Yield Spreads Suggest The Risk Isn't Over Yet

Authored by Lance Roberts via RealInvestmentAdvice.com,

In November last year, I discussed the importance of yield spreads, historically the market’s “early warning system.” To wit:“

“Yield spreads are critical to understanding market sentiment and predicting potential stock market downturns. A credit spread refers to the difference in yield between two bonds of similar maturity but different credit quality. This comparison often involves Treasury bonds (considered risk-free) and corporate bonds (which carry default risk). By observing these spreads, investors can gauge risk appetite in financial markets. Such helps investors identify stress points that often precede stock market corrections.”

In other words, the yield spreads reflect the perceived “risk” in the financial markets. The spread between risky corporate bonds and safer Treasury bonds remains narrow when the economy performs well. This is because investors are confident in corporate profitability and willing to accept lower yields despite higher risks. Conversely, during economic uncertainty or stress, investors demand higher yields for holding corporate debt, causing spreads to widen. This widening often signals investors are growing concerned about future corporate defaults, which could indicate broader economic trouble.

The two charts above show the importance of yield spreads, which tend to rise before financial turmoil in the stock market. When yield spreads began to widen, those increases often preceded liquidity events, reduced corporate earnings, economic contractions, and stock market downturns. In other words, the increase in yield spreads reflected increased investor risk aversion. Eventually, that risk aversion spilled over into the financial markets as investors realized the fundamental shift in the financial markets.

As we discussed in this past weekend’s #BullBearReport, yield spreads reflect the recognition of a shift in three primary areas:

1. Corporate Financial Health: Credit spreads reflect investor views on corporate solvency. A rising spread suggests a growing concern over companies’ ability to service their debt. Particularly if the economy slows or interest rates rise.

2. Risk Sentiment Shift: Credit markets tend to be more sensitive to economic shocks than equity markets. When credit spreads widen, it typically indicates that the fixed-income market is pricing in higher risks. This is often a leading indicator of equity market stress.

3. Liquidity Events: As investors become more risk-averse, they shift capital from corporate bonds to safer assets like Treasuries. The flight to safety reduces liquidity in the corporate bond market. Less liquidity potentially leads to tighter credit conditions that affect businesses’ ability to invest and grow, weighing on stock prices.

The recent market disruption caused by Trump’s trade war has undoubtedly widened spreads between “risk-free” treasury yields and corporate bonds. This is because those tariffs directly impact corporate financial health (reduced profitability), a shift in “risk sentiment” (valuations), and liquidity (potential increase in default risk). Regarding the last point, the lack of market liquidity is at levels not seen since the economic shutdown in 2020.

While yield spreads have widened, they remain well below the long-term averages. However, if recession risks increase due to tariffs, sentiment, or illiquidity, those yield spreads will widen further. The illiquidity issue is currently the most significant risk to the markets, as the sharp spike in yields this past week is warning of a more significant event brewing in the bond market. As we noted in our Daily Market Commentary this past week:

“On Monday, Treasury bonds had a sharp decline far beyond what the economic or tariff data suggested would be the case. We suspect that on Monday, there was forced liquidation through either margin calls or demand redemption of an institutional fund. The outsized selling and volume on a single day for bonds is highly unusual. The media excuses of “tariffs” or “economic concerns” are issues the bond market has known about for quite some time.”

That type of sharp liquidation has historically been the issue of some liquidity events in the bond market. In this case, it appears to be the heavily leveraged arbitrage trade used by hedge funds called the “basis trade.” That trade is a little complicated but critically important to understand. The link below is a brief explanation.

However, the increase in yield spreads and the disruption in the bond and equity markets certainly raise the risk profile for investors in the near term.

Economic Policy Uncertainty

We previously addressed the market’s selloff, primarily due to the Trump administration’s “tariff on, tariff off” policies.

“That catalyst turned out to be President Trump’s “on again, off again” tariff announcements, which created turmoil in earnings expectations. The flux in tariff policies makes it difficult for markets to predict future earnings and corporate profitability. With the “E” in forward valuation measures in flux, markets struggle to price in expected outcomes.”

As shown, those policies are creating a sharp increase in policy uncertainty. We suspect this isn’t going to change in the near term. However, it is notable that these periods are historically short-term, and such spikes are generally near market lows. In other words, the current policy uncertainty will pass, and markets can return to focusing on earnings and valuations. Until then, market rallies will likely be an opportunity to reduce risk.

Regarding earnings and valuations, Wall Street only expects a one-quarter impact from tariffs. As shown, earnings for Q1 are currently expected to come in at $217/share, down from $226.54 one year ago. But, interestingly, Q2 earnings are expected to rise to $223.86, roughly where Q1 estimates started a year ago.

However, in Q3, earnings are expected to drop sharply to just $179/share. If realized, that 20% drop in earnings will be pretty significant. This is particularly problematic for the equity market when assigning forward valuation multiples. For example, assuming the market trades at an 18x multiple of $179 in earnings would pin the market’s fair value at 3,222. Such would be a nearly 40% decline from Friday’s close.

Following that sharp drop in earnings, analysts at S&P Global expect Q4 earnings to rebound sharply to their previous estimates. That assumption suggests they believe the tariffs to be temporary, and the Trump administration will negotiate “no tariff” deals with our trading partners. While such could be the case, I am not so optimistic.

However, whatever outcome occurs will likely lead to reduced estimates heading into 2026, closer to the long-term linear growth trend. That is what the rise in yield spreads suggests as the economy slows and inflation falls. That is barring the expansion of the current bond market crisis into a more significant credit-related event that begins to impact the major banks.

This uncertainty, in both policy and markets, is why we are cutting risk for now.

We Cut Risk For Now

As discussed in last week’s post, “Hope In The Fear,” the weekly “sell signal” was triggered.

“The chart below is a long-term weekly analysis of the relative strength (RSI) and momentum (MACD) indicators. I have denoted when the indicators are trading in bullish and bearish trends. The primary signal is the crossover of the weekly moving averages, as noted by the vertical lines. While the MACD and RSI indicators provided early warning signals, the moving average crossover confirmed a market correction or consolidation. These indicators will not necessarily cause a risk reduction precisely at the top. However, they generally provide sufficient indications to reduce risk ahead of more significant market corrections and consolidations.“

“Conversely, they also offered signals when investors should increase market equity risk. These signals were instrumental in avoiding the 2008 market crash and the 2022 correction. Currently, the RSI is crossing below 50, which may suggest a continued correction process with the MACD beginning to revert. However, the moving average crossover has not yet confirmed the RSI and MACD messages.”

Currently, both the market and the increase in yield spreads warn investors of elevated market risk that could induce further market declines and increased volatility. While such does not preclude a significant counter-trend rally in the short term, the longer-term risks seem to be growing.

As investors, we could undoubtedly ignore the warning signs, and this could be a short-term corrective event like we saw during the 2020 pandemic or the Fed’s “taper tantrum” in 2018. The market correction was brief in those instances, and the bull market resumed. However, it is worth noting that during those periods when the “sell signals” were short, the Federal Reserve intervened by cutting rates, increasing monetary accommodation, or both. Currently, as shown in the Fed Liquidity Index, that is not the case.

For these reasons, we began cutting risk on this week’s rally. With the market still technically oversold, we will not be surprised to see a continuation of the rally this week. Such would be similar to the reflexive rally we saw immediately following the weekly “sell signal” in 2022. Today, like then, sellers emerged as market concerns remained elevated. I suspect that will be the case this time as market participants continue to reprice markets for slower economic growth and policy changes. Markets rarely bottom without retracing toward the previous lows or setting new lows. Given the technical damage to the market, we suspect we will see a pullback before this correction process is over.

From a more bullish point of view, the valuation reversion will eventually become complete. However, that is likely not in the coming weeks or even the next couple of months.

If the markets rally substantially from current levels, our risk reduction actions will drag on portfolio performance. I am okay with that until I am more confident that the corrective process is behind us and that the benefits of increased equity exposure outweigh the risks to invested capital. Given the warning signs from yield spreads, the weekly “sell signal,” and slowing economic growth and inflation, market risk seems tilted against investors temporarily.

For now, we will continue to use rallies to rebalance risk, manage asset allocations, and hold increased cash levels.

Trade accordingly.

Tyler Durden Mon, 04/14/2025 - 15:00

UAW Boss Sides With Trump On Tariffs, Stuns MSNBC Panel

Anti-Trumper—perhaps now reformed—UAW union boss Shawn Fain stunned far-left MSNBC hosts Alicia Menendez, Symone Sanders-Townsend, and Michael Steele over the weekend by echoing MAGA talking points and defending President Trump's tariffs. 

