Nvidia Slides After Data Center Revenues Miss, Solid Guidance Fails To Wow Bulls

Earlier today we wrote an extensive preview of what to expect from Nvidia's Q1 earnings (here), but for those who missed it here is the summary: if Nvidia beats and raises, revisions might restart, and high valuation could sustain. However, if the results are just in line or even lower, as what happened in the last two quarters, the market may assume margins have peaked, and the story will become less about hypergrowth and more about stabilization. 

Here are the bogeys: 

• The revenue consensus for fiscal Q3 revenue is $53.46 billion. But there’s a much wider range than usual going into that average.
  • For fiscal Q2 that target is $46.23 billion.
• Adj EPS for fiscal Q2 should be $1.01
• Nvidia’s data center division is expected to post $41.3 billion in fiscal Q2 revenue.

That's the 30,000 foot snapshot. In reality, a lot more has happened, starting at the end of July, when President Trump put American chips and other infrastructure at the heart of his AI plan, even prompting a standing ovation for Jensen Huang during a grand speech in DC. Then news: Nvidia got a quid pro quo deal with the Administration to sell China-specific AI accelerators, if the US gets 15% of the sales. Then the President, quite skillfully, dropped a hint that Huang and Nvidia are pushing for a new China-specific chip based on Blackwell architecture. Still, a lot of questions remain on how much of this is real on Nvidia’s side and whether it has not changed the near term trajectory for Nvidia’s top line. Or is this still far from moving the needle for a company that already dominates the market for AI chips. In any case, one area to keep an eye on is any update around its H20 chips, which is a hot-button issue for investors

China aside, Nvidia - which is the world's largest company and accounts for 8% of the S&P - is growing quickly and Wall Street, which has revenue estimates going as far out as 2030, projects steady increases in that time. The question is at what rate? Any hint of disappointing numbers and investors will once again raise concerns that the massive spending in AI infrastructure has to eventually slow down.

Those concerns will get even louder after the company's earnings which just came out and leave quite a bit to be desired, especially since data centers missed. Here is what the company just reported for Q2:

• Adjusted EPS $1.05, beating estimates of $1.00 (NVIDIA benefited from a $180 million release of previously reserved H20 inventory, from approximately $650 million in unrestricted H20 sales to a customer outside of China.)
• Revenue $46.74 billion, +56% y/y, beating estimates of $46.23 billion 
  • Data center revenue $41.1 billion, +56% y/y, missing estimates of $41.29 billion; this was the second consecutive quarter in which data centers missed.
  • Gaming revenue $4.3 billion, +49% y/y, beating estimates of $3.82 billion
  • Professional Visualization revenue $601 million, +32% y/y, beating estimates of $532 million
  • Automotive revenue $586 million, +69% y/y, missing estimate $592.7 million

Going down the income statement:

• Adjusted gross margin 72.7%; beating est of 72.1%
  • Excluding the $180 million release, non-GAAP gross margin for the quarter would have been 72.3%.
• Adjusted operating expenses $3.80 billion, +36% y/y, below estimates of $4.02 billion
• Adjusted operating income $30.17 billion, +51% y/y, beating estimates of $29.36 billion
• R&D expenses $4.29 billion, +39% y/y, below the estimates of $4.44 billion
• Free cash flow $13.45 billion, -0.2% y/y

Addressing the elephant in the room, NVDA said that there were no H20 sales to China-based customers in the second quarter, and the question whether there will be any sales in the future will likely be discussed on the call. NVIDIA also said that it benefited from a $180 million release of previously reserved H20 inventory, from approximately $650 million in unrestricted H20 sales to a customer outside of China.

Of course, not assuming any H20 shipments to China in the 3Q outlook does leave room for upside. All of the above happened quickly in July and the report for 2Q is for the period ending July 27, exactly a month a go, so let's see what happened in the month of August.

In his comments, tit-signing CEO Jensen Huang said that “Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap — production of Blackwell Ultra is ramping at full speed, and demand is extraordinary." He added that "NVIDIA NVLink rack-scale computing is revolutionary, arriving just in time as reasoning AI models drive orders-of-magnitude increases in training and inference performance. The AI race is on, and Blackwell is the platform at its center.”

NVDA also announced that while it returned $24.3 billion in stock repurchases and cash dividends in Q1, leaving it with $14.7 billion remaining under its share repurchase authorization, on August 26, 2025, the Board of Directors approved an additional $60.0 billion to the Company’s share repurchase authorization.

While the Q2 results were generally ok if not stellar (and data center missed), the company's guidance came slightly on the weak side of the buyside expectations we discussed in our premium preview.

• Revenue is expected to be $54.0 billion, plus or minus 2%; which was above the consensus est of $53.46 billion but keep in mind some had estimates as high as $60 billion. That said, the surge in revenue continues: for Q2, its guidance was $45.0 billion, so a $9 billion sequential increase!.
• Sees adjusted gross margins at 73.5%, plus or minus 50 basis points, just above the 73.4% median estimate. 
• Operating expenses are expected to be approximately $5.9 billion and $4.2 billion, respectively. Full year fiscal 2026 operating expense growth is expected to be in the high-30% range.
• Other income and expense are expected to be an income of approximately $500 million, excluding gains and losses from non-marketable and publicly-held equity securities.
• Tax rates are expected to be 16.5%, plus or minus 1%, excluding any discrete items.

Of note: the forecast excluded data center revenue from China, a market where it has struggled with US export restrictions and opposing pressure from Beijing. Expect China to buy a lot of NVDA chips as its own domestic AI chips are nowhere near good enough to power its latest LLMs. 

Commenting on the results, CEO Jensen Huang said that “Global demand for NVIDIA’s AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate.”

Putting these results and forecasts in visual context, starting with revenue.

The thorn in today's results: data center. It dipped sequentially. This was the second quarter in a row that data center revenues missed. 

Here’s some more detail on what did happen with the data center business and Blackwell products in quarter gone (2Q) from the CFO commentary:

“We continue to ramp our Blackwell architecture, which grew 17% sequentially, including our newest architecture, Blackwell Ultra. We recognized Blackwell revenue across all customer categories, led by large cloud service providers, which represented approximately 50% of Data Center revenue.”

A growth number for the latest generation architecture Nvidia has confirmation the hyperscalers are still half of Nvidia’s data center business and the fact they are packing it all up and selling it through various channels.

Somewhat concerning was the unexpected jump in inventories, although a more benign explanation is that the company is just stockpiling ahead of a Trump green light to sell to China. 

Receivables jumped too:

While NVDA's results were fine, the tepid outlook adds to concern that pace of investment in artificial intelligence systems is unsustainable. Difficulties in China also have clouded Nvidia’s business. Though the Trump administration recently eased restrictions on exports of some AI chips to that country, the reprieve hasn’t yet translated into a rebound in revenue. 

As we noted in our preview, Nvidia has been dealing with the fallout from a growing US-China rivalry, where semiconductor technology has become a major flashpoint. In April, the Trump administration tightened restrictions on exports of data center processors to Chinese customers, effectively shutting Nvidia out of the market. Washington has subsequently rolled that back, saying that the US will allow some shipments in return for a 15% slice of the revenue. 

At the same time, Beijing has encouraged a move away from using US technology in AI systems accessed by the Chinese government. The shifting policies have made it difficult for Wall Street to predict how much revenue Nvidia might be able to recover in the market. Some analysts have made projections in the billions of dollars, while others have refused to predict any China sales until the company makes the situation clearer. 

Nvidia shares fell about 4% in extended trading following the announcement before recovering much of the loss. They had rallied 35% this year through the close, lifting the company’s market capitalization above $4 trillion. Shares of other AI-related hardware stocks are also falling in after-hours trading following Nvidia’s results. CoreWeave shares are down about 3%, SMCI is down about 2%, Palantir is down 0.8% and Dell is also slipping. 

Tyler Durden Wed, 08/27/2025 - 16:47

Victor Davis Hanson: What Is The Democratic Alternative To Trump?

Authored by Victor Davis Hanson,

The Pavlovian Left goes berserk at the mere prospect of each new Trump initiative.

Its escalating reactive venom and hysteria are calibrated to the success of Trump’s latest policy.

Yet the new hard-left Democratic Party offers no counter-agenda to explain its furor.

Still less do Democrats attempt bipartisan efforts to craft shared legislation.

Take foreign policy.

Democratic senators trashed the recent Trump-Putin Alaskan summit as a failure. Then they became depressed when, just days later, an entourage of European leaders and Ukrainian President Volodymyr Zelenskyy suddenly flew to the White House.

The Euros praised Trump for offering some sort of negotiated pathway to peace after over three years of war and some 1.5 million dead, wounded, missing, and captured on both sides — on Europe’s doorstep.

So why did Democrats object to such negotiations by Trump?

Was the reason that no such thing occurred during the Biden administration, when Putin invaded Ukraine, after his earlier invasions during the Obama era?

What is the left’s alternate plan? The old Biden idea of supplying Ukraine with enough money and arms to keep fighting and dying, but with no path to either victory or a negotiated peace?

Would they prefer a fourth, fifth, or sixth year of war, or an additional one million casualties?

The more Trump pressed almost all NATO members to pay their promised two percent of GDP on defense, the more Democrats grew irate over Trump’s overseas influence.

NATO members now want to raise defense spending to 5% of GDP and gush that Trump is “Daddy.”

Democrats steamed at that, since Europeans are supposed to hate Trump, not admire him for rebooting NATO.

Would they prefer the old, disarmed NATO?

Under the Biden administration, over 10 million illegal aliens flooded the country, sometimes 10,000 a day at the southern border. More than half a million criminals swarmed in.

Yet now there is essentially zero illegal immigration and over 100,000 criminal aliens deported. A million who entered illegally have voluntarily gone home.

Yet the left has fought the enforcement of immigration law tooth and nail.

Do they believe that it is lawful and moral to break immigration law but immoral and illegal to enforce it?

What is their solution?

To allow in 20, 30, or 40 million more illegal aliens to distort the census and bring in new voters and constituencies?

Is their plan to protect 400,000 illegal-alien criminals to roam at will? Or to add another 600 sanctuary jurisdictions that will not hand over criminal illegal aliens to immigration authorities?

Democrats used to support reciprocal tariffs to save American jobs and businesses — while warning of Chinese mercantilism.

But now they blast Trump for negotiating tariffs with dozens of nations in efforts to reduce an unsustainable $1 trillion trade deficit.

So far, Washington projects $300 billion in new revenue.

Foreign businesses have promised to invest between $10 and $15 trillion within the United States. Trading partners have lowered tariffs on U.S. goods and services.

So why the left-wing frenzy?

Do they object to too much new federal income? Is there too much new foreign investment?

