Hi All,

Considering markets around the world are getting crazy, that section is going to be ahead of the news section. Let's dive into things.

Word of the Week

Drag On (phr v)

To continue for longer than expected or desired, usually in a way that feels tedious, exhausting, or unproductive. Often used to describe negotiations, conflicts, legal proceedings, or any situation where there is no clear end in sight and progress feels painfully slow.

• The peace talks between the two countries dragged on through the winter with no breakthrough, as neither side was willing to budge on its core demands.

• What was supposed to be a quick meeting with the principal dragged on for two hours, leaving parents waiting in the hallway with nothing to do but check their phones.

• The lawsuit dragged on for so long that by the time a verdict was reached, most people had forgotten what the original dispute was even about.

New Class Article

The Shrinking Million (Adv) / A Million Dollars Is Not What It Used to Be (Int)

A million dollars sounds like a lot of money until you do the math. The grand prize on Survivor has not changed since the show first aired in 2000, which means today's winners walk away with roughly $620,000 after taxes, a sum that would have felt closer to $330,000 back when the show first launched. In other words, the famous check has lost nearly half its original punch without anyone officially announcing it. While other reality shows have quietly adjusted their payouts to match the times, CBS has kept the number frozen in place, leaving contestants to figure out on their own what to actually do with a windfall that shrinks a little more every year. Turns out, winning a million dollars is only half the battle.

What's Happening in the Markets (Not Financial Advice!)

🤖 AI: Nvidia, the Bubble, and Your Job

Nvidia reports earnings after Wednesday's close (EST), the single biggest market event of the week. A beat is almost a sure thing (Polymarket puts it at 97%), so the real question is by how much, plus gross margins, Q2 guidance, and any mention of China sales restrictions. Nvidia now sits at the center of a $725 billion combined 2026 capex commitment from Microsoft, Amazon, Alphabet, and Meta, and carries a $5.7 trillion market cap. Here's the catch: the stock has fallen after three of its last four reports despite beating every time. Expectations are that elevated. Whatever Nvidia does, the S&P 500 and NASDAQ likely follow.

As for whether we're in an AI bubble, that debate is basically over; the only question is timing. The semiconductor index is up 150% in two years and has met the official criteria for a bubble. The obvious parallel is the dot-com crash of 2000: stretched valuations, unprofitable companies, and a massive infrastructure buildout. Back then over $500 billion poured into fiber optics; today it's data centers, partly funded by Nvidia extending equity to its own customers. Most AI firms are selling access below cost to grab market share, the way Uber subsidized rides, except Uber had few competitors while new AI rivals pop up weekly. When prices eventually rise, users will defect and margins will compress. The dot-com alarm bells first rang around 1996, four years before the top; the AI version has been ringing for about three years. If history rhymes, that leaves roughly one year of runway.

Meanwhile, the displacement of white-collar workers is moving from theory to reality. Several big corporations are quietly planning roughly 10% staff cuts over the next 12 to 18 months, mostly through hiring freezes and attrition rather than dramatic layoffs, because AI-proficient employees can do the work of several people. The buildout itself is inflationary: a trillion-dollar chip boom pulls in copper, power, construction, and transportation, driving up real-world prices. The result is a K-shaped economy, where asset holders and AI users pull ahead while everyone else gets squeezed from both sides.

🛢️ Oil & the Strait of Hormuz

Oil is the most underrated macro story running. West Texas crude is around $103.71, up nearly 60% from the $57–60 range before hostilities began in late February. The head of the IEA is calling it the biggest energy crisis in history. A ceasefire exists but is fragile, and Trump's comment that the US doesn't necessarily need to keep the Strait open pushed prices higher immediately. With the Strait still largely closed, the damage is cascading: fertilizer prices are surging during planting season, jet fuel costs have already pushed one airline out of business, and diesel and plastics remain elevated. Even if the fighting stopped today, refinery and oilfield damage means a return to pre-conflict prices is years away, not months.