President Shawn Fain is about to go live on @CNN to talk about Trump, Harris, and our fight against corporate greed. #StandUpUAW pic.twitter.com/BhJGxrOZ9c

— UAW (@UAW) August 20, 2024

"We know that tariffs will influence these companies to do the right thing and reinvest in this country," Fain said, who oversees 400,000 union members across America's auto industry. 

Fain continued: "We believe Stellantis and these companies will bring work back because of these tariffs ... look what these auto manufacturers have done without them..." 

He praised former presidential candidate Ross Perot, who famously warned about the consequences of NAFTA in the early 1990s, calling him a "prophet."

Fain emphasized that Perot was right: "Since NAFTA's inception in 1993, we've lost 90,000 manufacturing facilities in this country. Millions of jobs."

Fain waived Perot's 1993 book "Save Your Job, Save Our Country: Why Nafta Must Be Stopped--Now! Unknown Binding"...

Responding to Fain, Symone Sanders-Townsend had a mental glitch (404 error) when trying to understand the union's alliance with MAGA on auto tariffs. She said, "I'm really struggling to understand how UAW has aligned with Trump on this." The other leftist hosts also experienced 404 mental errors, causing a flare-up of Trump derangement syndrome. 

Fain then countered the MSBC hosts: "So first off, NAFTA is still causing us to lose jobs in this country - our broken trade system is still causing us to lose jobs in this country, and no one from either party has been willing even to address the issue for 30 plus years...We support tariffs as a tool, a tool in the toolbox, not the be-all and end-all. We've got to fix the broken trade system." 

UAW President Shawn Fain on the need for tariffs:

"We know that tariffs will influence these companies to do the right thing and reinvest in this country."

"Since NAFTA's inception in 1993, we've lost 90,000 manufacturing facilities in this country. Millions of jobs." pic.twitter.com/kdJ5HqRyNF

— Rapid Response 47 (@RapidResponse47) April 13, 2025

More here...

UAW President Shawn Fain joins the MSNBC panel to speak out on behalf of President Trump's tariffs and their application in real-world terms: "Tariffs are a motivator to make these companies do the right thing."

He gets straight to the point, saying, "Our broken trade system is… pic.twitter.com/FeQZMbtg5j

— DeVory Darkins (@devorydarkins) April 13, 2025

It seems that unions are increasingly supportive of Trump — yet, for some inexplicable reason, they continue backing a rudderless and imploding Democratic Party more focused on illegal aliens, anti-Trump/Musk color revolutions, gender politics, and policies that undermine national security.

Tyler Durden Mon, 04/14/2025 - 14:45

Passengers Will Soon Need Real ID To Board Domestic Flights, TSA Warns

Authored by Bill Pan via The Epoch Times,

In less than a month, Americans without a star on their driver’s license may face potential delays or even be turned away when trying to board domestic flights, federal officials said.

The Transportation Security Administration (TSA) on April 11 said it will begin enforcing the long-delayed REAL ID rules at airports nationwide on May 7. Once the rules are fully enforced, state-issued driver’s licenses and ID cards that do not meet the new standards will no longer get through the security checkpoints.

“The Real ID requirement bolsters safety by making fraudulent IDs harder to forge, thwarting criminals and terrorists,” said Adam Stahl, TSA’s acting administrator. 

“TSA will implement REAL ID effectively and efficiently, continuing to ensure the safety and security of passengers while also working to minimize operational disruptions at airports.”

What Changes on May 7?

Starting that day, TSA will only accept licenses and ID cards that meet federal REAL ID standards, which include having applicants provide certain identifying information such as Social Security numbers and proof of lawful presence.

Travelers can still use documents that the TSA recognizes as acceptable alternatives to a Real ID. These include a passport or passport card, a permanent resident card, and an enhanced driver’s license issued by one of five states—Michigan, Minnesota, New York, Vermont, and Washington—as well as other federally approved forms of identification.

Children under 18 don’t need any identification to fly within the United States.

Travelers relying solely on a non-compliant driver’s license and without any approved alternative can expect to face delays, extra screening, and in the worst case, not being permitted into the security checkpoint, TSA warned in a statement issued April 11.

TSA did say it was planning to begin “phased enforcement“ on May 7, though it hasn’t shared many details about the plan. In a federal rule published on Jan. 14, the agency said it could take a “phased approach” in the first two years, with the ability to issue warnings to people without Real IDs to avoid “a serious risk of operational disruption, negative public impact, and potential security vulnerabilities.”

How to Get a REAL ID

According to TSA, some 81 percent of domestic travelers already use a Real ID or an approved alternative. A state-issued, REAL ID-compliant license can be identified by a star marking in one of its upper corners.

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Otherwise, travelers may check with their state’s motor vehicle agency to apply for a Real ID. According to the Department of Homeland Security (DHS), an applicant may need to at least verify his or her full legal name, date of birth, Social Security number, and lawful status, as well as provide two forms of proof of address.

While these are the minimum federal requirements, some states may require additional information. DHS recommends checking with local authorities for the most accurate instructions.

Why Is This Happening?

In 2005, Congress passed the REAL ID Act in the aftermath of the Sept. 11, 2001, terrorist attacks. It established minimum security standards for state-issued driver’s licenses and ID cards to make sure that people presenting them are who they claim to be.

Implementation has been slow. It wasn’t until 2020 that all 50 U.S. states met compliance standards for issuing REAL IDs.

The enforcement deadline has since been postponed multiple times, most recently due to disruptions caused by the COVID-19 pandemic. Originally scheduled for Oct. 1, 2021, the deadline was extended to May 3, 2023, and again to May 7, 2025, to give states and residents more time to prepare.

In addition to airports, Real IDs are needed to enter certain federal facilities and nuclear power plants, according to the DHS.

Tyler Durden Mon, 04/14/2025 - 12:05

 

 

 

The transcript from this week’s, MiB: Anthony Yoseloff, Davidson Kempner CIO, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

 

 

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XXXXX insert transcript here XXXXX