Are new foreign tariffs too low on U.S. exports? Are Democrats worried that China may lose money?

In 35 minutes of precision bombing, Trump disabled the Iranian nuclear program that was readying nuclear weapons. Few Iranians and no Americans died. No wider war followed.

And the Democrats still cursed the Trump action.

Did they prefer the Obama-era “Iran Deal” that had brought Iran to the threshold of nuclear acquisition? Did they want theocratic Iran to have nuclear weapons to threaten democratic Israel?

Do Democrats complain that Trump tweets too much and sometimes is crude in his postings?

Not really. California Gov. Gavin Newsom tries to out-Trump on social media.

Rep. Jasmine Crockett responds with scatological attacks.

Democrats in Congress let off f-bombs.

What explains the Democrat nihilism?

One, the prior Biden administration was among the most aimless, corrupt, and unpopular in modern history.

So the contrast with Trump’s successes is too hard to bear.

Two, Democrats so hate Trump the messenger that they seek to destroy his entire message, even when it benefits their own country and the world at large.

If Trump conducts peace, they prefer war. If he wages war on crime, they side with the criminal. If he stops illegal immigration, they want more illegal immigrants.

Three, they fear they have no alternatives to the Trump record, because his agenda is common sense and supported by a majority of Americans.

Fourth, the left cannot stop Trump’s success.

Nothing seems to destroy him — not the raid on his home, not 93 lawfare indictments, not efforts to strike him from state ballots, not two impeachments, not even two assassination attempts.

Instead, all that only made him stronger — and thus more hated.

*  *  *

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Click hat... add to cart... check out... receive awesome hat... Tyler Durden Wed, 08/27/2025 - 16:20

NY Times Slammed For Predictable RFK Health Hit-Pieces

Authored by Luis Cornelio via Headline USA,

The New York Times came under fire on Monday for running a hit piece against Health Secretary Robert F. Kennedy Jr. and Defense Secretary Pete Hegseth’s pro-exercise campaign.

The leftist newspaper, as legacy media often does, leaned on so-called experts cautioning “against jumping into a difficult routine suggested by Robert F. Kennedy Jr. and Pete Hegseth.”

Its headline—100 Push-Ups and 50 Pull-Ups in Under 10 Minutes. What Could Go Wrong?—was predictably snarky.

The piece targeted the “Pete and Bobby Challenge,” a social media campaign aimed at raising awareness about fitness and weight loss.

However, according to The Times and their quoted experts, the exercise “may not be for everyone.”

“For the average person, I would definitely recommend building volume in these movements over three to four weeks before giving it a go,” said Utah athlete Dallin Pepper.

The leftist rag then cited Toronto-based personal trainer Chris Smits to say that the regimen proposed by Hegseth and Kennedy is not feasible for most Americans.

Citing experts is a common tactic in legacy media attacks on conservatives.

Self-described journalists pick a topic, guide the experts toward the conclusions they desire and then publish the story.

This cycle allows them to wash their hands by claiming they are simply reporting.

On X, critics piled on The Times, describing the hit piece as predictable as it was laughable.

“The New York Times really hates working out,” wrote Republican communicator Nathan Brand.

the New York Times really hates working out pic.twitter.com/m0lPBMnNnu

— Nathan Brand (@NathanBrandWA) August 26, 2025

Media personality Collin Rugg added: “The @TheBabylonBee couldn’t even come up with something as insane as this.”

The New York Times is warning against RFK Jr. & Pete Hegseth's 100 Push-Ups & 50 Pull-Ups challenge by citing "experts" who say it could be dangerous.

One Canadian 'trainer' cited by the NYT said the challenge could give people "serious muscle strains or tears."

"Pushing for… pic.twitter.com/H54RQhSPAb

— Collin Rugg (@CollinRugg) August 25, 2025

Fitness expert Oliver Anwar quipped, “This is confirmation that The New York Times is run by low-T softies.”

Tyler Durden Wed, 08/27/2025 - 15:45

Federal Government Returns To US Supreme Court In Push To Freeze $12 Billion In Foreign Aid

Authored by Melanie Sun via The Epoch Times,

The federal government on Aug. 26 filed an application with the U.S. Supreme Court seeking to suspend a court order that is preventing it from freezing billions in foreign aid.

President Donald Trump, on inauguration day, ordered a 90-day pause on all foreign aid.

His presidential order was met with legal challenges from two nonprofit groups that receive federal funding grants related to aid: the AIDS Vaccine Advocacy Coalition and Journalism Development Network.

They alleged that Trump’s funding freeze was unlawful.

The order directed federal agencies to “immediately pause new obligations and disbursements of development assistance funds to foreign countries and implementing non-governmental organizations” while the newly elected administration reviewed the programs to see if they were consistent with its America First foreign policy objectives.

Secretary of State Marco Rubio then outlined in a memorandum that he was freezing foreign-aid programs funded by the State Department and the U.S. Agency for International Development (USAID). The AIDS Vaccine Advocacy Coalition and Journalism Development Network were among those granted money from this pool of funding.

In an emergency filing, U.S. Solicitor General D. John Sauer of the U.S. Department of Justice said on Aug. 26 that the administration’s position to overturn a federal court injunction had been supported 2–1 by the panel of the U.S. Court of Appeals for the District of Columbia Circuit earlier this month.

Despite that ruling, the injunction by a lower court remains in effect after U.S. District Judge Amir Ali in Washington on Aug. 25—and the federal appeals court last week—rejected the Justice Department’s request to put it on hold.

“The government is thus forced to ask this Court to give effect to the D.C. Circuit’s decision, which correctly held that private parties cannot enlist Article III courts to supplant the interbranch dialogue regarding the expenditure of appropriated funds,” Sauer said in his 36-page application to the Supreme Court.

The funds subject to the injunction comprise tens of billions of dollars, some $12 billion of which would need to be spent by the U.S. Department of State before Sept. 30, when they expire, according to the filing.

Without the court’s intervention, Sauer said, the State Department will be bound by the injunction to keep making the foreign aid payments before the expiry date.

The injunction “will effectively force the government to rapidly obligate some $12 billion in foreign-aid funds that would expire September 30 and to continue obligating tens of billions of dollars more—overriding the Executive Branch’s foreign-policy judgments regarding whether to pursue rescissions and thwarting interbranch dialogue,” Sauer said.

Disputes between the legislative and executive branches over federal funding have historically been determined through the political process, as codified by the Impoundment Control Act of 1974 (ICA).

“Yet the district court jumped ahead, appointing itself as overseer of spending decisions and allowing private parties to bring suits without regard to the Comptroller General or Congress’s views,” Sauer said.

The lower court decision effectively ruled that such private parties “could persuade district courts to superintend the Executive Branch’s disbursement of funding streams and second-guess the political branches’ views of the ICA,” the filing said.

Sauer said the plaintiffs face no irreparable harm from the federal government’s decision to freeze funding.

“They cannot claim irreparable harm from the unavailability of certain funding streams when they have no entitlement to those funds anyway,” the petition said.

“They simply want to compete for foreign-aid awards. But even under the injunction, they have no guarantee of getting a penny, making it all the more incongruous for them to effectively commandeer the spending of billions of dollars.”

The U.S. Supreme Court declined on March 5 to intervene after Ali ruled against the administration on Feb. 25.

The Supreme Court at the time asked Ali to “clarify what obligations the Government must fulfill to ensure compliance” with his temporary restraining order.

Ali then determined it was likely the Trump administration was acting beyond its purview by canceling funds earmarked by Congress, and barred it from “unlawfully impounding congressionally appropriated foreign aid funds.”

The DOJ appealed, and the three-judge appeals panel stayed Ali’s order. The plaintiffs then appealed to the full court of appeals, which has yet to make its decision but has left Ali’s injunction in place.

Sauer has asked for its petition to be addressed by Sept. 2 “due to the additional irreparable harms the government would incur past that point.”

“Backtracking on those commitments and proposing rescissions after September 2 would inflict irreparable diplomatic costs and generate needless interbranch friction,” he said.

Tyler Durden Wed, 08/27/2025 - 15:00

Goldman's iPhone 17 Breakdown Ahead Of "Awe Dropping" Event

Apple announced on Tuesday that its upcoming "Awe Dropping" iPhone 17 event will take place on September 9. The launch is expected to feature an all-new super-thin iPhone, new Watch models with satellite connectivity, and the long-awaited AirPods Pro 3.

Ahead of the launch event, Goldman analysts led by Michael Ng told clients that his desk is "Buy" rated on the stock. 

"We are encouraged by reports surrounding (1) form factor updates to iPhone 17 models (17 "Air" model, larger base screen size); (2) the potential for a price increase to the iPhone 17 Pro; and (3) continued carrier competition driving device-related promotions," Ng told clients. 

He stated, "We reiterate our Buy rating on AAPL and forecast iPhone revenue to grow +5% yoy in F2025E before accelerating to +7% yoy growth in F2026E."

Ng expects four new iPhone models to be launched at the beginning of the iPhone 17 cycle:

1. iPhone 17 (base);

2. iPhone 17 "Air" (replacing the Plus model);

3. iPhone 17 Pro; and

4. iPhone 17 Pro Max.

So, what's really changing with the new iPhone? Good question. The analyst provides some thoughts:

First, the iPhone 17 series will reportedly feature a variety of different form factor changes (Exhibit 1). For one, Apple should debut the first iPhone 17 "Air" model (which should replace the iPhone "Plus" model), featuring a thinner and lighter form factor relative to other iPhone models, with a display size between that of the 17 Pro (6.3") and 17 Pro Max (6.9"). In addition, the iPhone 17 base model display size should now measure 6.3" (v. 6.1" in the base iPhone 16 model), now equal to that of Pro models. Second, the iPhone 17 series should be able to support greater compute intensity, with updated A19 series processor chips and 12 GB of RAM (v. 8GB RAM in the iPhone 16 family). iPhone 17 Pro & Pro Max models should feature premium chip models (likely A19 Pro), and the iPhone 17 (base) and Air models featuring a less advanced chip model (A19 base or less compute intensive A19 Pro). Greater chip power and RAM capacity likely reflects a greater need for compute intensity ahead of upcoming Apple Intelligence feature updates and releases, including the 2026 expected release of AI-enhanced Siri. Third, the iPhone 17 series should see an improved front camera (24 MP v. 12 MP in the iPhone 16 family).