📊 Inflation & the Fed

April CPI came in at 3.8% year-on-year, but the monthly 0.6% gain annualizes to roughly 7%. Energy is up 17.9%, gasoline 28.4%, beef 14.8%, and airfares 20.7%. Worse, the Producer Price Index printed at 6% (forecast was 4.9%), a sign that more pain is coming down the pipe. Real hourly wages are now down 0.3% year-on-year, meaning workers are losing ground in absolute terms. Inflation is sticky, accelerating, and rooted in more than just the Middle East.

Into this walks the Fed's new chair, Kevin Warsh, confirmed after Jerome Powell's term ended. He was appointed under political pressure for aggressive rate cuts, but he's boxed in: inflation is rising and the bond market is already stressed, so selling Treasuries to shrink the balance sheet would only push yields higher. The market currently prices a 98.9% chance of no change in June and a growing chance of a hike later this year. The Fed left rates at 3.5–3.75% in April, but that vote saw four dissents, the most internal disagreement since 1992. With rates now below inflation, real rates have gone negative. Warsh is trapped between a president demanding cuts, a bond market that can't absorb easing, and inflation that conventional tools can't fix without bigger damage.

📈 Bonds & Yields

The bond bear market has gone global. US yields are pressing toward multi-year lows in price: the 30-year is at 5.13%, the 10-year at 4.6%, the 2-year at 4.08%, all near 20-year highs. The UK is in worse shape thanks to a political crisis (Labour just had its worst local-election result in 30 years, and nearly 100 MPs want Keir Starmer out), with the 30-year gilt at 5.8%, last seen in 1997. Japan is making history too: its 30-year yield broke above 4% for the first time ever. The common thread is that governments who borrowed at near-zero rates for a decade are now rolling that debt over at 4–5%, creating a fiscal spiral that only gets harder to manage. One pattern worth watching: bonds falling while stocks rise has historically appeared right before major market tops, but the signal is the eventual bond rally, and we're not there yet.

💼 Labor Market & Growth

April payrolls came in at 115,000, with gains concentrated in healthcare, transportation, and retail; February was quietly revised down to negative 156,000. Unemployment sits at 4.3% and is drifting higher, which matters more than the level itself. Teen unemployment (14.4%) and African-American unemployment (7.3%) are climbing, and those groups usually lead broader weakness by a few months. There are now 7.4 million unemployed against 6.9 million openings, so the labor market is no longer as tight as headlines suggest. GDP looks fine on the surface (Q1 +2%, Q2 estimated +4%), but underneath, prices are rising faster than output and manufacturing employment is shrinking. The Fed's two jobs are now in direct conflict: inflation says tighten, the softening job market says don't.

🏠 Housing & the Consumer

Housing is cooling without crashing. Existing home sales are flat year-on-year, the median price ($417,700) is up just 0.9%, and supply still slightly favors sellers. The clearest warning is the homebuilder ETFs (XHB and ITB), which are printing fresh lows; builders historically top well before the broader market. On the consumer side, retail sales rose 0.5% for the month, but once you strip out inflation, real spending gains are basically zero. Consumer sentiment is down 7.7% year-on-year, and because inflation is outrunning wages for anyone without significant assets, the bottom of the income ladder is falling further behind every month.

📈 Stocks & Cycle Signals

A "three-day down" signal just fired on the S&P 500 from an all-time high (three straight days of lower highs and lower lows from a peak). Across 20 historical examples, every single one led to either a meaningful correction or a sharp slowdown in momentum. Worth noting: strip out the handful of mega-cap AI and chip names and the index would likely be negative on the year. That said, the historical odds of a red Q3 following a green Q2 are extremely low, so the near-term path is probably a grind sideways-to-higher rather than an immediate breakdown. A close below 6,500 would be the real warning sign. Globally, markets were mixed: South Korea's KOSPI dropped 3.25% on a threatened Samsung strike (Samsung shares fell 8%), while European indices rose. US markets have outperformed Europe by at least 10% this year, partly because the US exports energy and benefits from high oil while Europe and Asia import it.