 

~~~

 

 

 

 

The post Transcript: Anthony Yoseloff, Davidson Kempner CIO appeared first on The Big Picture.

Zelensky Urges Trump To Visit Ukraine Before Pressing Negotiations, Says Vance 'Justifying' Putin's Actions

Ukrainian President Volodymyr Zelensky is urging for President Donald Trump to visit Ukraine and see the war's devastation first-hand before pressing for peace negotiations with Russia.

"We want you to come," the Ukrainian president pleaded in reference to Trump while speaking with CBS’ "60 Minutes" on Sunday. Zelensky hit out at what he strongly hinted was Trump's lack of understanding of the conflict and Russian brutality.

"You think you understand what’s going on here. Okay, we respect your position. You understand. But, please, before any kind of decisions, any kind of forms of negotiations, come to see people, civilians, warriors, hospitals, churches, children destroyed or dead," he said.

The February 28 clash at the Oval, via Newsweek

"Come, look, and then let’s — let’s move with a plan how to finish the war," he added. He further suggested that with such a trip, Trump will finally grasp Putin's true nature.

"You will understand with whom you have a deal. You will understand what Putin did," the Ukrainian leader said. This comes as the US and Russia are seeking diplomatic normalization through a series of bilateral meetings which have cut out any Ukrainian or EU representation.

"We will not prepare anything. It will not be theater, with preparing actors in the streets and the [city] center. We don’t do this. We don’t need it," he continued. "You can go exactly where you want, in any city which been under attacks, just to come and to understand.”

The CBS interview aired the same day that Russian ballistic missiles pummeled the Ukrainian city of Sumy, resulting in a mass casualty event which was quickly condemned by the United States and European Union. Ukrainian emergency authorities said the Sumy attack killed at least 34 people and wounded more than a hundred.

Trump's special envoy to Ukraine, retired lieutenant general Keith Kellogg, reacted by saying it "crosses any line of decency". He suggested the strikes intentionally targeted civilians. "As a former military leader, I understand targeting and this is wrong," Kellogg posted on X. He said there are "scores of civilian dead and wounded."

However, Trump's reaction was one in which the Russians were less singled out and condemned, instead the US president highlighted that this "horrible war" shows the urgency of ending the war before more people die...

‼️Reporter: Do you have a reaction to Russia's Palm Sunday attack on Ukraine?

Donald Trump: I think it was terrible, and I was told they made a mistake. But I think it's a horrible thing. I think the whole war is a horrible thing. pic.twitter.com/lrCwXUzO3m

— Ostap Yarysh (@OstapYarysh) April 14, 2025

But the White House has strongly complained over the past months that Zelensky has appeared unwilling to genuinely engage in peace talks with Moscow, also at a moment more hawkish European allies are seeking to fill the gap of waning Washington support. Zelensky knows he'll have to make serious concessions for peace.

It is especially the tense February meeting in the Oval Office which still stings and looms large. Zelensky in the CBS interview took the opportunity to once again slam Vice President J.D. Vance.

"It’s a shift in tone, a shift in reality, really yes, a shift in reality, and I don’t want to engage in the altered reality that is being presented to me," Zelensky said.

"First and foremost, we did not launch an attack [to start the war]. It seems to me that the Vice President is somehow justifying Putin’s actions. I tried to explain, 'You can’t look for something in the middle. There is an aggressor and there is a victim. The Russians are the aggressor, and we are the victim'."

Below: RT's Editor-in-Chief responded sarcastically to Zelensky once again complaining that Russian 'propaganda' is winning in America...

Zelensky complains about "the enormous influence of Russian information policy on America" - says "Russian narratives are prevailing in the US."

We will take the compliment, even from him.

Good job, team. pic.twitter.com/BpZh9oGKVK

— Margarita Simonyan (@M_Simonyan) April 14, 2025

Meanwhile, Trump has since made clear on where he stands concerning 60 Minutes' repeat efforts to make him look bad.

"Almost every week, 60 Minutes … mentions the name ‘TRUMP’ in a derogatory and defamatory way, but this Weekend’s ‘BROADCAST’ tops them all," the president complained on Truth Social, in apparent reference to both the Ukraine report and another on Greenland. "CBS is out of control, at levels never seen before, and they should pay a big price for this. MAKE AMERICA GREAT AGAIN!"

Tyler Durden Mon, 04/14/2025 - 11:45

Meta's Monopoly Trial Kicks Off: Here's What To Know

Authored by Joseph Lord via The Epoch Times,

The fate of social media giant Meta, billionaire Mark Zuckerberg’s primary company, is on the line as a trial begins in Washington on Monday to determine whether the tech giant is violating antitrust laws.

The Federal Trade Commission, which has spent the past six years investigating Meta, is expected to argue before U.S. District Judge James Boasberg that Meta’s acquisitions of Instagram and WhatsApp created an illegal monopoly over social networking.

In the worst-case scenario for Meta, the company could be forced to divest both subsidiaries in a breakup on a scale not seen since the dismantling of AT&T’s telephone empire more than 40 years ago.

Here’s what to know about the most important trial in Meta’s history.

Trial

The case is being held at the E. Barrett Prettyman U.S. Courthouse, just a few hundred yards from the U.S. Capitol.

It’s a bench trial, meaning Boasberg alone will decide the outcome, not a jury. That gives the judge extraordinary influence over the future of one of the most powerful companies in the world.

FTC Claims

The Federal Trade Commission (FTC) investigation into the company began during President Donald Trump’s first term and was aggressively pursued under President Joe Biden.

The FTC has taken issue with the company’s 2012 purchase of the image-based app Instagram and 2014 purchase of WhatsApp, a messaging platform that’s particularly popular outside of the United States.

During the trial, the FTC is expected to argue that Meta’s purchase of the two platforms was part of a calculated effort to “buy or bury” any potential rivals to Facebook.

In a 2008 email presented by the FTC in a past federal court filing, Zuckerberg wrote, “It is better to buy than compete.”

FTC Chairman Andrew Ferguson has said that his agency is “raring to go” against Meta but also that he’ll follow lawful orders from the president to close the case.

Meta’s Response

Meta has consistently denied the allegations of operating an illegal monopoly and has argued that the FTC’s case is both outdated and out of step with current market realities.

A spokesperson for Meta said in a statement to The Epoch Times that the acquisitions were approved by regulators at the time and that the company has always operated competitively. He cited the presence of competitors such as TikTok, YouTube, X, iMessage, and others.

The spokesperson said the lawsuit “defies reality” and that it would send a message that “no deal is ever truly final” if Boasberg sides with the FTC.

The company has also suggested that dismantling its integrated platforms would harm users, who’ve come to rely on interconnected services and shared back-end systems.

Since Trump was elected to a second term, Zuckerberg has visited Mar-a-Lago, ended the company’s controversial fact-checking efforts, rolled back diversity and inclusion programs, and staffed the company with GOP-friendly executives.

The Epoch Times reached out to FTC for further comment but did not receive a response by publication time.

‘Creaking Antitrust Precedents’

Boasberg has heard years of pretrial motions in this case and has made clear he isn’t fully sold on the government’s argument.

He threw out the FTC’s original filing in 2021, citing a lack of clear market definitions. While he allowed the revised case to proceed, he’s continued to express skepticism, warning in recent months that the FTC’s claims “strain this country’s creaking antitrust precedents.”

Antitrust statutory law and litigation are among the most labyrinthine areas of the federal code.

Boasberg has given both sides a chance to make their case in court. Witness lists include Zuckerberg himself, former Chief Operating Officer Sheryl Sandberg, and executives from rival platforms such as TikTok and Snapchat.

The trial is expected to last through the summer, with a decision potentially arriving by July.

Tyler Durden Mon, 04/14/2025 - 10:45

Nvidia Announces "Engines Of World's AI Infrastructure" Will Be Built In America For First Time

President Trump's 'America First' agenda - more specifically, the revival of domestic critical supply chains to reinforce hemispheric defense - scored a massive win this morning as Nvidia announced plans to design and build AI supercomputer factories in the United States for the first time.

Nvidia outlined new initiatives aimed at strengthening America's chip manufacturing sector:

• Nvidia is localizing AI chip and supercomputer manufacturing in the U.S. for the first time, partnering with TSMC, Foxconn, Wistron, Amkor, and SPIL.

• Over 1 million square feet of manufacturing space has been commissioned for Blackwell chips and AI supercomputers in Arizona and Texas.

• Mass production of these chips is expected within 12–15 months.

• Total AI infrastructure by Nvidia could total $500 billion over the next four years.

"Tens of 'gigawatt AI factories' are expected to be built in the coming years," Nvidia said, adding, "Manufacturing Nvidia AI chips and supercomputers for American AI factories is expected to create hundreds of thousands of jobs and drive trillions of dollars in economic security over the coming decades."

Nvidia CEO Jensen Huang commented on 'Made In America' supercomputers: 

"The engines of the world's AI infrastructure are being built in the United States for the first time" and "adding American manufacturing helps us better meet the incredible and growing demand for AI chips and supercomputers, strengthens our supply chain and boosts our resiliency." 

Nvidia's move will bolster America's chip manufacturing sector and reduce reliance on high-tech AI chips from Taiwan — a supply chain that Beijing could disrupt at any moment with an invasion of Taipei.

Rebuilding these critical domestic supply chains plays into a broader theme of hemispheric defense as the world fractures into a more profound bipolar state by the 2030s.  