Thoughts on pricing:

Though it has been reported that Apple could raise prices by $50 across its iPhone 17 line up, we expect pricing for iPhone 17 (base) and Pro Max models to be in-line with that of preceding models ($799 128GB base model starting price; $1,199 256GB Pro Max starting price). That said, we believe Apple could implicitly raise prices on the Pro model, in-line with recent reports. While the iPhone 16 Pro started at 128GB at $999, we believe Apple could raise prices by eliminating the 128 GB storage option, moving 17 Pro starting storage and price to 256 GB and $1,099. This would be similar to how Apple raised prices on Pro Max models in 2023 during the launch of the iPhone 15 series, when it eliminated the $1,099 128 GB storage option for the iPhone 15 Pro Max, moving the Pro Max model's starting storage and price to 256 GB and $1,199. We expect iPhone 17 Air pricing to be relatively in-line with the iPhone 16 Plus ($899), due to its specialized thin form factor yet reported inferior battery capacity and single-lens back camera.

And what does the new iPhone mean for Apple's revenue growth? Well, Ng has that topic covered as well:

Overall, we view the iPhone 17 line-up as supportive of sustaining iPhone revenue growth from F2025 into F2026 (GSe iPhone revenue growth estimates for +5% yoy in F2025E, +7% yoy in F2026E). First, from a demand standpoint, we view updates including larger screen sizes on the 17 base model, improved front-cameras, and improved processor chip power as supportive of device refresh, particularly amongst members of the iPhone installed base with devices that are aging (>3 years since purchase) or that do not support Apple Intelligence (devices less powerful than iPhone 15 Pro and 15 Pro Max) ahead of the launch of additional AI features in the coming year (AI-enhanced Siri). Second, from a price perspective, we view the potential for an implicit iPhone price increase through eliminating the 128GB $999 Pro model option as supportive of ASP uplift over time, particularly as the iPhone shipments skew increasingly premium over time (Exhibit 5). We are mixed on the benefits of the iPhone 17 Air model. While the thinner, lighter form factor may drive some demand interest, potential features such as an inferior battery & a single lens rear camera (vs. base model with 2 lenses & better camera) may not justify a purchase over the iPhone 17 base model.

Summary of key changes expected in iPhone 17 series

iPhone announcement event has not historically been a stock catalyst for outperformance/underperformance

Promotional activity among US carriers for iPhones 

iPhone 17 pricing 

iPhone revenue forecast 

Remaining product pipeline

How "Awe Dropping" will this upcoming launch event be if the iPhone 17 still looks the same as previous iPhone models? 

Tyler Durden Wed, 08/27/2025 - 14:40

Momentum Strategies And Physics: Mass And Velocity Matter

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

In his 1687 book, Philosophiae Naturalis Principia Mathematica, Sir Isaac Newton defined momentum as the product of mass and velocity, or p = m * v. The reason we begin with a physics lesson is that momentum strategies are very popular, and Isaac Newton’s famous formula can teach us a lot about financial asset momentum.

Recently, we have seen rapid shifts in and out of various sectors and stock factors that disrupt momentum strategies. Therefore, understanding how momentum strategies work can help you better identify when they might be effective and when it’s time to switch to a different approach.

The graphs used in this article are from 8/21/2025. Although slightly outdated, their goal is to help readers understand how to measure momentum rather than assess the current momentum state.

Physics 101

Returning to our basic physics formula, p = m * v.

To measure financial momentum, we also need to measure the velocity and mass of a financial asset or index.

Mass

Mass (m) in finance terminology refers to the trading volume or market interest behind an asset. Market cap or AUM, trading volumes, and investor sentiment can be used to measure mass.

The graph below, courtesy of SimpleVisor, highlights the bullish trend channel (blue) from late May through mid-August.

In this example, we will focus on three indicators to evaluate mass.

The first indicator is volume, along with its moving average. As indicated by the red and green bars, volume has remained steady throughout the trend. This is also supported by the relatively flat moving average (black line). Ideally, we want to see rising volume alongside a trend. However, volume isn’t decreasing either, which would suggest the trend is losing momentum.

The middle graph is On Balance Volume (OBV). OBV adds volume on days when a security’s price closes higher and subtracts volume when it closes lower. Therefore, it shows a running total of buying or selling pressure. Ideally, we want to see it increasing. Like we noted with volume, which is also flat, OBV momentum isn’t gaining strength, but it doesn’t indicate that momentum is declining either. 

The bottom graph shows the Volume Oscillator, which compares a shorter and a longer moving average of volume. When it declines, it indicates that volume over the shorter moving average period is less than that of the more extended period. As shown above, the oscillator has been declining, though at a slow rate.

None of the volume indicators suggest a break in the momentum trend is imminent, but they also don’t indicate the trend is gaining strength. 

Velocity

Velocity (v) quantifies the persistence of the trend and its slope.

Let’s revisit the graph above with three popular indicators of velocity.

The graph shows the Moving Average Convergence Divergence, or MACD. The MACD is computed by subtracting a longer-term moving average from a shorter-term one. Additionally, a signal line, an even shorter moving average, accompanies the MACD. We examine not only the trend and level of the MACD but also convergences or divergences from the signal line. A convergence indicates a weakening trend, while divergence suggests increasing momentum. In the graph, the MACD remains stable with no apparent signs of convergence or divergence. Although generally bullish, the MACD level is high, which is difficult to sustain, and it has been gradually sloping downward.

The indicator just below the price chart is the Relative Price Index, or RSI. The RSI is an oscillator that measures the speed and magnitude of price movements. The index ranges from 100, which signals it’s very overbought, to 0, indicating it is very oversold. Typically, levels above 75 and below 25 suggest a reversal in momentum is likely. Equally important is the trend of the RSI line. Like most indicators, we prefer a gently rising or falling trend over sharp movements. Currently, after reaching overbought levels in late July, the RSI has generally been declining, showing that momentum is weakening.

Last is the Rate of Change (ROC). The ROC calculation shows the percentage difference between the current price and an earlier price. An ROC of zero, as indicated by the graph, means the price has not changed compared to 9 days ago. ROC should be above zero in an uptrend and below zero in a downtrend. However, during healthy market consolidations, the ROC can reach zero. In such cases, breaking below zero could coincide with breaking the highlighted price channel and a change in momentum.

What Is p?

Before moving on, let’s review the momentum of the S&P 500 based on the indicators and charts above. The highlighted trend channel, along with the mass and velocity indicators, suggests a market with positive momentum. Both sets of indicators are indicating some easing of momentum but not warning of an upcoming reversal. As we mentioned earlier, it’s healthy to experience brief periods of correction or consolidation in strong upward trends. So far, we should assume this is the case until our indicators and the price chart indicate otherwise.

Pitfalls of Momentum Strategies

Momentum strategies depend on the persistence of price trends and indicators that measure those trends, some of which are described above. When markets undergo significant two-way volatility or rapid rotations with market leadership shifting quickly between sectors and/or stock factors, momentum strategies often face difficulties.

The biggest problem with the strategy is its delayed reaction. Because momentum strategies rely on past price data, trends may reverse or fade before the strategy can fully take advantage of them, resulting in whipsaw losses. Additionally, the model might not detect a new momentum trend until it is well into the cycle, leaving little upside potential.

Another important factor is time. If you plan to follow a momentum strategy, you must decide whether you’re a short-term trader or a medium- or long-term investor. A short-term trader might use minute-by-minute data to capitalize on momentum trends over hours or days. Long-term traders, on the other hand, need to focus on the bigger picture. Naturally, the scope of that picture depends on how long-term an investor you are.

Mitigating Data Lag

When markets are volatile and rotations occur quickly, momentum can still be effective. Still, strategies need to adjust to the environment. For example, you may want to use shorter lookback periods to capture momentum changes more quickly.

Another practical step is diversification. Instead of depending on just one or two sectors, factors, or stocks with strong momentum, think about broadening your portfolio. This can help reduce the volatility of your returns. Additionally, including other value factors, such as market capitalization, beta, or value versus growth, alongside the momentum indicator, can result in more stable outcomes.

Summary

Momentum strategies give investors the chance for higher returns than the market. Additionally, momentum can be fairly easily measured, allowing investors to use a rule-based system, which can help reduce the influence of emotions on trading decisions.

Momentum strategies, like all other investment strategies, have periods when they perform well and periods when they underperform. For example, during periods of quick rotations where momentum trends are not sustained and volatility is high, investors can often find themselves on the wrong side of momentum.

We leave you with the graph below.

Since 2022, the performance of a widely followed momentum ETF (MTUM) has matched the S&P 500 (SPY). However, the blue shading indicates that although both ended up in the same place, the strategy experienced periods of outperformance and equally poor periods of underperformance.

Tyler Durden Wed, 08/27/2025 - 14:25

Tom Cotton Targets Tax Status Of 'Terrorist-Supporting' Youth Movement

Renewed high-level scrutiny on far-left nonprofits emerged overnight with a New York Times report on Tuesday evening, which revealed that the Gates Foundation had abruptly severed ties with a "dark money" network operated by Arabella Advisors. Then by morning, President Trump fired off a post on Truth Social calling for possible RICO charges against George Soros and his radical leftist son for their "support of violent protests." We must note that Bill Gates met with Trump at the White House earlier on Tuesday, according to an NBC report. 

The move by the Gates Foundation, along with Trump's comments, suggests that an impending crackdown on rogue progressive philanthropic networks could arrive as early as this fall. 

Additional evidence of this scrutiny surfaced actually last week, Senator Tom Cotton (R-Ark.) sounded the alarm on X. Cotton singled out the Palestinian Youth Movement (PYM), a leftist activist group closely aligned with Students for Justice in Palestine (SJP), accusing it of working across university campuses to incite anti-Israel protests and campus chaos.

"The Palestinian Youth Movement's support of Hamas and ties to terror groups should prevent it from receiving tax-exempt donations. I'm asking the IRS to investigate and remedy this situation," Cotton wrote on X last Friday. 

The Palestinian Youth Movement’s support of Hamas and ties to terror groups should prevent it from receiving tax exempt donations. I’m asking the IRS to investigate and remedy this situation. https://t.co/dmCimJObgM

— Tom Cotton (@SenTomCotton) August 22, 2025

Cotton sent a letter to U.S. Treasury Secretary Scott Bessent, requesting that the IRS investigate PYM and its funding sources for potential violations of U.S. tax law.

Cotton emphasized that while PYM is known for antisemitic activities and support for terrorist groups like Hamas, the core issue is its ability to receive tax-exempt donations...

"An organization that supports terrorism, breaks U.S. law, and sows antisemitic discord should not receive any benefits from the American tax system. I ask you to immediately investigate both PYM and Honor the Earth and to take any actions necessary to remedy this situation," Cotton wrote in the letter. 