🥇 Commodities: Metals, Gold & Silver

Of the industrial metals, copper has the cleanest long-term case: it underpins power grids, EVs, renewables, data centers, and AI infrastructure, and the market is shifting from surplus in 2025 to a structural deficit in 2026. For copper, mining stocks are generally a better play than the physical metal; among them, Southern Copper at 26.5x earnings looks stretched next to peers like Rio Tinto (11x) and Glencore (13x). Gold and silver have pulled back hard (gold down ~18% from its January high, silver down ~36%), but that reflects position adjustment, not a broken thesis. Rising yields and a stronger dollar created short-term headwinds, yet gold's biggest historical gains tend to come 6 to 18 months after rate-hiking begins and accelerate once real yields go negative, exactly the setup forming now. Central banks are still buying gold at more than double historical averages.

₿ Bitcoin

Bitcoin failed to break above its 200-day moving average (the $82,000–$83,000 zone) and has turned back lower, so the path of least resistance is down for now. It had recovered from lows near $62,000, helped partly by a Q1 disclosure showing Trump-family purchases of crypto-linked holdings. But the failed breakout resets the picture, and Bitcoin remains capable of sharp moves in either direction without warning.

🔄 The Big Picture & Positioning

The weight of evidence points to the late, euphoric phase of the long economic cycle, where the peak is a process rather than a single day. Three signals are converging: the "three-day down" on the S&P, homebuilder ETFs at fresh lows, and a global bond market near lows. The most relevant historical comparison isn't 2008 or COVID but the 1960s–70s: multiple sharp 35–50% corrections interrupted by stimulus-driven recoveries as the market grinds through a long top. With the Strait of Hormuz unresolved and oil capable of spiking toward $150–200 in an escalation, some investors are getting defensive without fully exiting, staying invested in stocks, gold, silver, and copper while building cash toward 20–30% as dry powder. The long-term case for staying invested holds, because central banks always intervene at the first serious threat of recession; the near-term risk is just how fast and deep the dip gets before that help arrives. In the meantime, hard assets are likely to soak up any new liquidity first.

What's Happening in the News

Trump in Beijing

Trump wrapped up a multi-day visit to China, sitting down with Xi Jinping to talk trade, Iran, and Taiwan. The hope was a "grand bargain" covering all three; the reality was a lot of handshakes and very little progress. The reason is simple: China doesn't need a deal right now. They're happy to watch the US stretch itself thin in the Middle East, and their relationship with Iran is too useful to throw away. Trump did come home talking about welcoming 500,000 Chinese students because American universities need the tuition money, an interesting pivot for an administration that spent months threatening those same universities over their politics.

The Most Expensive Primary in History

Thomas Massey, a 14-year congressman from Kentucky, lost his Republican primary by about 10 points, a stunning reversal for a man who used to win his primaries by 70 to 80 percent. The official story, pushed by the White House and most of the media, is that this was a referendum on Trump's grip over the party. The reality is about money. More than $20 million of the $33 million spent against him came from pro-Israel organizations, including AIPAC and major individual donors, and one pro-Israel group celebrated the result as "the most important election for Israel." Defense Secretary Pete Hegseth even flew to Kentucky to campaign against him in person.

So why pour millions into a rural Kentucky seat? Because Massey had made himself a problem for years. He voted against a $26 billion aid package to Israel during the Gaza war, voted against Trump's "big, beautiful bill," and, most damaging of all, was central to forcing the release of the Epstein files. After Speaker Mike Johnson and the DOJ tried to bury any vote, Massey teamed up with Marjorie Taylor Greene and Democrats to use a procedural maneuver that bypassed the Speaker entirely. The release passed nearly unanimously, and three million files came out, some touching figures in Trump's own donor network. He then voted to limit Trump's ability to keep waging war in Iran. By that point, his fate was sealed.

The argument that this was really about immigration falls apart fast: there's no border wall, deportations have stalled, and Trump was off welcoming Chinese students. The one thing that happened without obstruction was the war. The fallout is already showing: exit polling found that every demographic under 55 voted for Massey, and several voices on the anti-interventionist right now say they'll vote Democrat in the midterms purely to inflict damage on the current GOP coalition. That generational split is worth watching.

The Iran War: Running Out of Options

The US–Iran conflict is past the 80-day mark and the picture out of the Pentagon is grim. A New York Times report revealed that despite months of airstrikes, Iran still has roughly 90% of its missile storage intact, about 70% of its stockpile, and most of its coastal launch platforms along the Strait of Hormuz. In short, the campaign hasn't meaningfully degraded Iran's core ability to close the Strait. This week the Pentagon reportedly told Trump not to authorize more air operations, because Iran, with help from Russia and China, has now mapped American flight patterns and can shoot down US aircraft.