The race to secure supply chains and strengthen hemispheric defense is intensifying. That's because the technological competition between the U.S. and China is set to go into hyperdrive. Control over AI chips and their applications — including EVs, clean tech, humanoid robots, drones, low Earth orbit (LEO) satellites, and large language models (LLMs) — will be critical. While these may seem like separate industries, they all share a common ecosystem of technologies and supply chains. Whoever dominates these industries will dominate the next decade. 

If America wants to win 2030 - now is the time to bolster domestic supply chains.

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Click pic... buy seeds... take food supply into your own hands... Tyler Durden Mon, 04/14/2025 - 10:00

Apple Races To Boost iPhone Production In India, Vietnam As Trump Pauses Tariffs

President Trump's 90-day pause on his "reciprocal" tariffs for countries that did not retaliate—excluding China—has allowed Tim Cook's Apple to ramp up production of smartphones, tablets, and laptops in India and Vietnam.

Sources familiar with Apple's supply chains told Nikkei Asia that top suppliers in India were instructed to ramp up iPhone production. Yet the people noted that factory utilization rates were already at maximum levels, making it challenging to bring on significant amounts of new production. 

Here's more from the report:

Apple has helped suppliers purchase equipment that could increase iPhone production in India by several million units, one of the people told Nikkei Asia.

The company expects to produce at least 50 million iPhones there this year and is pushing to make the majority of its upcoming iPhone model bound for the U.S. in India.

It has also told suppliers that the majority of MacBooks and iPads for the U.S. market need to be made in Vietnam, sources briefed on the matter said.

Apple also asked suppliers to ship as many components and parts from China as possible to Southeast Asia and India to support the increasing production for a wide range of products for the U.S. market, according to multiple sources familiar with the matter.

The good news for Apple over the weekend is that U.S. Customs and Border Protection issued updated trade guidance on some of the highest-value goods—such as computers, chips, and smartphones—from reciprocal tariffs (though they remain subject to a 20% basic tariff if made in China). However, U.S. Commerce Secretary Howard Lutnick told This Week host Jonathan Karl on Sunday that these consumer devices will be subject to separate tariffs in the coming months.

After Pres. Trump exempts tech like phones, computers and chips from new tariffs, Commerce Sec. Howard Lutnick tells @JonKarl they will be included in semiconductor tariffs to be released in coming months.

“This is not a permanent sort of exemption.” https://t.co/p9xXrT2Xvx pic.twitter.com/RoVH72kfM1

— This Week (@ThisWeekABC) April 13, 2025

Last week, Appel scrambled five emergency air freight shipments of iPhones and other products from India and China to the U.S. to avoid the tariff war. 

Trade data via the supply chain platform Sayari shows that Foxconn India is a major iPhone supplier.

Nikkei's report also noted that Apple informed suppliers to "accelerate the shift of component production, such as printed circuit boards, to Thailand and other non-China locations." 

"We are requested to ship all of our components to Southeast Asia and India by air as much as possible. ... It's like the client is scooping up all the inventories to move them outside of China," said an executive with an Apple component supplier, adding that his company will have to shoulder the extra air-shipping costs.

"Apple is very serious about auditing multiple sites in Thailand for component production," a manager at another key Apple supplier told Nikkei Asia. "The accelerating diversification out of China is ongoing."

Meanwhile, Meta, HP, and Dell have also instructed suppliers to increase production in Vietnam and other Southeast Asia countries to avoid China tariffs. The direct result of Trump's trade war is to push the supply chains of US companies out of China and toward friendshoring or re-shoring. 

Tyler Durden Mon, 04/14/2025 - 09:30

Intel To Sell 51% Of Altera To Silver Lake In $8.75 Billion Deal As Turnaround Accelerates

Intel has reached a definitive agreement to sell a 51% stake in its programmable chip unit, Altera, to Silver Lake Management for $8.75 billion, marking the latest step in its ongoing turnaround strategy. The transaction aims to reduce Intel's expenses and improve its balance sheet as the struggling chipmaker refocuses on core operations and capital efficiency. The deal also positions Intel to shift more aggressively toward ramping up its foundries in a potential joint venture with Taiwan Semiconductor Manufacturing. 

"The transaction, which values Altera at $8.75 billion, establishes Altera's operational independence and makes it the largest pure-play FPGA (field programmable gate array) semiconductor solutions company," Intel wrote in a press release. 

"Altera offers a proven and highly scalable architecture and tool chain and is focused on driving growth and FPGA innovation to meet the demands and opportunities of an AI-driven market," Intel said, adding, "Intel will own the remaining 49% of the Altera business, enabling it to participate in Altera's future success while focusing on its core business." 

Here's a timeline of headline developments featuring Altera:

• Sept. 2024: Worst Finally Over? Intel To Move Forward With Assessing Strategic Transactions This Month

• Dec. 2024: Intel Shortlists Suitors For Chip Division Altera Amid Turnaround Efforts

Intel announced that Raghib Hussain, former president of Products and Technologies at Marvell, will succeed Sandra Rivera as CEO of Altera on May 5. 

"Today's announcement reflects our commitment to sharpening our focus, lowering our expense structure and strengthening our balance sheet," Intel CEO Lip-Bu Tan stated, adding, "Altera continues to make progress repositioning its product portfolio to participate in the fastest growing and most profitable segments of the FPGA market." 

Hussain said, "I am excited to lead Altera in its next chapter, and this milestone with Silver Lake furthers Altera's journey to be the world's No. 1 FPGA solutions provider" and "backed by Silver Lake's strong track record and now with clarity of focus as an independent company, Altera is well-positioned to build on its momentum and deliver breakthrough FPGA-based solutions that are shaping the future of compute driven by AI." 

Intel's turnaround plan also includes a potential joint venture with TSMC to operate the company's chipmaking factories. Under the proposed deal, TSMC would take a 20% stake in the JV and offer manufacturing expertise and personnel training. 

In markets, Intel shares are up 4% in premarket trading. On the year, shares are flat and hovering around the $20 handle - a level that dates back to near GFC lows. 

Will Intel shares fly in Trump's America First era? 

Tyler Durden Mon, 04/14/2025 - 09:15

US Strips Benefits From Thousands Of Criminal Aliens, Those On Terror Watchlist

Authored by Chase Smith via The Epoch Times,

The Trump administration has ended temporary immigration parole and revoked federal benefits for thousands of foreign nationals flagged as national security risks, part of a broader effort to roll back immigration programs implemented under the Biden administration.

According to White House officials, more than 6,300 individuals who were paroled into the United States during or after 2023 were identified as having criminal records or were listed in the FBI’s Terrorist Screening Database. Their parole was terminated starting April 8.

As part of the enforcement action, the Social Security Administration reclassified those individuals’ Social Security numbers into its Ineligible Master File, a restricted database that prevents improper payment of federal benefits. Formerly known as the Death Master File, the system is used to ensure that only lawfully eligible individuals can access programs such as Social Security, Medicaid, and other federally administered aid.

Immigration parole allows certain noncitizens to temporarily enter and remain in the United States, during which they may receive work authorization and Social Security numbers if granted parole for more than one year.

White House assistant press secretary Liz Huston said the action fulfills President Donald Trump’s campaign pledge to enforce immigration laws more strictly.

“President Trump promised mass deportations, and by removing the monetary incentive for illegal aliens to come and stay, we will encourage them to self-deport,” Huston said in an emailed statement to The Epoch Times. “He is delivering on his promise he made to the American people.”

The policy change follows a March 25 notice in the federal register from the Department of Homeland Security (DHS ) formally ending the CHNV parole programs. Those programs, created in 2022 and 2023, allowed approximately half a million citizens of Cuba, Haiti, Nicaragua, and Venezuela, along with their immediate family members, to request authorization to enter the United States and apply for parole under categorical criteria.

“DHS has determined that it is now appropriate and necessary to terminate the CHNV parole programs,” the notice stated. “These programs do not serve a significant public benefit, are not necessary to reduce levels of illegal immigration, did not sufficiently mitigate the domestic effects of illegal immigration, are not serving their intended purposes, and are inconsistent with the administration’s foreign policy goals.”

DHS also noted that the parole period for individuals still present in the United States under CHNV authority will end on April 24, unless the secretary of Homeland Security makes an individual exception. Those without a lawful basis to remain after that date must depart voluntarily or face enforcement.

The changes are being implemented under Executive Order 14165, Securing Our Borders, signed by Trump on Jan. 20. The order directed the department to terminate parole programs deemed inconsistent with the administration’s immigration priorities.

Tyler Durden Mon, 04/14/2025 - 08:40

'Welfare Cliff' Continues: UK's £100,000 Childcare Tax Trap Punishes Success Once Again

It's been the case for years that government entitlements have provided low-income families with a higher standard of living than those earning substantially more.

But, as we pointed out in 2010 and 2012 that 'benefit' can backfire as "work is punished."

"the single mom is better off earning a gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045."

Fast forward to the pandemic, and we find that the $2.2 trillion 2020 CARES (Coronavirus Aid, Relief, and Economy Security) Act left many employed Americans making less than their unemployed counterparts.