Commentary on PYM via Jason Curtis Anderson, cofounder of the good government group One City Rising, reveals: 

"One of the basic qualifications for tax-exempt 501(c)(3) charity status is that an organization must actually work for the public good. The Palestinian Youth Movement (PYM) is an international terror-supporting network that doesn't even pretend to contribute anything positive to society. Last year's People's Conference for Palestine in Detroit—the largest pro-terror conference in U.S. history—was sponsored, convened, and managed by PYM, which also served as the primary recipient of donations. Its speaker lineup included current PFLP member Wisam Rafeedie, Sana' Daqqa—the wife of convicted PFLP terrorist Walid Daqqa—and even a promotional endorsement from PFLP founding member Salah Salah. With another conference looming in 2025, it is unacceptable that groups openly glorifying terrorism enjoy the same tax-exempt privileges as organizations that truly serve the public good, like feeding the homeless. The 501(c)(3) world has become the Wild West of government subversion, permanent protests, and foreign influence, and I applaud Senator Tom Cotton's much-needed efforts to put a stop to this rampant abuse." 

Takeaway is clear: The days of dynastic billionaire families, foreign money, taxpayer dollars, and leftist nonprofits feeding the Democratic Party machine are about to come under the crosshairs and face heavy scrutiny this fall. Americans are sick and tired of rogue leftist NGOs unleashing color-revolution-style operations across major cities, if that's rioting, burning private property, and attacking government facilities. We also suspect the Marxists around Neville Roy Singham have been put on notice.

Tyler Durden Wed, 08/27/2025 - 14:05

"A Big Signal" - Trump's Envoy Witkoff To Meet Ukrainians In New York This Week

Authored by Guy Birchall via The Epoch Times,

U.S. special envoy Steve Witkoff said he is set to meet with Ukrainian representatives in the United States this week during an interview on Tuesday.

“I’m meeting with the Ukrainians this week. So I will be meeting with them this week in New York, and that’s a big signal,” Witkoff said on Fox News’ “Special Report” with Bret Baier.

“We talk to the Russians every day,” he added, saying he believed Russian President Vladimir Putin wished to bring the war to a close.

“I think he [Putin] has made a good faith effort to engage. He certainly did at the Alaska summit. But it’s a very complicated conflict.

“I think that we may end up seeing a bilateral meeting. My own opinion is that the president is going to be needed at the table to finish a deal.”

U.S. President Donald Trump met with Putin in Alaska on Aug. 15 and later with Ukrainian President Volodymyr Zelenskyy at the White House on Aug. 18.

In the wake of those summits, Trump said the two leaders would hold a bilateral meeting, which would then be followed by a trilateral meeting including him.

Zelenskyy has said Russia was doing everything it could to prevent a meeting between him and Putin, while Russia has said the agenda for such a meeting was not ready.

Last week, U.S. Vice President JD Vance said that Moscow has made “significant concessions” toward reaching a peace deal to end the more than three-year conflict between Russia and Ukraine.

In an interview with NBC News’s “Meet the Press,” the vice president said Putin made multiple concessions toward reaching a deal with Kyiv, including one that allows Ukraine to receive security guarantees to ward off future attacks.

Vance said that the Russians have “recognized that they’re not going to be able to install a puppet regime in Kyiv,” noting it was “a major demand at the beginning.”

“And importantly, they’ve acknowledged that there is going to be some security guarantee to the territorial integrity of Ukraine,” he said.

“Have they made every concession? Of course, they haven’t. We’re making progress.”

The violence between Moscow and Kyiv continued overnight, with a Russian drone attack damaging an energy sector facility in Ukraine’s central Poltava, the region’s governor said on Wednesday.

“This night, the enemy massively attacked the Poltava region,” Governor Volodymyr Kohut said on Telegram. “Falling debris and direct hits were recorded in the Poltava district. An energy sector enterprise was damaged. An administrative building, vehicles, and equipment were damaged. Fires broke out on the territory of the enterprise.”

He added that consumers had temporarily lost power as a result of the attack and that “fortunately, there were no casualties.”

The nighttime aerial assault also shut off power in parts of the northern city of Sumy after Russia struck critical infrastructure facilities, leaving all water utility facilities without power and relying on emergency backups on Wednesday morning, according to a Telegram post from Sumy City Military Administration Chief Serhii Kryvosheienko.

“Restoration efforts are now underway in the Sumy region after Russian drone strikes,” Zelenskyy said in a post on X on Wednesday discussing the attack. “Nearly a hundred UAVs [unmanned aerial vehicles] and targeted overnight attacks on our regions, aimed specifically at civilian infrastructure.”

“The Russians continue the war and ignore the world’s calls to stop the killings and destruction,” he added, calling for “new steps” to “increase pressure” on Moscow to “stop the attacks and to ensure real security guarantees.”

The Ukrainian Air Force said it downed 74 out of 95 Shahed drones overnight, and that 21 drones hit nine locations across the country.

Russia, meanwhile, said that its air defenses intercepted and destroyed 26 Ukrainian drones over the country through the night, according to Moscow’s Defense Ministry.

At least seven apartment buildings were damaged in a drone attack on the southern city of Rostov-on-Don, located just more than 60 miles from the Russia–Ukraine border, Russian state news agency TASS reported.

Tyler Durden Wed, 08/27/2025 - 13:45

Tailing 5Y Auction Sees Record High Directs, Record Low Dealers

After yesterday's stellar, blowout 2Y auction, moments ago the US sold $70 billion in 5Y paper in what was a far weaker auction. 

The high yield was 3.724%, down from 3.983% in July and the lowest since last September's 3.519%; it also tailed the When Issued 3.717% by 0.7bps, the 3rd tail in a row.

The Bid to Cover was 2.36, up from last month's ugly 2.31, but below the six auction average of 2.37.

The internals were also wobbly, with Indirects taking 60.5%, up from 58.3%, but also far below the recent average of 69.3%. But weakness in foreign demand was offset by a surge in domestic demand, with Directs taking a new record high of 30.7%.

This left just 8.8% for Dealers, tied with the previous record low from Jan 2023.

And overall:

While this was generally a disappointing auction, although with some silver linings below the surface, clearly the market did not care, and 10Y yields slumped to the day's lows shortly after the auction.

Tyler Durden Wed, 08/27/2025 - 13:35

Two weeks ago I wrote The Next Financial Crisis. I noted:

The key to preventing a financial crisis is to keep the non-regulated (or poorly regulated) areas of finance out of the financial system.

Currently the most obvious non-regulated area of finance is cryptocurrency. And that leaves us with two choices to prevent this "financial rat poison" from leading to another financial crisis:

1. Keep crypto out of the financial system, or

2. Regulate crypto.

Keeping crypto out of the financial system could range from banning it outright, to just prohibiting financial institutions from holding or lending against crypto holdings (including mortgage lending). Unfortunately, the current administration has embraced crypto.

Regulation is the alternative. If crypto is an "asset", then it should be registered with the SEC (with quarterly filings). If it is a currency, the issuer should also be required to register with the SEC and provide quarterly updates on the amount in circulation, the mechanics of the scheme, and list all the backing assets. Then lenders could be allowed to the lend up to a percent of the backing assets.

For example, for Bitcoin, the original issuer should file quarterly with the SEC. If the backing assets amount to $0.01 per coin (just a guess), then lenders could lend up to a percentage of $0.01 for each Bitcoin.
These are the two choices to avoid a financial crisis.  



 

 

At The Money: Buying into the Ownership Society (August 27, 2025)

Equity-based compensation has become a means of participating in the “Ownership Society.” You give up some cash salary in exchange for the potential to see enormous gains if your company IPOs.

Full transcript below.

~~~

About this week’s guest:

Joey Fishman is a Senior Advisor at Ritholtz Wealth Management (RWM), where he assists clients with managing their stock, options, and equity compensation.

For more info, see: Personal Bio

~~~

Find all of the previous At the Money episodes here, and in the MiB feed on Apple Podcasts, YouTube, Spotify, and Bloomberg. And find the entire musical playlist of all the songs I have used on At the Money on Spotify

 

 

 

TRANSCRIPT:

(Intro: All the other kids with the pumped-up kicks,  You better run, better run, outrun my gun; All the other kids with the pumped-up kicks, You better run, better run faster than my bullet)

 

How would you like to become part of the ownership society? It’s complicated, with lots of moving parts, rules, regulations, and taxes. But if you do it right – and get a little lucky — there are potentially big gains to be had.

To help us unpack all of this and what it means for your compensation, let’s bring in Joey Fishman. He’s an expert in equity-based compensation in Bend, Oregon. He has clients from Seattle and Redmond down to San Francisco and Silicon Valley, and full disclosure, Joey is the equity compensation expert at Ritholtz Wealth Management and is also one of my partners.

So let’s start, Joey, from the employer perspective. What does a firm like RWM get out of equity compensation for its senior employees and partners?

Joey Fishman: It sets the tone from the beginning and incentives as long as their property aligned, it puts everybody in the right position to, to help push the firm forward and help succeed.

Barry Ritholtz: So let’s drill down to some of the most, um, important aspects of this. Obviously if you’re, you’re either offering stock options or any form of equity compensation, that’s gonna be less expensive than using cash. That’s obvious, but what about attracting talent, retaining talent, and then getting all the horses pulling in the right direction?

Joey Fishman: That’s a really good question and I think a lot of it depends on the individual industry with which you’re working in.

For years over the last, you know, run up to the bull market over the last 15 years, there was a huge demand for coders and people in the tech world. And so if you could fog a mirror, you were offered, you know, hundreds of thousands of, uh, incentive stock options to come join this or that tech company to help build them out.

In the banking world, you know, RSAs or restricted stock awards was a different form of equity that suited better that industry just because of the way which cash flows came in. And RSUs seem to be the better approach for the oil and gas industry. There is a lot of volatility in that market, but there’s also a lot of stability, and so RSUs tend to work really well in that environment.

Barry Ritholtz: You mentioned banking in the space we work in wealth management. It seems like it’s very much bifurcated. Some companies very much embrace it. Other firms don’t really pay much attention to it. What do you see in this space for equity-based compensation?

Joey Fishman: I mean, if you wanna keep your employees around, you’re gonna incentivize them accordingly. I mean, they gotta get paid.

Barry Ritholtz: Is that, is that why we seem to have sort of a prisoner exchange at, at the big wirehouses? They go from Merrill to Morgan to UBS to Goldman and back. They take a big cash check in front as opposed to a long-term backend equity version of this. I’m just, I never really thought about it that way, but that seems to be what happens in, in parts of the industry.

Joey Fishman: You hit the nail on the head. Exactly. So by allowing us to be share owners of the firm, there’s no incentive us, for us to be lured away by someone else offering us a huge check just to move for the next couple of years.

Barry Ritholtz: What about different employees at different levels of the companies? We have founders. Partners, employees, and for lack of a better word, probationary employees. What does this look like in all fields, not just wealth management?

Joey Fishman: Once you get to the executive level, the pay package changes. It may not just be NSOs or ISOs, they’re gonna add in what’s called PSUs or performance stock units. After you meet a predetermined threshold, that’s part of your agreement or a part of your contract. You’ll be granted X number of additional shares. They too have their own tax treatment.

