who have IP that has been stolen by the Chinese. I have nothing against the Chinese people, but the government cheats and steals and finally an administration that puts up and says, ‘enough.’”

O’Leary thinks Trump should impose 400 percent tariffs on China. Maybe that will get their attention. He also suggested that America, with what is still the biggest economy and biggest domestic market on earth, may not have this much economic leverage in the future. He’s right. Now is the time to exert economic pressure on China because a decade from now, it will be too late.

The Trump administration recognizes three realities that softer heads and wishful thinkers try to either deny or bury in nuance. 

(1) We are in a cold war with China, and if we don’t step up, we will lose.

(2) We have hollowed out our manufacturing prowess, and that must change. Fast. 

(3) Federal spending is out of control; the trends are unprecedented and must be reversed.

This is the rest of the story. Tariffs are just the beginning salvos in a fight we can’t avoid any longer.

Back in 1986, Herbert Stein, an economist at the American Enterprise Institute, in reference to US federal debt, famously said, “If something can’t go on forever, it will stop.” That was 40 years ago, when America’s epic debt binge was still in its first decade. Since then, it has gone on and on, and as the numbers indicate, it has intensified in the last few years.

It will stop. The only question is when and how. One must forgive the anxiety that is triggered in so many because of our current administration’s attempts to confront the unsustainable. But for those calling themselves economists who now, with unwarranted certainty, decry Trump’s bold gamble as unnecessary or foolish, less charitable sentiments might be appropriate.

Tyler Durden Wed, 04/16/2025 - 23:25