For minimum wage and low wage workers the difference between what they are being paid to work and would receive on unemployment is no doubt the most crushing. Many struggle to pay their bills as is and receive no benefits to complicate the equation. While they are dodging coughs and bringing in masks from home for $10 an hour, others who made the same money are now being paid to sit safely at home.

Now, the same thing is happening in the UK, where getting a raise could leave one thousands of pounds poorer.

Welcome to the childcare cliff, a policy anomaly so irrational that a mere £1 pay rise can leave parents worse off by tens of thousands.

This September, the government’s expansion of free childcare in England - offering 30 hours of weekly care for children under three - was meant to ease the burden on working families. But for any household where one parent earns more than £100,000, this support vanishes entirely.

It’s a line drawn in concrete. 

Earn £99,999? Full benefits. Earn £100,000? You lose thousands.

Jeremy Hunt has withdrawn tax-free subsidies for working parents after they start earning £100,000 A 50% Raise Just to Break Even

According to new analysis from the Institute for Fiscal Studies (IFS) cited by the Financial Times, a London-based parent with two young children would need to earn over £149,000 just to break even vs. a colleague earning £99,999 who receives full childcare support. That’s a nearly 50% raise required simply to stand still.

And the system doesn’t stop there. As soon as you hit six figures, the personal allowance - the first £12,570 of tax-free income - begins to taper off. Combined with other clawbacks, this creates an effective marginal tax rate of 60% for earnings between £100,000 and £125,140 (and is even higher in Scotland).

In practical terms, this turns a middle-class promotion into a financial landmine.

Parents Penalized for Working

The result is both absurd and tragic: professionals across the country are turning down promotions, cutting their hours, and abandoning second children altogether - not for personal reasons, but because the math just doesn’t work.

FT reader Davina (name changed to maintain anonymity), a finance worker and mother of two, has dropped to a four-day workweek just to remain eligible for childcare benefits. “This year, we are £250 per month better off as a result, although I know that going part-time has affected my promotion prospects," she told FT, adding "I feel bad for complaining, as we aren’t poor, but we’re still spending £2,750 per month on childcare even after the government help, and the reduction in my take home pay means we can’t afford holidays or a car."

Others are stuffing bonuses into pensions just to stay under the line—sacrificing near-term cash flow for long-term retirement savings they can’t touch for decades.

'Rob,' a tech worker, rejected two promotions to avoid the cliff. Eventually, he quit to become a contractor, sacrificing stability for income he could control. He and his wife made a brutal decision: they won’t have a second child.

These aren’t isolated cases, they’re rational responses to irrational policy. One FT reader had to pause fertility treatment after a modest raise triggered thousands in unexpected taxes.

Others are gaming the system with salary sacrifice, electric vehicle schemes, and leave-buying tricks. Some have gone self-employed, precisely to limit taxable income. And across sectors, women are disproportionately going part-time, often doing full-time work for part-time pay just to preserve childcare support.

In the NHS - where long hours and defined-benefit pensions make income unpredictable, the effects are especially damaging. Consultants are turning down shifts to stay below the threshold. Some doctors, including those in cancer care and psychiatry, say they can’t afford to work more.

"I am a hospital consultant, and feel trapped by this," another person ('Martha') told the Times. "I have tried to put as much as possible into my NHS pension, but I am really worried about what my tax bill is going to be next year. I can’t take on any extra work for the NHS because it would penalise me too much."

Fiscal Drag Becomes Fiscal Punishment

The £100,000 threshold was set in 2017. It hasn’t moved since. Had it tracked inflation, it would now sit above £130,000. But instead, more than 1.8 million taxpayers now fall within range, with that number expected to climb as frozen thresholds and rising salaries collide.

This stealth taxation - known as fiscal drag - helps Chancellors raise billions without raising headline rates. But it creates cliffs, not curves, and encourages less work, not more.

IFS economists say that by 2028, 2.2 million people will fall into this trap, facing both the childcare cliff edge and the personal allowance taper.

Fixing this mess wouldn’t be cheap, but it wouldn’t be unaffordable either. The IFS estimates that scrapping the childcare cliff edge entirely would cost a few hundred million pounds - a rounding error in the national budget.

The true cost of inaction, however, is likely far higher: lost productivity, lower tax receipts, stalled careers, and family planning decisions dictated by HMRC.

Dan Neidle of Tax Policy Associates is blunt: “This is what happens when successive governments try to hide the real tax rate with tricks. What started as a small anomaly is now a serious problem.”

The political calculus is simple: it’s easier to complicate the lives of a few high earners than face the wrath of the many. 

But as this broken system snares more and more working families, inaction is becoming a choice with economic—and human—costs.

Tyler Durden Mon, 04/14/2025 - 06:55

My back-to-work morning train WFH reads:

• The 18 hours that changed Trump’s mind on trade: From Tuesday evening to Wednesday afternoon, Trump and his trade advisers spoke to several Republican lawmakers and top foreign leaders who raised concerns about the faltering global markets. (Washington Post)

• When the Bond Market Panics Like This… Trump’s global tariff war has wiped out more than $5 trillion in equity-market value. But, as always, the most reliable clue about what’s heading our way is the bond market. Buckle up… (Puck) see also The Fed Isn’t Rushing to Save the Markets… This Time With stocks in a steep decline and tariffs inducing recession jitters, the patience of investors may be tested. (New York Times)

• Misbehaving in a Volatile Market: Volatility is heightened right now. We have volatility in markets, government policy, trade and supply chains, which translates into emotional volatility. (Wealth of Common Sense)

• Vertigo: Preparing for Equity Drawdowns. Drawdowns are inevitable. They will hurt. Five ruminations ahead of time to remove (a bit of) the sting. (Man Group)

• Tim Cook’s ‘Long Arc of Time’ Prepared Apple for the Trade War: The CEO managed to help the iPhone avoid another U.S. battle with China. (Wall Street Journal)

• As new real estate listings rules take effect, will buyers and sellers benefit? It allows owners to offer their homes for sale in more limited, private ways than simply listing on the broad marketplaces known as multiple listing services. NAR says it was developed in response to seller demand for such an approach. But many industry professionals say very few sellers actually ask for such an option but are instead steered to it by brokers, who stand to benefit from keeping listings semi-private and shared among their own client networks. (USA Today)

• Good Explainer: Trump’s Focus on Trade Deficit Bewilders Economists. Behind Trump’s new tariffs is a goal that is as ambitious as it is unrealistic: eliminating the bilateral trade deficit with every U.S. trading partner. (New York Times)

• PR campaign may have fuelled food study backlash, leaked document shows: Eat-Lancet report recommended shift to more plant-based, climate-friendly diet but was extensively attacked online. (The Guardian)

• The West is bored to death: Our nihilistic politics are a product of the crushing ennui and spiritual vacancy of modern life. (New Statesman)

• ‘The White Lotus’: Walton Goggins Knows It Had to End This Way: (Spoilers!) “I realized that there was really no other conclusion,” the actor said in an interview on Monday about the season finale. (New York Times) see also Why Wasn’t Anyone Traumatized in the ‘White Lotus’ Finale? After a violent climax to the third season of the hit HBO show, everyone seems A-OK. Was it a Hollywood ending, or a natural trauma response? Listen.(New York Times)

Be sure to check out our Masters in Business this week with Tony Yoseloff, Managing Partner and Chief Investment Officer at the $35 billion Davidson Kempner. He is Chairman of the New York Public Library’s endowment, sits on the Board of Trustees of Princeton and the Board of Directors of its  endowment, and is Vice Chair of the investment committee at New York-Presbyterian.

 

Crisis Consensus: The Mandate-Overreach Cycle

Source: Bruce Mehlman

 

 

Sign up for our reads-only mailing list here.

 

The post 10 Monday AM Reads appeared first on The Big Picture.

European Travel To US Drops 17% Amid Trump Backlash, Worries About Treatment Of Foreigners

Reflecting some mix of anti-Trump sentiment, unease over American treatment of foreigners and economic worries, European travel to the United States plummeted 17% in March versus the same month last year.  More broadly, global tourism to the USA dropped 12% -- the biggest decline since travel restrictions imposed during the Covid-19 pandemic. 

There's even more trouble coming: Hotel giant Accord, with brands that include upper-tier brands Sofitel, Novitel and Fairmont, said Europeans' summer bookings in the USA are down 25%. People aren't merely opting not to visit the United States -- more foreigners are cancelling trips they've already booked. The cancellation rate leapt 17% in the first quarter compared to last year -- with the cancellation rate among French, German and British would-be visitors soaring 40%.  

Year-over-year change in European visitors to US (via Financial Times)

There's one seasonal factor that contributed to the fall-off: Easter fell in March last year, but April this year. However, Adam Sacks, president of Tourism Economics says Easter alone can't account for the depth of the descent, telling the Financial Times that other data shows "it’s very clear something is happening . . . and it is a reaction to Trump." He's not the only one in the travel business pointing a finger at the White House. Didier Arino of French travel consultant firm Protourisme also blamed anti-Trump sentiment, and expressed amazement at the scale of the impact. “It’s unheard of. It’s happened before in a country at war, in a county where there was a security risk, or risk of health crisis, but in a normal situation, we’ve never seen this kind of turnaround," he said.

Similarly, the CEO of luxury French tour operator Voyageurs du Monde told CNN his US bookings since Trump's inauguration have fallen 20%, saying, “In the 30 years I’ve been in this business, I’ve never seen anything like this for any destination. It’s huge.” Tourism represents 2.5% of America's economy, and international travelers spent $253 billion on US trips last year. 