We’re seeing now that it used to be more reckless, abandoning. We’re just gonna assign and grant you shares each year as part of your equity refresh. Now it’s a little bit more of. Performance stock unit compensation, where it’s put up or shut up, show us that you’re worth the compensation before we’re actually gonna be granted it to you.

Barry Ritholtz: Let’s talk about profit interest, which has been something that I’ve noticed a lot more of over the past five years. Hey, you’re joining a company with a billion-dollar valuation. If the company is sold for anything over that and you have a profit interest, you participate, but you don’t have to pay in, and there’s no initial tax penalty for this.

Tell us about profit interest.

Joey Fishman: Stock appreciation rights is maybe in line with what you’re discussing. There’s something also called phantom stock too. Phantom stock is, is not used that much anymore because the, the tax liability associated with it is so severe if you get caught on the wrong side.

But stock appreciation rights is more aligned with what you’re discussing here, which is. We’re not granting you or giving you shares per se, but what we’re doing is we’re going to give you whatever appreciation takes place between now and the next date. And let’s say we’re gonna give you a thousand shares now if it’s trading to 10 bucks a share, and if it increases to $15 a share, well, the net to you is the equivalent of $5,000 because we’ve, we’ve given you that stock appreciation right.

Barry Ritholtz: Let’s talk about winners versus losers. We, you mentioned the banking industry. We were talking about technology previously, you and I have talked about oil and gas.

How common or rare are the modest winners and how rare are the, you know, lottery tickets, like a Netflix or an Nvidia?

Joey Fishman: It is a really, really good thing to wrap your head around. So at the end of the day, it’s about 4% of stocks are responsible for the vast majority of market returns. So 4% of stocks; of that, roughly 80% of employees sell their shares immediately after they vest.

Barry Ritholtz: Really? That is shocking to me.

Joey Fishman: So think about like, think about what has to happen in order for you to, you know, hit it outta the park. You have to join early enough to get a meaningful amount of equity. You gotta stay long enough at least four years to invest all of your equity and like God willing, knock on wood, you’re getting equity refreshes each year as part of your bonus.  You need to exercise at the right time to avoid, you know, tax traps. If it’s ISOs, it’s a AMT tax that you have to navigate around; if it’s NSOs, it’s ordinary income that has to be navigated with over time as more liquidity events or funding rounds happen. Your ownership stake is gonna be diluted, but hopefully the, the firm is getting more valuable.

And then finally, you have to wait until there’s an actual liquidity event. And if it’s a publicly traded firm or a firm that went IPO’d. It’s six months after that IPO, even if it’s fully vested, do you then have access to it? So it’s kind of like winning the lottery, but you don’t, there’s ambiguity in terms of when you can sell and at what price you can sell it; there’s always gonna be that fluctuation in price.

The rarity amongst the winners is much, much lower. I think that most people realize. And you know, going back to Michael Moubbisson’s book of skill and luck in business and investing like it. This is a great example of what it takes to to find yourself in the right place, to have the skill to be there, and then to also be lucky enough to to, to thread all of the needles that need to be navigated for you to win.

Barry Ritholtz: I’m genuinely shocked to hear that 80% of employees sell their stock immediately after vesting. Is it just that I’m risk embracing and I want to go on the ride and other people have mortgages, kids and bills, and they just wanna take the cash?

Joey Fishman: I think it goes back to 4% of stocks are responsible for the vast majority of returns.

The other way to say this, or another way to look at the markets is that 63% of stocks are losers throughout the course of their lifetime. The vast majority of stocks that IPO or the vast majority of equity grants that are given turns out to really be bubkiss in the end.

Barry Ritholtz:. So let’s talk about some of the rules that govern this. They’re kind of fascinating.

First there was a, a big rule change in the 1990s under the Clinton administration for executives where they were capped at a relatively low amount of compensation in cash. And hey, they had to participate by being equity owners. That worked out really well for senior management, didn’t it?

Joey Fishman: It did. What took place then is the, the original goal was to put a ceiling on executive compensation and the outcome that actually occurred. So they allowed incentive stock options to flourish at that time.

As long as it fell under, as long as that option contract or that grant fell under the auspices of being incentive, so you needed to work or prove yourself to be, uh, incentivized, to be gifted that option, then you would be eligible for a much more favorable tax treatment and avoid those laws that went into place.

Barry Ritholtz: And then there were some rule changes following the dot com implosion. What took place in the 2000s, that affected employee equity compensation

Joey Fishman: Among the main challenges is the. Requirement that each year an independent valuation take place through the process of what’s called a 4019A. What that means is that the company itself can’t just pull out of its tush, whatever valuation they expect it to be. Instead, it has to be verified by an independent third party.

The other thing is that. Equity now vests upon a schedule. So there are a number of backdating, sc, uh, scandals that took place in Sure. The late ‘90s, early 2000s. Apple’s Steve Jobs was even famously and started in one of them.

And so there’s a much more stringent set of rules as it governs equity compensation, the, the, the main ones that to take away from obviously the 4019A and that. Going forward, no forms of equity. Compensation can be given below market value. It has to be at least at a hundred percent of market value, or if you’re an insider or an executive, it has to be at 110% of current market value.

Barry Ritholtz: Really interesting. What about some of the crazier tax stories? I know you’ve regaled me with all sorts of wild scenarios that take place. What? What are some of the wacky attempts to circumvent taxes that have led to bad outcomes?

Joey Fishman: Everyone knows the term, like who you hang out with is who you become.

It it depends on your, the socioeconomic demographic with which you’re hanging out with, you know. But right now, like making the rounds is conservation easements. These are a tax scheme to help absolutely gut your tax liability on the ordinary income side. The IRS has, has put a stop to it. And basically, I think how they work these days is that for every dollar that you would put into a conservation easement, I believe 20 cents goes towards litigation over the next 11 years on your behalf.

It’s not for the faint hearted. They don’t materialize in the way that they  they promise. So that’s among the main things where people really get themselves in trouble. And I will say, like if you find yourself on the wrong side of a conservation easement. The tax bill that’s going to be jammed down your throat is gonna be so insane. It you’ll, you’ll regret having done it in the first place.

Barry Ritholtz: So you sound very conservative when it comes to tax schema that aren’t approved by the IRS. Let’s talk about one that the IRS has already blessed: The QSBS. Tell us about what that is and how does that work?

Joey Fishman: That is the gold standard. So QSBS or qualified small business stock essentially is if you, the, the new rules actually just changed with the big beautiful bill.

But what it does is that if the company or the industry with which you work in, if you are issued shares, and as long as you hold it for a certain time period. Then all of the gains are entirely tax-free. So there are situations where folks come to us and they’ve been at the company for 10 years. They’ve had this stock for 10 years. Their cost basis is 15 cents, and now it’s trading at 35 or $40. And so the first 10 million is entirely tax free at the federal and the state side. So like in the California example, you know, as, as opposed to walking away with 48 cents on the dollar. When all is said and done you’re walking away with a hundred cents on the dollar on that first $10 million worth of gains.

Barry Ritholtz: One of the things that we talked about with private companies is often a lack of a liquidity event for some time in the future, but a lot of these small startups, especially in technology, they’re venture-funded. You have the seed round, the A round, the B round. How significant are dilution issues for employees? Or if this goes public, it doesn’t matter. It’s just money, money, money.

Joey Fishman: Ideally you’re not having a down round when you’re, when you’re raising cash. If you are, then. The odds of your iso working out tend to be slim to nil, but typically in the, the startup spaces, you want as many option contracts as you can because if this thing ends up being a runner or ends up being something magnificent, the leverage factor is just so enormous that, it’s well worth it.

The vast majority of these companies end up crumbling. Carta does a really good job of the regulatory work that’s required behind the scenes for then the startup space. And so I’d say over the last probably five or six years, they’ve been one of the greatest improvements in this space. Helping like the broader investor class or employees that have access to this stuff have a much better understanding of what is a very, very complicated set of personal finance.

Barry Ritholtz: And for people not familiar with Carta, they’re the ones who track the entire cap table from seed investments to A, B, C, D round. They know everybody that owns every last share. You get a sense of exactly what the value of your holding is, at least relative to the most recent round.

Last two questions. Let’s talk about common mitigation strategies. What should an employee or an employer be doing to make sure that the compensation structure is fair and that everybody involved pays their legitimate but minimal taxes?

Joey Fishman: So if you’re an employee, I’ve never seen a plan where this wasn’t the case. But if you’re an employee, the company is responsible for withholding taxes on your behalf whenever you exercise, if there’s taxes on exercise, and whenever you sell the shares. Or there’s a tender offer, so.

The company itself is responsible for withholding taxes.

Where things can go sideways is that the company is only required to withhold the statutory minimum, which is 22% or 24%. Most folks, like if you’re having a big payout, are in the 35 to 37% federal tax base. So you’ll find yourself under withheld. It’s important that you work with the CPA or advisor to figure out exactly what your tax liability is on that distribution.

Barry Ritholtz: final question. We’ve been talking very judiciously about all the risks and all the downsides and how circumspect you need to be about this. But obviously, equity compensation has been really attractive going back to the 1990s. How advantageous can these be? Not in an Nvidia, Microsoft, Netflix sort of way, but just in a good, solid company that has fairly reasonable results over the course of your employment there.

Joey Fishman: It is fantastic. Any additional cash flow that you can capture, that you can then add to your financial plan to help reinforce your quality of life is a great thing.

Barry Ritholtz: Thanks, Joey. This has been really interesting. So to wrap up, if you have an opportunity to become part of the ownership society, understand what you’re getting into. It’s complicated. There are a lot of moving parts. There are rules and regulations and taxes, But if you do it right and you get a little bit lucky, there are enormous potential upsides to be had over and above your employment cash compensation.