One factor most coverage skips is Israel's role in keeping this going. When Trump opened a 60-day diplomatic window with Iran, Netanyahu publicly insisted the only acceptable deal was the physical destruction of Iran's centrifuges, effectively poisoning the talks before they began. Days after the window closed, the fighting started. Several analysts say Israel oversold the operation to Trump by pointing to Venezuela as a model, suggesting it would be just as clean and quick. It was not.

The economic damage is real and spreading. The Strait is still effectively closed, ship traffic is down 80 to 90 percent, US gas prices are rising, Europe is rationing energy, and Japan has added fuel surcharges to all flights. Trump has floated a possible exit: a symbolic final strike, then declaring victory and placing what he calls "rings of death" around Iranian nuclear sites to prevent rebuilding. Whether that saves him politically, and whether Israel even lets the US step back, remains unclear. His approval rating has dropped to around 30 percent, and the midterm environment looks very bad for Republicans.

Israel Declares War on Europe

A separate confrontation has opened up between Israel and Europe. As the International Criminal Court pursues arrest warrants against Netanyahu and other officials over Gaza, Israel's Finance Minister Bezalel Smotrich announced this week that any country trying to enforce those warrants is, in his words, declaring war, and that Israel would retaliate against "every economic or other target" within his authority. He kicked things off by ordering the demolition of a Palestinian Bedouin village. Israel has also pressured Washington to punish European allies who've cooled on its military operations, and there are reports of the US relocating NATO troops away from less-supportive countries, essentially reorganizing the alliance around Israel policy. Netanyahu, for his part, declared this week that Israel is becoming a "superpower," not just a regional one.

The Daily Wire is Dying

A recent New Yorker piece confirmed what many have watched in slow motion: The Daily Wire, once the biggest conservative media outlet in the country, is in serious trouble. We're talking mass layoffs (reportedly up to 50% of staff) and a 3-million-subscriber YouTube channel pulling fewer than 10,000 views per video. Not long ago they were the number one English-language publisher on all of Facebook, bigger than CNN and the New York Times combined, pulling in around $100 million a year.

So what happened? They lost young people, and the biggest reason is Israel. Ben Shapiro is a hardcore supporter of Netanyahu, a position that has gotten less and less popular with the same young conservatives who used to be his biggest fans. As the war dragged on, figures like Tucker Carlson and Candace Owens, all skeptical of US involvement in the Middle East, started pulling bigger audiences than Shapiro. The New Yorker suggests this could be a warning sign for the entire traditional wing of the Republican Party. If young conservatives are done with the idea that America should police the world, the Shapiro brand of politics might go the way of the dinosaurs.

Venezuela: Actually a Win?

Looking back at the January operation that removed Venezuelan president Nicolás Maduro, the picture is cleaner than it seemed at the time: no ongoing fighting, minimal US casualties, clear objectives met, and no mission creep. The bigger point is that Venezuela was never really about Venezuela. It was the opening move in a broader strategy to reclaim US dominance in the Western Hemisphere after years of watching China build ports and infrastructure across Latin America. Notably, the success there appears to have been used by Israeli officials to convince Trump that a similar operation against Iran was achievable, which turned out to be a very different situation.

Cuba Has No Lights

That same hemispheric strategy is now squeezing Cuba hard. The country's energy minister put it plainly: no fuel oil, no diesel, and blackouts running 20 to 22 hours a day. When Venezuelan oil stopped flowing after Maduro fell, and Mexico got pressured into cutting shipments too, Cuba (which has zero domestic oil production) was left with almost nothing. CIA Director John Ratcliffe flew to Havana with a message from Trump: the US is willing to talk, but Cuba has to make real changes, starting with shutting down Russian and Chinese intelligence posts on the island. Whether a government that's been ideologically opposed to the US for over 60 years folds under economic pressure is anyone's guess, but with the lights out, Havana isn't exactly negotiating from a position of strength.

That’s all for this week, see you next time!