Given the intensity of Western leftists' revulsion over Trump, it's reasonable to attribute some or maybe even most of the decline to politics and policies, but not all of it. With recession fears mounting, some travelers are likely opting against transatlantic travel to brace their personal balance sheets against potential trouble ahead.

That said, there are some Trump policies that hit travel where the rubber meets the proverbial road. Never mind the Trump administration's progress in securing the Mexican border against infiltration of Venezuelan gang members and other would-be illegal immigrants. It's an increasingly aggressive treatment of credentialed visitors that's generating unease among would-be Western tourists. 

This is an absolutely horrific story.

This bloke has been living in the US for seven years *with a valid visa* but had it cancelled, a 5-year entry ban imposed and was deported to Australia by ICE.

The US is no longer a safe country to visit.https://t.co/tCXACIr7Bq pic.twitter.com/Zz8ZJ2BX66

— taipan168 (@taipan168) April 11, 2025

For example, British citizen Farah Mendlesohn told CNN she forfeited $1,000 in nonrefundable commitments and cancelled a long-planned summer trip to Oregon, Seattle and Vancouver after reading about Welsh resident Becky Burke, who was detained for 19 days and then expelled -- wearing leg chains, waist chains and handcuffs -- on the allegation that she worked illegally while in the US on a tourist visa. Burke was halfway through a US-Canada backpacking trip when she was nabbed leaving for Vancouver. Her parents told BBC she may have run afoul of US law by helping host families "around the house," but was treated like Hannibal Lecter. 

Mendlesohn also feared that her previous provocative writing against sweeping UK anti-terrorism measures may have invited harsh treatment by border and customs officials. That's not far-fetched in light of the Trump administration's campaign to expel foreigners whose beliefs clash with those of the administration.

Mahmoud Khalil never expressed "hatred" toward the US. To the contrary, he came to the US, is married to an American with an American baby on the way, on a path to citizenship.

He criticized Israel. But because you're drowning in AIPAC money, you think Israel is part of the US. https://t.co/bfHOCNNuhz

— Glenn Greenwald (@ggreenwald) April 12, 2025

In the most prominent case, Columbia student Mahmoud Khalil -- charged with no crime -- was detained and whisked off to a prison in Louisiana over his activism relating to the Israel-Palestine conflict, on Secretary of State Marco Rubio's "personal" determination that Khalil is antisemitic and that his continued presence in the USA would "undermine a significant foreign policy objective." A federal judge affirmed Rubio's unilateral, unchecked power to make such determinations under a 1952 law, with affected individuals holding no right to due process or ability to challenge the rationale. 

Danish citizen Robert Christiansen cancelled a trip to Texas where he'd planned to surprise his daughter who's studying there. He attributed his decision to flight safety worries, and to the fact that he's used social media to voice political views that vary from the Trump administration's, concluding, “I cannot trust the government of the United States.” 

While Christiansen's unease about vacationing in Dallas could be overblown, we must say, those are words for everyone on Earth to live by -- no matter who's in the White House.  

Tyler Durden Mon, 04/14/2025 - 05:45

UK MPs Call For Digital Identity To "Tackle Illegal Immigration"

Authored by Kit Knightly via Off-Guardian.org,

It turns out that the solution to illegal immigration is instituting a nationwide system of digital identity, issued to every baby at birth and containing all your social, education, financial, medical, and employment information.

At least, according to the 40 or so Labour MPs who co-signed an open letter calling for such a system.

Of course, that digital ID could solve the immigration “problem” should come as no surprise. After all, it can solve every “problem”.

It can make sure our elections aren’t rigged. It can protect our children on the internet. It can prevent the spread of disease. It can lower crime. It can tackle truancy and benefit fraud. It can government eliminate inefficiency.

Oh, it’s good for the economy too!

Yay!

Digital Identity is the Swiss Army knife of political policy. 

It has an attachment for everything, even funny-shaped ones you never use.

That’s why virtually every government in virtually every nation on Earth is keen to get one set up, to make life easier and safer for all of us.

And for no other reason.

This is nothing new. 

They’ve been saying it for years, but this louder and prouder, and worthy of note for that.

Tyler Durden Mon, 04/14/2025 - 03:30

US, EU Condemn Russian Mass Casualty Strikes On Ukraine's Sumy

On Sunday Russian ballistic missiles pummeled the Ukrainian city of Sumy, resulting in a mass casualty event which was quickly condemned by the United States and European Union.

Trump's special envoy to Ukraine, retired lieutenant general Keith Kellogg, reacted by saying it "crosses any line of decency". He suggested the strikes targeted civilians. "As a former military leader, I understand targeting and this is wrong," Kellogg posted on X. He said there are "scores of civilian dead and wounded."

State Emergency Services of Ukraine

Ukrainian emergency authorities said the Sumy attack killed at least 34 people and wounded more than a hundred. Local officials said that among the dead were at least two children. 

"On this bright Palm Sunday, our community has suffered a terrible tragedy," Sumy's acting Mayor Artem Kobzar said. Orthodox Christians across both Ukraine and Russia are celebrating Palm Sunday.

Ukrainian officials suggested the casualty toll is so high because the strikes were near a Palm Sunday church celebration, which marks the first day of Holy Week for the Orthodox.

Zelensky called on the West to ramp up support in the wake of the deadly strikes:

“It is crucial that the world does not stay silent or indifferent. Russian strikes deserve nothing but condemnation,” Zelenskyy said. “There must be pressure on Russia to end the war and guarantee security for people.”

Likely the death toll could rise amid ongoing efforts to rescue people under the rubble amid a devastated city section. Zelensky called called Russia "filthy scum" after the attack.

"Talks have never stopped ballistic missiles and aerial bombs. What’s needed is an attitude toward Russia that a terrorist deserves," Zelensky followed with.

The Ukrainian leader has of late argued that ongoing attacks like these show Moscow doesn't want peace, but is stringing Washington along as President Trump seeks the start of serious peace talks.

Via Reuters

Kiev has been frustrated that the White House has been more muted in reaction to such attacks, in comparison to the prior Biden administration.

But Trump may also see in this tragedy greater impetus for quickly achieving ceasefire. He's been emphasizing that people are needlessly dying on both sides in a war which "never would have started" if he had been president, instead of Biden.

Tyler Durden Mon, 04/14/2025 - 02:45

Can Israel & Turkiye Manage Their Escalating Rivalry In Syria?

Authored by Andrew Korybko via substack,

The “deconfliction mechanism” that they’re reportedly discussing would likely be insufficient for resolving their security dilemma and might thus only delay what could be an inevitable clash.

Israel and Turkiye held talks in Azerbaijan last week on the creation of a so-called “deconfliction mechanism” for preventing an accidental conflict between them in Syria. No details were disclosed but it might resemble the one that Israel and Russia agreed upon in September 2015 and which is still in use. Unlike its precedent, however, this new one that’s reportedly in the works has much higher stakes given the escalating Israeli-Turkish rivalry in Syria since the fall of the Assad Government last December.

Israel never regarded post-Soviet Russia as a threat, and in fact, relations between them are closer than ever under Putin due to his lifelong passionate philo-Semitism. Their “deconfliction mechanism” therefore wasn’t all that difficult to negotiate and maintain since Russia had no ideological or strategic reason to interfere with Israel’s regular bombing of the IRGC and Hezbollah in Syria. Israeli-Russian relations sharply contrast with Israeli-Turkish ones, however, in the ways that’ll now be explained.

Israel and Turkiye’s mutual threat perceptions worsened after October 7th. Turkiye believes that Israel’s military operation in Gaza is a genocide that could one day be replicated against Muslims everywhere and can only be averted by restoring a regional balance of power. Israel suspects that Turkiye might try to achieve the aforesaid by ordering its Syrian clients to host ideologically aligned Hamas militants who’d be defended from Israeli airstrikes by Turkish air defense systems (even if they’re only Syrian-manned).

Turkiye abuts Syria so it can bolster its new authorities’ military capabilities and those of their shared Hamas allies much easier and quicker than Iran was able to bolster the Assad Government’s and their shared “Resistance Axis” allies’. This represents a much greater national security threat than the one that Israel earlier mitigated via its “deconfliction” mechanism with Russia, not least because Turkish systems might be used to defend Hamas, while Russian ones were never used to defend the “Resistance Axis”.

The potential downing of an Israeli jet by Turkish air defense systems (even if they’re only Syrian-manned) during an anti-Hamas bombing mission in the Arab Republic could spark a regional crisis that they want to avoid for now. Neither can be sure whether the US would take their side against the other, both over that hypothetical incident and whatever they choose to do afterwards, and the worst-case scenario of a direct Israeli-Turkish clash – let alone a conventional war – is fraught with uncertainties.

At the same time, such a scenario could become more likely if the newly exacerbated Israeli-Turkish security dilemma in Syria isn’t responsibly managed, but the root cause is arguably more connected to regional leadership aspirations than it is to Hamas. Israel and Turkiye are vying to fill the void left by the unexpected expulsion of Iran’s on-the-ground influence in Syria, which both envisage achieving via a hybrid approach, but their methods differ.