I’m Barry Ritholtz. You are listening to Bloomberg’s at the Money.

~~~

Find our entire music playlist for At the Money on Spotify.

 

The post At The Money: Buying into the Ownership Society appeared first on The Big Picture.

The post Being a Reserve Currency Is Not a Zero-One Proposition appeared first on CEPR.

WTI Holds Gains After Across-The-Board Inventory Drawdowns

Oil reversed some of Tuesday’s decline as investors looked ahead to stockpile data and weighed the start of a higher US tariff on Indian goods in reprisal for the nation’s imports of Russian crude.

Brent nudged above $67 a barrel after falling more than 2% in the prior session, though prices have largely been stuck in a $5 band this month.

As Bloomberg reports, the US raised the tariff on some Indian goods to 50% on Wednesday - the highest levy applied to any Asian nation - to punish the country for buying Moscow’s oil. Still, processors plan to maintain the bulk of their purchases.

Traders continue to look ahead to an outlook for oversupply later in the year, said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management.

“There are also no signs that the increase in US tariffs on Indian goods from 25% to 50%, which took effect today as punishment for India’s purchases of Russian oil, has had any significant impact on global oil supply,” he said.

All eyes are now on this morning's official data after API reported a smaller than expected crude draw last week...

API

• Crude -974k (-1.7mm exp)

• Cushing

• Gasoline +2.06mm

• Distillates +1.49mm

DOE

• Crude -2.4mm (-1.7mm exp)

• Cushing -838k

• Gasoline -1.236mm

• Distillates -1.786mm

Official data showed a bigger than expected (and larger than API reported) crude draw. Additionally products saw inventory draws as stocks at the Cushing Hub tumbled for the first time in 8 weeks...

Source: Bloomberg

Despite a sizable 776k addition to the SPR (largest since May), US commercial crude stocks still fell for the second week in a row...

Source: Bloomberg

US Crude production hovered near record highs as the decline in rig counts has stalled...

Source: Bloomberg

WTI prices sustained their earlier gains after the bigger than expected crude draw...

Source: Bloomberg

Finally, Bloomberg reports that a key physical market flashed a sign of weakness on Tuesday.

In a North Sea pricing window that helps underpin benchmark futures prices, top traders lined up with eight offers of benchmark grades and no willing bidders.

One grade fell to near a two-month low and related swaps contracts also softened.

Tyler Durden Wed, 08/27/2025 - 10:42

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local Housing Markets in July and a Comment on July Sales from Tom Lawler

A brief excerpt:

After the National Association of Realtors® (NAR) releases the monthly existing home sales report, I pick up additional local market data that is reported after the NAR. This is the final look at local markets in July.

There were several key stories for July:

• Sales NSA are down YoY through July, and sales last year were the lowest since 1995!

• Sales SAAR (seasonally adjusted annual rate) have bounced around 4 million for the last 2 1/2 years.

• Months-of-supply is above pre-pandemic levels (this is the highest level for July since 2016).

• The median price is barely up YoY, and with the increases in inventory, some regional areas will see more price declines - and we might see national price declines later this year (or in 2026)

Sales at 4.01 million on a Seasonally Adjusted Annual Rate (SAAR) basis were slightly above the consensus estimate.

Sales averaged close to 5.40 million SAAR for the month of July in the 2017-2019 period. So, sales are about 26% below pre-pandemic levels.
...
In July, sales in these markets were down 0.6% YoY NSA. Last month, in June, these same markets were also up 4.9% YoY Not Seasonally Adjusted (NSA). The NAR reported sales in July were down 0.5% YoY NSA, so this sample is very close.

Important: There were the same number of working days in July 2025 (22) as in July 2024 (22). So, the year-over-year change in the headline SA data was similar to the NSA data.
...
More local data coming in September for activity in August!

There is much more in the article.

Futures Flat, Dollar Jumps Ahead Of Nvidia's Critical Earnings

Futures are flat with all eyes on NVDA - the largest S&P component by far accounting for a record 8% of the S&P - set to report after the bell. As of 8:00am, S&P futures are just barely in the green recovering from a modest loss earlier, while Nasdaq futures gain 0.1%, with NVDA up +54bps premarket, tracking most of the Mag7 higher and Semis also bid. Cyclicals are mixed (Industrials up, Fins down) with Defensives mostly higher. The yield curve is twisting steeper but with a lesser magnitude to yesterday: bonds steadied after long-dated debt from the US to France and the UK retreated Tuesday, with the yield on 10-year Treasuries little changed at 4.27%. $70 billion of 5Y notes will be auctioned at 1pm ET; yesterday’s 2Y auction saw strong demand closing 1.5bp through. The USD jumps to the highest since Friday's Jackson Hole dovish pivot, with the Euro sliding to a 3 week low as attention turns to the political mess in Europe, and gold continues to trade rangebound. The market’s focus is on NVDA today (our preview is here).

In premarket trading, Mag 7 stocks are mixed (Nvidia +0.6%, Microsoft +0.2%, Tesla +0.1%, Apple little changed, Amazon little changed, Meta -0.2%, Alphabet -0.3%).

• Elanco Animal Health (ELAN) gains 4.9% with the company to replace Sarepta Therapeutics in the S&P MidCap 400 effective Sept. 2.
• MongoDB (MDB) shares soar 31% after the software company reported second-quarter results that were much stronger than expected. It also raised its full-year forecast.
• nCino (NCNO) gains 11% after reporting adjusted earnings per share for the second quarter that beat the average analyst estimate.
• Okta (OKTA) is up 5.4% after the software company reported second-quarter results that beat expectations and raised its full-year forecast.

There’s been plenty to rattle markets in recent days, including French political turmoil and the Trump administration’s attacks on the Fed, as well as fresh tariff threats. But investors are now focusing on Nvidia’s earnings, due after the bell (our full preview is here). The chipmaking giant is expected to provide clues on the sustainability of massive AI spending, and how the US-China rivalry is limiting growth. Options currently imply a 6.1% swing in the stock, which would represent a move of roughly $270 billion in either direction in market value, larger than about 95% of the S&P 500 companies.

“Nvidia is the story of the week. We’ve seen some erosion of the AI premium, so this is an important number to determine whether the AI story has got further to go,” said Guy Miller, chief strategist at Zurich Insurance Group. “This could either allow the technology cycle, the AI dream, to continue, or it could get significantly dented.”

Dimming the excitement is uncertainty over how much business Nvidia will be able to do in China. The US government has curbed China’s access to Nvidia products on national security grounds. While the Trump administration recently eased some of those export restrictions, Beijing has pressed domestic customers to seek alternative suppliers. 

“A miss could spark meaningful volatility, while a positive surprise would likely see the major indexes make a run at all-time highs,” said Tom Essaye at The Sevens Report. 

Elsewhere, in a reminder of the lingering tariff threat to global trade and inflation, Trump’s 50% levy on most Indian imports took effect Wednesday, penalizing the country for buying Russian oil. In Europe, the EU aims to fast-track legislation by the end of the week to scrap all tariffs on US industrial goods — a Trump demand before Washington lowers duties on the bloc’s car exports.

In Europe, The Stoxx 600 is steady after giving up earlier gains. The CAC 40 outperforms with a 0.4% rise even as the OAT-bund spreads widens slightly.

Earlier in the session, Asian stocks declined, weighed down by a sudden drop in Chinese equities, as an absence of new reasons to buy paved the way for profit-taking. The MSCI Asia Pacific Index slipped as much as 1.1%, with Tencent, Woolworths Group and Meituan the biggest drags on the gauge. Major equity indexes in the region were mixed, with those in China and Hong Kong dropping, while the Philippines and Taiwan were among the top gainers. Chinese equities slid in the afternoon session, reversing an earlier advance. One reason for the reversal may have been the fact that chipmaker Cambricon Technologies Corp. briefly became the country’s most expensive onshore stock, which then triggered some profit taking. Chinese officials are seeking to manage bubble risks as the rally extends. Sinolink Securities Co. raised its margin deposit ratio for new client financing to 100%, becoming the first broker to introduce tightening measures amid surging interest in stocks.

In FX, the Bloomberg Dollar Spot Index is up 0.3% as the greenback strengthens versus its G-10 peers. The kiwi is the weakest, falling 0.5% while the Canadian dollar is the most resilient, slipping just 0.1%.

In rates, the Treasury curve steepens further following Tuesday’s front-end rally, stoked in part by strong demand for 2-year note auction. However, new 2-year note’s yield dipped below 3.65%, the lowest for the tenor since early May. Supply cycle continues with $70 billion auction of 5-year notes, the largest of the seven nominal coupon sales, at 1 p.m. New York time. Yields are within 1bp of Tuesday’s closing levels; the 10-year near 4.27%; swap contracts linked to future Fed rate decisions continue to fully price in one quarter-point rate cut this year in October and a second one by year-end.

In commodities, WTI crude futures fall 0.4% to $63 a barrel. Spot gold drops $12. Bitcoin is down 0.5%.

US economic data calendar is blank; second estimate of 2Q GDP is ahead Thursday, July personal income and spending (includes PCE price indexes) Friday. Fed speaker slate includes Richmond Fed President Barkin repeating his Aug. 12 remarks on the economy (time TBD). Nvidia’s earnings after the US close will be the main highlight. 

Market Snapshot

• S&P 500 mini little changed
• Nasdaq 100 mini little changed
• Russell 2000 mini -0.1%
• Stoxx Europe 600 little changed
• DAX -0.3%
• CAC 40 +0.2%
• 10-year Treasury yield little changed at 4.26%
• VIX +0.2 points at 14.77
• Bloomberg Dollar Index +0.3% at 1208.98
• euro -0.4% at $1.159
• WTI crude -0.4% at $63.01/barrel

Top Overnight News

• New tariffs on Indian goods, the highest in Asia, took effect at 12:01 a.m. in Washington on Wednesday, doubling the existing 25% duty on Indian exports: BBG 
• Cracker Barrel said it is reverting to its “Old Timer” logo after a rebrand ignited a culture war. “We said we would listen, and we have. Our new logo is going away and our ‘Old Timer’ will remain,” the company said Tuesday. Cracker Barrel’s shares jumped more than 9% in after-hours trading.
• Musk’s Starship carries out successful space mission after multiple failures. Giant SpaceX rocket’s 10th test flight deploys dummy satellites and reinforces billionaire’s dominance of commercial space flight: FT
• Exxon Mobil Corp. held talks with Russia’s state-controlled oil company about returning to its Sakhalin-1 oil development: WSJ
• Commerce Secretary Howard Lutnick sparked a minor rally in shares of defense contractors with his suggestion that the US might take ownership stakes in some of them, even as industry analysts warned the idea poses serious conflict-of-interest concerns: CNBC
• Why the Democrats are losing post-industrial America. Former steel town of Bethlehem, Pennsylvania will be crucial battleground in next year’s midterms and the 2028 White House race: FT
• US offers air and intelligence support to postwar force in Ukraine. Washington prepared to contribute surveillance, command and control and air defence assets, say European officials: FT
• China’s industrial companies saw their profits fall at a slower pace in July, with industrial profits declining 1.5% last month from a year earlier, Bloomberg Economics had forecast a decline of 5.8%: BBG
• Cambricon Technologies Corp. swung to a record profit in the first half, reflecting a wave of demand for Chinese chips after Beijing encouraged the use of homegrown technology in a post-DeepSeek AI boom: BBG
• Ukraine to allow young men to leave the country. Change to border rules aims to address high number of males being sent abroad by their parents before they reach 18: FT
• Microsoft Investigating Employees After Gaza Protest Locks Down Building. The tech company is weighing disciplinary measures for employees who occupied President Brad Smith’s office in protest of Microsoft’s relationship with the Israeli government during its war in Gaza: WSJ
• America’s most senior envoy in Pakistan has told the South Asian nation that US companies are showing “strong interest” in its oil and gas sector: BBG
• French assets hit by prospect of government collapse. Investors warn government is likely to lose a snap confidence vote on September 8: FT
• Trump media group in $6bn deal to buy Crypto.com tokens. Venture will be the ‘first and largest publicly traded CRO treasury company’: FT
• US tariff threat over Indian imports of Russian oil could backfire. If New Delhi reduced its purchases to zero, oil prices and inflation would jump: FT

Top Corporate News

• Royal Bank of Canada beat estimates on strong performance across its biggest businesses and as the firm set aside less money than expected to cover possible loan losses, a rebound from notable misses on credit earlier this year.
• Newmont Corp., the world’s largest gold miner, is studying plans to drive down costs that could lead to deep job cuts.
• MongoDB Inc. soared 29% in premarket trading after the software company reported second-quarter results well above expectations and significantly raised its forecast, with analysts at Citi calling the report a “blowout” that showed a strong AI contribution.
• Cracker Barrel Old Country Store Inc. said it’s getting rid of a new logo that had sparked controversy and prompted a slump in its share price.
• Meituan’s profit got wiped out in a price-based battle with rivals Alibaba Group Holding Ltd. and JD.com Inc., the most striking sign yet that its longstanding dominance in a lucrative home market is under threat.
• Nikon Corp.’s shares surged 21% after Bloomberg reported that EssilorLuxottica SA, the maker of Ray-Ban sunglasses, is exploring a potential deal to increase its stake in the Japanese optical equipment manufacturer.
• Rio Tinto Group’s new chief executive officer has combined some of its biggest businesses as he looks to simplify the world’s No. 2 miner.
• Vitol Group is set to load the first cargo of Syrian crude oil since the lifting of western sanctions on Damascus as the country’s energy industry attempts to recover of more than a decade of destruction from armed conflict.

Trade/Tariffs

• US President Trump is considering quickly announcing a nominee to replace Fed Governor Cook with Stephen Miran and former World Bank President Malpass potential candidates, according to WSJ citing sources.
• US Senate panel is preparing to hold a hearing next week on Trump's Fed pick Stephen Miran for the seat vacated by former Fed governor Kugler.
• The Trump administration is reviewing options for exerting more influence over the Federal Reserve’s 12 regional banks that would potentially extend its reach beyond personnel appointments in Washington, according to Bloomberg citing sources.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly in the green but with trade rangebound amid recent Fed independence concerns and as participants braced for NVIDIA's earnings. ASX 200 was kept afloat amid outperformance in the mining and materials industries, although gains are capped by heavy losses in consumer staples and tech, with supermarket operator Woolworths suffering a double-digit percentage drop after it reported a 19% decline in profits. Nikkei 225 traded indecisively, swinging between gains and losses before eventually recovering on currency weakness. Hang Seng and Shanghai Comp lacked firm conviction as the focus turns to earnings releases with the big banks set to report tomorrow, while participants are also awaiting the resumption of US-China talks later in the week.

Top Asian News

• Chinese Commerce Ministry official Sheng Qiuping said China is to announce policies to broaden services consumption in September.
• Mitsubishi Motor (7211 JT) cuts guidance (JPY): net seen at 10bln (prev. 40bln); operating at 70bln (prev. 100bln), recurring 60bln (prev. 90bln); Co. cites US tariffs, decline in sales volume, increase in selling expenses, competition, inflation.

European bourses (STOXX 600 U/C) opened modestly firmer across the board, but sentiment did dip a little bit off best levels to currently show a mixed picture. European sectors hold a slight positive bias. Consumer Products takes the top spot joined thereafter by Healthcare whilst Banks lag; the latter pressured by Commerzbank (-2.6%) and Deutsche Bank (-2.5%) after the pair received broker downgrades.

Top European News

• UK's Ofgem raises energy price cap by 2% for Oct-Dec (vs exp. 1% by forecaster Cornwall Insight).
• EU is preparing emergency measures to support the ailing aluminium industry amid recycling plants in the bloc shutting down capacity due to US producers paying more for European scrap metal, according to FT.
• SNB's Martin said the SNB does not see a risk of deflationary developments and forecasts show a jump in inflation in coming quarters, adds inflation dynamics in Switzerland should not be dramatically disrupted by recent dollar movements. Martin added the current Swiss franc value is more due to dollar weakness than franc strength, but forex market interventions may be necessary to ensure price stability. The SNB currently has no reason to increase or reduce gold holdings. The bar for taking rates into negative territory is higher than for cutting rates when above zero.
• UK ONS said June 2025 Producer output Price inflation estimated to be -1.0% Y/Y.

FX

• DXY is on a firmer footing and continuing to gain this morning amid a weaker EUR (see below) and following the prior day's marginal losses owing to Fed independence concerns after President Trump moved to fire Fed Governor Cook who will be challenging the attempt in court. On top of that, it was also reported that the Trump administration is reviewing options for exerting more influence over the Federal Reserve’s regional banks that would potentially extend its reach beyond personnel appointments in Washington. DXY trades in a 98.24-98.70 range.
• EUR/USD pared recent gains amid a lack of fresh catalysts from the bloc and with France facing political uncertainty. Losses accumulated for the EUR despite a lack of headlines around the European equity open, with market contacts noting of potential stops tripped under 1.1600 after the pair found support near the level in the prior two session. German GfK Consumer Sentiment did little to sway the EUR at the time, which printed below expectations. EUR/USD currently sits in a 1.1578-1.1651 range.
• USD/JPY steadily advanced towards the 148.00 handle as the dollar regained poise with newsflow on the lighter end, but the pair influenced by a rebound in the Buck. USD/JPY trades in a 147.29-147.97 range.
• GBP is softer amid the firmer Dollar but losses cushioned by a weaker EUR. On the inflation front, UK's Ofgem raises energy price cap by 2% for Oct-Dec (vs exp. 1% by forecaster Cornwall Insight). The price cap limits the amount suppliers can charge per unit of energy and is revised every three months. Cable trades in a 1.3431-1.3482 parameter and sandwiched between its 50 DMA (1.3493) and 100 DMA (1.3436).
• AUD/USD failed to sustain the initial knee-jerk uplift seen following hot Monthly CPI data and stronger-than-expected Construction Work which feeds into Australia's GDP data.
• PBoC set USD/CNY mid-point at 7.1108 vs exp. 7.1559 (Prev. 7.1188)

Fixed Income

• USTs traded with a negative bias earlier but caught a slight bid as the risk tone deteriorated a touch; in a very narrow 112-02+ to 112-06+ range. Price action overnight was lacklustre, as US paper took a breather following the bull steepening seen on Tuesday, spurred by US President Trump’s move to oust Fed Governor Cook. Today’s session has seen yields rise across the curve, generally to a similar degree. Recent newsflow has not really had too much of an impact on price action today; US President Trump is considering quickly announcing a nominee to replace Fed Governor Cook with Stephen Miran and former World Bank President Malpass potential candidates, according to WSJ citing sources.
• Bunds are outperforming vs peers; initial trade was sloppy in-fitting with global peers but has recently picked up a little to trade higher by a handful of ticks. Currently trading at the upper end of a 129.33 to 129.71 range. The docket is void of any pertinent European data/ECB speakers. German GfK earlier saw sentiment drop a little from the prior, and more than expected. Germany's new 2032 line which was very weak, had little impact on price action.
• Gilt price action today has been dictated by global peers; initially opened lower amid the subdued trade seen in USTs/Bunds, but then reversed, but without a clear driver. Currently higher by around 17 ticks, and trades in a 90.26-62 range.
• UK sells GBP 5bln 4.375% 2028 Gilt: b/c 3.16x (prev. 3.71x), average yield 3.991% (prev. 3.941%) & tail 0.2bps (prev. 0.2bps).
• Germany sells EUR 2.675bln vs exp. EUR 4.0bln 2.50% 2032 Bund: b/c 1.2x, average yield 2.46% and retention 33.13%.

Commodities

• Crude futures have tilted lower following a flat overnight session and after retreating throughout the prior day and with demand not helped by the narrower-than-expected headline crude draw in private sector inventory data, while there were also bearish views on oil including from US President Trump who thinks oil will fall beneath the USD 60/bbl level soon and with Goldman Sachs forecasting Brent to decline to the low USD 50s by late 2026. WTI currently resides in a 62.99-63.46/bbl range while Brent sits in a USD 66.40-66.91/bbl range.
• Spot gold pulled back from near the USD 3,400/oz level after advancing yesterday amid a softer dollar. The yellow metal has been unfazed by the recent bout of Dollar strength, suggesting deteriorating risk across the market. Spot gold trades in a USD 3,373.78-3,393.55/oz parameter within Tuesday's 3,351.33-3,393.75/oz range.
• Softer trade across base metals amid the deteriorating risk and broader Dollar strength. 3M LME copper resides in a USD 9,785.00-9,865.00/t range.
• US President Trump thinks oil prices will break below USD 60/bbl soon.
• US Private Energy Inventories (bbls): Crude -1.0mln (exp. -1.9mln), Distillate -1.5mln (exp. +0.9mln), Gasoline -2.1mln (exp. -2.2mln), Cushing -0.5mln.
• Kazakhstan holds talks to resume oil transit via BTC, according to Tass citing the energy ministry; oil supplies to Europe are proceeding without delays.
• Two Chinese investors are interested in taking a stake in Vietnam’s largest tungsten business, via Reuters citing sources.
• Ukraine's Energy Ministry said Russia attacked energy and gas transit infrastructure in six Ukrainian regions overnight.

Geopolitics - Middle East

• US special envoy Witkoff said they are negotiating multiple entries into peace accords with Israel, while Witkoff said President Trump will chair a meeting on Gaza at the White House on Wednesday.
• US Secretary of State Rubio is to meet with Israeli Foreign Minister Sa'ar at the State Department on Wednesday.
• Hamas said all Palestinians killed by Israel in Gaza’s Nasser Hospital attack on Monday were civilians and that two of the six Palestinians identified by Israel as alleged militants were killed in separate attacks away from the hospital.
• WSJ's Norman posts "If SnapBack happens this week, very strong odds it happens tomorrow"; in relation to the Iranian snapback mechanism. "If no SnapBack, either things change dramatically or extension. Odds of dropping SnapBack without extension are tiny at this point. There is still a very real possibility that SnapBack triggered but extension agreed during 30-day process. Depends on Iran".

Geopolitics - Ukraine

• US special envoy Witkoff said he is meeting with Ukrainians in New York this week and that Russian President Putin made a good-faith effort to engage.
• "Moscow: No agreement yet to upgrade the level of Russian and Ukrainian negotiating delegations", according to Al Arabiya.