Israel wants to retain its freedom to bomb whoever it wants there together with strengthening the Druze and Kurds in order to facilitate the creation of a decentralized Syria that could be more easily divided-and-ruled for thwarting latent threats. Turkiye wants military bases and Hamas militants in a centralized Syria, which are tangible returns on its 14-year-long investment into regime change there, and to symbolically lead the Ummah by positioning its forces to strike Israel from Syria (even if it never does).

Each is convinced that their national security interests can only be ensured by filling the void left by Iran in Syria through their respective abovementioned methods, which they consider to be a zero-sum competition, but one that doesn’t have to lead to an accidental war if it’s responsibly managed. To that end, they might agree to a compromise whereby Turkiye entrenches itself in the north while Israel maintains freedom of action in the south, but such an arrangement would likely prove unsustainable.

Israel would feel uncomfortable with Hamas possibly operating training camps in Turkish-defended northern Syria while Turkiye would feel uncomfortable with Israel holding the Damocles’ sword of airstrikes above the head of Syria’s new authorities in Damascus. Turkish air defense systems could also secretly be deployed in proximity to the Golan Heights for defending Hamas militants that might launch missiles against Israel from there. A regional crisis might therefore only be delayed instead of averted.

As such, whatever imperfect “deconfliction mechanism” might be agreed to between Israel and Turkiye would be insufficient for responsibly managing their escalating rivalry, thus perpetuating regional instability as they continue vying for leadership in Syria. These dynamics raise the risk of a direct Israeli-Turkish clash that could quickly spiral into a conventional war unless creative diplomacy succeeds in reshaping them. It’s here where Syria, Russia, and the US could possibly play positive roles.

To explain, Syria wants to replace some of its military equipment that Israel destroyed right after Assad’s fall, which Russia could help it do in exchange for privileged economic (reconstruction, resource, etc.) contracts and so long as this is within Israeli-approved limits. Israel doesn’t regard post-Soviet Russia as a threat and has a decade-long history of successfully interacting with it in the context of their “deconfliction mechanism” so Israel would accordingly prefer for Russia to rearm Syria than for Turkiye.

This accounts for why Israel is reportedly lobbying the US to keep Russia’s bases in Syria as a way for Moscow to help West Jerusalem balance Turkish influence there through these means. Damascus would have to agree, however, but it would do well to go along with the abovementioned arrangement since this is the only realistic pathway for partially rearming, liberating itself from Turkish tutelage, and eliminating the pretext for more Israeli bombings. It’s unclear how interested it is in this though.

The new authorities came to power due to the leading role that their Turkish patron played in the 14-year-long rolling regime operation in Syria so they’re indebted to Ankara and trust it a lot too. These factors reduce the likelihood that they’d agree to rely on Russia instead of Turkiye for (at least partially) rearming, not to mention within Israeli-approved limits that would amount to tacitly subordinating themselves to its interests, though the US could offer phased sanctions removal as an incentive.

The problem though is that Turkiye wants tangible returns on its lengthy investment in overthrowing Assad, so it probably won’t accept not being able to at least set up a few bases in Syria and secure the right to use its airspace for military purposes, both of which Israel doesn’t want Damascus to provide. Just like the US could offer incentives to Syria for agreeing to this, so too could it offer some to Turkiye after Trump volunteered to mediate between it and Israel, though it’s unclear what he might propose.

All in all, the insight that was shared in this analysis suggests that more than a “deconfliction” mechanism is required for responsibly managing the escalating Israeli-Turkish rivalry in Syria, with the most effective solution being the proposal that was just forth with regard to Russia. Damascus might not agree, however, while Turkiye could unilaterally establish more bases in Syria even if it does. Trump might therefore try to broker a deal, but if he fails, then an Israeli-Turkish clash might be inevitable.

Tyler Durden Mon, 04/14/2025 - 02:00

How The Ukraine Minerals Deal Supports US Strategy And Ukrainian Security

Authored by Milo Austin and WIlson Beaver via The Epoch Times (emphasis ours),

China currently has a significant advantage over the United States in terms of critical minerals.

These minerals are “critical” for the production of green energy technology, the semiconductors used in consumer electronics, and military hardware—including missiles, aircraft, and ammunition.

An aerial view shows a dragline excavator operating in an open-pit titanium mine in the Zhytomyr region, Ukraine, on Feb. 28, 2025. Roman Pilipey/AFP via Getty Images

The PRC controls over 90 percent of the world’s production of gallium, over 80 percent of the production of magnesium, tungsten, and bismuth, and over 70 percent of the production of graphite. China also controls between 40 and 50 percent of the world’s supply of refined rare earth elements. Domestic production of critical minerals is comparatively weak, and the construction of new mines was repeatedly blocked by the Department of the Interior and the Environmental Protection Agency under President Joe Biden.

If we are to successfully counter Chinese influence in the Indo-Pacific, it is imperative that we secure new sources of critical minerals and grow our ability to refine them.

In light of these challenges, President Donald Trump has indicated his intent to promote the production of critical minerals both at home and abroad.

The Ukraine minerals deal, which will set up a “reconstruction investment fund” with the revenues from Ukrainian government-owned natural resources, is a significant step in the right direction.

The deal accomplishes several important goals.

First, it provides capital for the reconstruction of Ukraine’s devastated infrastructure and is designed to attract additional private sector investment, giving Ukraine a path toward financial recovery from the war.

Second, it compensates the U.S. for billions of dollars’ worth of military and financial assistance provided to Ukraine since the beginning of the invasion.

Third, it will create Western buy-in for the region’s stability that could deter future Russian aggression in lieu of a formal security guarantee.

Finally, and most importantly, it will give the U.S. a new source of the critical minerals and rare earth elements needed to expand semiconductor production and rebuild and modernize the military.

Ukraine is of particular importance because it is one of the most resource-rich countries in Europe. The Ukrainian government estimates that the country contains 5 percent of the world’s critical minerals, with large deposits of graphite, titanium, lithium, beryllium, uranium, and rare earth elements. Moreover, because of a lack of capital and sophisticated mining technology, only 15 percent of deposits were being exploited when the invasion began in 2022.

According to the director of a Ukrainian graphite factory, 70 percent of Ukraine’s critical minerals have not been mined. Up to $350 billion worth of these minerals are found in areas under Russian occupation, but the remainder are still accessible to foreign and domestic mining interests.

The deal is good for both Ukraine and for the United States, and ought to move forward.

Reprinted by permission from The Daily Signal, a publication of The Heritage Foundation.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sun, 04/13/2025 - 23:10

What $1 Million Can Buy In Prime Real Estate Around The World

Across global luxury property markets, $1 million doesn’t go as far as it used to.

In Dubai, for instance, a $1 million dollar property in 2020 is worth $2.7 million today. Meanwhile, in Miami, it would be worth $1.9 million. However, in some markets, cracks are beginning to show amid higher rates and frothy valuations spurred by the pandemic.

This graphic, via Visual Capitalist's Dorthy Neufeld, shows what $1 million can buy in prime real estate across 20 markets worldwide, based on data from Knight Frank.

Luxury Properties Are Getting Pricier

Below, we show the square footage that $1 million covers across luxury real estate markets, defined as the top 5% of residential listings as of 2024:

As we can see, $1 million covers just 205 square feet in Monaco, with an average new build costing a staggering $39 million in 2024.

Monaco’s appeal for the ultra-rich largely stems from its tax-haven status as it has no income tax, inheritance tax, or capital gains tax. Additionally, the scarcity of land met with high demand contributes to high property values.

Despite economic challenges, Hong Kong ranks as the second-most expensive luxury market. While many properties of Chinese real estate tycoons have sold at a sharp discount since the collapse of China Evergrande, it still commands top dollar for the most exclusive residences. Overall, buying power has moderately decreased compared to 2014 levels.

On the other hand, buying power has risen notably in London due to a falling pound against the dollar and a property market correction. Over the last decade, it has increased by 43%, the biggest jump across cities analyzed.

In many ways, this bucks the trend of a majority of prime real estate markets globally. In particular, Dubai has seen buying power drop 59% since 2014, followed by Miami (-54%) Lisbon (-51%), and Shanghai (-47%) amid robust demand and rising affluence.

To learn more about this topic from a real estate perspective, check out this graphic on the world’s least affordable housing markets.

Tyler Durden Sun, 04/13/2025 - 22:35

Escobar: Why China Won't Call The "Tariff-Wielding Barbarian"

Authored by Pepe Escobar,

The Toddler Temper Tantrum-style Trump Tariff Tizzy (TTT), now accelerated to 145% – and counting – is yet another thunderous trademark pigeon smashing the chessboard gambit.

It won’t work. Trump claimed that China would call him to “make a deal”. That’s reality show territory. Reality is more like the statement by the Customs Tariff Commission of the State Council: “Given that U.S. exports to China already have no market acceptability under the current tariff rates, if the U.S. further imposes additional tariffs on Chinese goods, China will simply ignore them.”

Translation: keep vociferating/tariffing. We don’t care. And we will stop buying from you. Anything.

The Chinese Foreign Ministry: A “tariff-wielding barbarian can never expect a call from China.”

Basic numbers. China’s GDP for 2025 is projected at 5%. U.S. imports account for at best 4% of Chinese GDP. China’s share of total exports to the U.S. dropped to 13.4 per cent in 2024.

Goldman Sachs – not exactly a CCP “mouthpiece” – has just projected that TTT will cost China only 0.5% of GDP in 2025, while costing no less than 2% of U.S. GDP. Talk about blowback.

Still, from now on, what matters most for Beijing is to keep diversifying the supply chain.

Asia-wide, the extra wheels are in motion. President Xi Jinping will soon start an ASEAN mini-tour (Vietnam, Cambodia, Malaysia). The Shanghai Cooperation Organization – increasingly focused on geoeconomics – is about to meet. The EU, for all the mendacity of its “elites”, is absolutely itching to strike trade deals with China.

Zhao Minghao, deputy director at the Centre for American Studies at Fudan University, in Shanghai, refers to the current incandescence as “a game of strategic resolve.”

Previously, the eminent Wang Yiwei, international relations star professor at Renmin University in Beijing and an expert on the New Silk Roads, noted that the current tariff rate already made China’s exports to the U.S. “almost impossible”.

This analysis noted how China started to deal with TTT with a “courtesy before force” approach, then turned to “we don’t care”, while cultivating “the art of timing” in its asymmetric attack on U.S. stocks.

A fascinating window on the real wheels of Chinese trade is offered by a timely visit to the vast Yiwu International Trade City, the largest concentration of small traders on the planet.

Less than 10% of Yiwu’s phenomenal amount of business involves the U.S. Among the 75,000 business operators in Yiwu Small Commodity City, only a little over 3,000 do business with the U.S.

Two Sinophobes meet one mirage

TTT is largely the product of two crude Team Trump arrogant/ignorant Sinophobes, economic advisor Peter Navarro and Secretary of the Treasury Scott Bessent, who know less than zero about all things China.

In fact it was Bessent who right at the start gave the game away:

“This was driven by the president’s strategy… You might even say that he goaded China into a bad position. They responded. They have shown themselves to the world to be the bad actors, and we are willing to cooperate with our allies and with our trading partners who did not retaliate.”

A crude trap. With the sole focus on China. That had nothing to do with the initial tawdry plot line: tariffs, Mafia-style, on most of the planet, penguins included. If you don’t retaliate, fine. If you do, we hit harder.

of the so-called “Miran mirage” – after Trump’s alleged economic brain Stephen Miran. What is actually happening, fast, bypassing the stupid notion that tariffs will be paid for by current depreciation elsewhere (see Miran’s white paper here), is the uncontrolled demolition of the U.S. as a world trade center.

Asked why he paused the tariffs, Trump answered: “I thought people were jumping a bit out of line. They were getting a little bit yipee. They were getting afraid.”

Nonsense. Trump cannot possibly admit on the record that the U.S. oligarchy, Jamie Dimon and co., freaked out big time; and that, plus the debacle in the bond market, forced him to backtrack.

Nobody in neoliberal heaven and earth can mess with the Goddess of the Market.

As for the long-term strategy of several nations of the Global Majority caught in TTT’s crossfire hurricane, not to mention big players like China and the EU, they will all avidly reduce their dependence on U.S. markets.

Once again, the elaborate “deal” offered by Trump and his illiterate advisors boiled down to a Mafioso “offer you can’t refuse”: blow up, or significantly diminish, your trade with China – the largest trading partner of nearly all of these nations – and trade with Exceptionalistan, plus 10% tariffs. To hell with your economic sovereignty and strategic flexibility. Once again: it’s our way or the – tariff – highway.

Reality instead will dictate that the U.S. will increasingly import Chinese products from third countries – while China will continue to get paid for it. China will export even more to ASEAN and other Global Majority actors.

As it stands, Trump’s “plan” – if there is any – remains to “stabilize” his allies while concentrating all the firepower on China, in theory to drive China’s complex supply chains to chaos and force companies to move production lines to, for example, Vietnam or India.

Shakedown leading to breakdown

China containment will be on overdrive. Expect a tsunami of technological restrictions, investment red lines and, of course, extra sanctions. Sinophobe Bessent does not rule out delisting Chinese stocks from U.S. exchanges: “I think everything’s on the table (…) That will be President Trump’s decision.”

Beijing, for its part, can easily go nuclear, deciding for a sell-off of its U.S. Treasuries en masse, with catastrophic cascading consequences. As of January, Beijing held $760 billion in U.S. debt. With a delightful diplomatic touch, Yang Panpan and Xu Qiuyan, researchers at the Chinese Academy of Social Sciences, note that what happens next with U.S. Treasury bonds remains “highly uncertain”.

Bridgewater billionaire investor Ray Dalio, for his part, while incisive, was also heavy on diplomacy: “We are seeing a classic breakdown of the major monetary, political and geopolitical orders.”

There’s no more “cooperative world order” led by the U.S. (in fact that was anything but cooperative”); Dalio at least recognizes the unilateralism manifest in “the U.S.-led trade-war, geopolitical war, technology war, and, in some cases, military wars.”

Chinese Foreign Ministry Spokesperson Lin Jian de facto synthesized Beijing’s position. No more Mr. Nice Guy, which was the default Chinese position until recently: if the U.S. insists on fighting a tariff war and a trade war, China will fight to the end.

So here we are. And once again, it’s the Empire of Chaos against BRICS.

The Empire of Chaos embarks on a hot geoeconomics war against its peer competitor China; contemplates a hot military war against sovereign Iran; and at the same time tries to appease nuclear/hypersonic power Russia into a sort of hazy deal to somewhat freeze the Forever War by proxy in Ukraine.

The new Primakov triangle, RIC (Russia-Iran-China) is perfectly aware of these moves. Putin had metaphorically characterized the Russian position in the U.S.-China trade war when he mentioned that the Chinese have a good proverb: when tigers fight in the valley, the smart monkey sits and watches how it ends.

Now is more the case of three wise monkeys perfectly aware of what a pigeon posing as eagle is really up to.

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Views expressed in this article are opinions of the author and do not necessarily reflect the views of ZeroHedge.

Tyler Durden Sun, 04/13/2025 - 22:00

The 'Nixon Shock' Might Help Us Make Sense Of The Trump One

Submitted by Huw van Steenis via the Financial Times,

The author is vice-chair at Oliver Wyman and former global head of banks and diversified financials research at Morgan Stanley

What will the longer-term financial consequences of Trump’s tariffs be? We may be in a 90-day pause but the question remains urgent. A look back at Richard Nixon’s experience in 1971 could help investors understand what might happen next.

President Richard Nixon addresses Congress to explain his new economic policy in 1971 © AP

Certainly recent events share some hallmarks with the “Nixon shock”, which occurred when the then president took the dollar off the gold standard, implemented a 10 per cent import tariff and introduced temporary price controls. This de-anchoring of the regime resulted in a period of global economic instability and uncertainty. It not only caused a loss in business confidence but led to stagflation. Nixon’s price and wage controls spectacularly backfired, triggering product shortages and helping to fuel a wage-price spiral. The whole episode was a pivotal contributor to the huge inflation of the ’70s.

As with Trump’s tariffs, Nixon’s were introduced to cudgel countries into changing the terms of trade to help reduce the US trade deficit. His biggest concerns were Japan and Germany. “My philosophy, Mr President, is that all foreigners are out to screw us and it’s our job to screw them first,” Treasury secretary John Connally had said to him.

In today’s hyperfinancialised world, we have already seen that bond markets can force the hands of politicians far more quickly. It took four months in 1971 before Nixon’s tariffs were removed via the Smithsonian agreement. But the shock had already done enough to catalyse extraordinary changes in finance, leading to the creation of new instruments to bet on the direction of interest rates and hedge currency risk, including FX futures and options. 

The pain of stagflation in the banking system prompted a huge change in financial behaviour and financial regulation. Investors shifted asset allocation to gold and real assets to preserve value. Meanwhile corporates and depositors increasingly moved their activities from banks to bond markets. Bank lending as a share of total borrowing in the economy has been falling ever since. In short, modern finance was forged in the early 1970s. 

There are parallels as well for countries outside the US currently worrying about tariffs. Back in 1971 there was also shoddy treatment for the US’s closest allies. Nixon hit Canada with tariffs despite its currency already floating. Like Prime Minister Mark Carney today, Canadians didn’t back down and eventually the tariffs were removed. It could have been even worse: Connally had also wanted the US to withdraw from a long-standing pact with Canada on cars and auto parts. But Paul Volcker fixed that, according to his memoirs, by cheekily encouraging a State Department official to tear off the last page of every press release which mentioned it. 

Ultimately, the need to stabilise international relations with allies helped tip the balance away from the tariffs. Henry Kissinger, then the national security adviser, “grew concerned about the unsettling impact of a prolonged confrontation on allied relationships”. 

Nixon also put huge pressure on the Fed for expansionary monetary policy to offset the shock. William Safire, Nixon’s speechwriter, recounts how the administration kept up a steady stream of anonymous leaks to pressure Fed chair Arthur Burns, including floating one proposal to expand the size of the Federal Reserve, so that Nixon could pack the committee with supportive new members.

At the end of it all, Nixon’s four-month tax may have helped facilitate dollar revaluation, but it fell short of the desired goals and had no discernible impact on imports. The move’s economic shockwaves, however, rippled through the decades. Even the creation of the euro stems from it. Might a digital euro or deeper European capital markets be next? It’s not yet clear but history suggests the fallout from this latest shock will be felt for years to come.

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