• Ukrainian President Zelensky said Russians are currently sending negative signals regarding meetings and further developments.

US Event Calendar

• 7:00 am: Aug 22 MBA Mortgage Applications -0.5%, prior -1.4%

DB's Jim Reid concludes the overnight wrap

Markets had a very eventful session yesterday, as concerns mounted about the Federal Reserve’s independence, whilst French assets came under fresh pressure ahead of the upcoming confidence vote. So that led to some pretty big milestones, and with investors pricing in faster rate cuts, the US 2yr inflation swap rose to 3.05%, marking its highest level since late-2022 when inflation was still above 6% and the Fed were hiking aggressively. Meanwhile in Europe, the reappraisal of sovereign risk meant that the 10yr French yield closed just 6bps above its Italian counterpart, which is the smallest gap between the two since 2003. So that’s a huge turnaround relative to most of the period since the Euro Crisis, as the spread between the two never fell beneath 50bps until late last year. Bear in mind we’ve also got Nvidia’s earnings after the US close tonight, so there’s plenty on the agenda right now. 

We’ll start with the Fed, as investors are watching closely after President Trump’s letter on Monday night that he was removing Lisa Cook from the Board of Governors “effective immediately”. In terms of the latest, Cook’s lawyer, Abbe David Lowell, said yesterday that they would be filing a lawsuit challenging the firing. And later in the day, the Fed issued a statement reiterating that Fed governors “may be removed by the president only “for cause””, but that the Fed would “abide by any court decision” resulting from Cook’s challenge. 

The move comes as President Trump is seeking to reshape the Federal Reserve in his direction, and yesterday he commented how “We’ll have a majority, very shortly so that’ll be great once we have a majority, and housing is going to swing and it’s going to be great”. Indeed, of the seven currently on the Board of Governors, two of the appointees from President Trump’s first term (Bowman and Waller) have already dissented in favour of rate cuts, and CEA Chair Stephen Miran has been nominated to fill Adriana Kugler’s old seat. So if Cook were replaced as well, then a majority of the Board could be in favour of rate cuts after Miran’s appointment, even before Chair Powell’s term comes to an end.
Later on, multiple press reports added to this theme. For instance, the WSJ reported that President Trump was considering quickly announcing a replacement for Cook, with former World Bank President David Malpass being one candidate whom President Trump had discussed. Interestingly, Bloomberg separately reported that the administration was looking at ways to have more influence over the Fed’s 12 regional banks, which is important given that 5 of the 12 regional bank Presidents sit on the FOMC at a given time. This is particularly noteworthy at the moment, because every five years, the 12 regional bank presidents come up for approval by the Board of Governors. The next five-year approval is slated for Q1 next year, and theoretically a majority could refuse to approve some of the regional voters.

Our US economists looked in more depth at some of these issues in a note yesterday (link here ). They don’t anticipate a titanic shift in near-term policy, as Cook had been one of the most dovish officials on the Committee already. However, there could be broader implications for the Fed, as it only takes a majority of the Board of Governors (rather than the wider FOMC that also includes 5 of the regional Fed Presidents) to adjust the interest rate on reserve balances (IORB). Historically, the IORB has been set at an appropriate level to maintain the fed funds rate within the target set by the FOMC. But at least theoretically, a Board that didn’t agree with the FOMC could set IORB at a lower level.

For now at least, markets have reacted broadly in line with other episodes where the Fed’s independence has been questioned this year. So we saw a significant yield curve steepening yesterday, with the 2yr yield (-4.5bps) down to 3.68% (helped by a strong auction), the 10yr yield (-1.4bps) down to 4.26%, and the 30yr yield (+3.0bps) moving up to 4.92%. Indeed, for the 2s30s curve, that’s now the steepest it’s been since January 2022. Those moves came as investors priced in a more dovish path for near-term policy, with futures dialling up the expected rate cuts over the months ahead. For example, 109bps of cuts were priced in by the June 2026 meeting at the close, up +5.3bps on the day. So that helped put downward pressure on the dollar index, which weakened by -0.21%, whilst the prospect of more inflation helped push gold prices up +0.82%.

Interestingly, equities advanced despite the news, with the S&P 500 (+0.41%) closing just -0.04% beneath its record high. In part, that was because investors were still unsure if there’d actually be a radical policy shift at the Fed. But several data points also helped to support risk appetite, as they leant against the idea that the US economy was slowing down, particularly after the recent jobs report. For example, the Conference Board’s consumer confidence reading was better than expected in August, at 97.4 (vs. 96.5 expected). Similarly, core capital goods orders were up +1.1% in July (vs. +0.2% expected), and the Richmond Fed’s manufacturing index moved up to -7 (vs. -11 expected).

Over in Europe, however, it was a very different story as fears continued to mount about the fiscal situation in France. As a reminder, Prime Minister Bayrou has called a confidence vote for September 8, but the National Rally, France Unbowed and the Socialists have all said they’ll oppose the government. So as it stands, the government would fall, and that would open the way for a new PM, or even fresh legislative elections. So that’s reinforced existing concerns about France’s deficit, and the country’s assets saw a clear underperformance yesterday. 

Those moves were evident across the board. For instance, France’s CAC 40 (-1.70%) built on its -1.59% decline on the Monday, with banks including Société Générale (-6.84%), Crédit Agricole (-5.44%) and BNP Paribas (-4.23%) seeing even bigger losses. That outpaced the Europe-wide STOXX 600 (-0.83%), and means the CAC 40 is now up just +4.46% this year, making it one of the worst performers among the major equity indices in local currency terms. Likewise for sovereign bonds, French 10yr yields were only down -1.1bps, compared with larger falls for bunds (-3.4bps) and OATs (-3.8bps). So by the close, the Franco-German 10yr spread was up to 78bps, which is its widest since April. And significantly, the French 10yr yield closed just 6bps beneath its Italian counterpart, which is the tightest it’s been since 2003.   

Elsewhere in Europe, UK markets returned from their public holiday on Monday, with 10yr gilt yields up +4.9bps as they caught up with Monday’s moves elsewhere. We also heard from the BoE’s Mann, who was one of four members on the MPC (out of nine) who voted against a cut at the recent meeting. She said that a “more persistent hold on Bank Rate is appropriate right now”, and investors remain sceptical that there’ll be another rate cut this year. Indeed, the likelihood of another rate cut by the December meeting fell to 42% by the close, down from 48% the day before.

Overnight in Asia, the mood has generally remained positive, with investors turning their focus to Nvidia’s earnings later today. So that’s meant that most of the major equity indices are trading higher, and the CSI 300 (+0.72%) is currently on track for its highest closing level since 2022. Elsewhere, there’ve been more modest gains, including for the Shanghai Comp (+0.33%), the Hang Seng (+0.06%), the Nikkei (+0.36%), and the KOSPI (+0.11%). And US equity futures are also pointing slightly higher, with those on the S&P 500 (+0.07%) up enough to push the index to a new record if realised.

Elsewhere this morning, data has also shown an unexpectedly large jump in Australia’s inflation, with CPI up to +2.8% in July (vs. +2.3% expected). Moreover, the trimmed mean measure also moved up to +2.7%, having been at +2.1% in June. That’s the highest headline inflation in 12 months, and investors have dialled back the likelihood of a rate cut at the RBA’s next meeting in response, with the probability of a cut now down to 22%.

To the day ahead now, and it’s a quiet one on the calendar. Nvidia’s earnings after the US close will be the main highlight. Otherwise, data releases include the GfK consumer confidence reading from Germany. 

Tyler Durden Wed, 08/27/2025 - 08:51

Illegal-Alien-Protecting Judge Suffers Key Loss With Rejection Of Her Judicial Immunity Claim

Authored by Jonathan Turley,

We have previously discussed the lack of a credible defense for Milwaukee County Judge Hannah Dugan, who has been charged with facilitating the escape of an undocumented man being sought by federal officers in her courthouse. Indeed, despite having high-powered lawyers such as Paul Clement,  her recent social media posts seem more like a pitch for jury nullification. One bright spot for Dugan was that she was assigned to U.S. District Judge Lynn Adelman, a liberal Democrat who has run for prior office and has been accused of bias on the bench.

However, Judge Adelman just delivered a blow to the defense by rejecting Dugan’s claim that she had judicial immunity in taking her actions.

According to the criminal complaint, a six-person arrest team (including an ICE officer, a Customs and Border Protection officer, two FBI special agents, and two DEA agents) came to the courthouse to arrest Eduardo Flores-Ruiz, a Mexican immigrant facing three misdemeanor battery counts they intended to deport.

He is accused of hitting someone 30 times during a fight that erupted over complaints that his music was too loud and assaulting three separate individuals, the Milwaukee Journal Sentinel reported.

Flores-Ruiz was previously deported and then entered again illegally, a federal felony. He was issued an I-860 Notice and Order of Expedited Removal on January 16, 2013, and Flores-Ruiz was “removed to Mexico through the Nogales, Arizona, port of entry.” Not only is reentry a felony but when there is an order of expedited removal, you can be deported without any further court hearing.

After facilitating his escape, Dugan was later arrested and charged with obstructing or impeding a proceeding (18 U.S.C. 1505) and concealing an individual to prevent his arrest (18 U.S.C. 1071).

Calls for resistance and even replication have also come from colleagues on the bench. Monica Isham, a circuit judge in Sawyer County, not only defended Judge Hannah Dugan in an email to other state judges but added that she “has no intention of allowing anyone to be taken out of my courtroom by [Immigration and Customs Enforcement agents] and sent to a concentration camp.”

Recently, Dugan went public with an interview that notably lacked any discernible defense, other than stating that she helps defendants use the “backdoor” when she considers circumstances that “warrant it.”

Judge Adelman ruled on that:

“Ultimately, as the Supreme Court has stated, ‘the official seeking absolute immunity bears the burden of showing that such immunity is justified for the function in question.’ I cannot say as a matter of law that the defendant’s alleged conduct falls within even this more limited version of immunity…There is no basis for granting immunity simply because some of the allegations in the indictment describe conduct that could be considered ‘part of a judge’s job.’”

The lack of any cognizable claim in Dugan’s public pitch suggests that she might be hoping for a juror to simply vote to acquit as a visceral or political statement.

This is a liberal jury pool where jury nullification must be a concern for prosecutors even though such an argument cannot be made overtly by the defense to the jurors.

Tyler Durden Wed, 08/27/2025 - 08:50

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 22, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week and was 19 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 0.1 percent compared with the previous week and was 25 percent higher than the same week one year ago.

“Mortgage rates inched higher for the second straight week, with the 30-year fixed-rate up to 6.69 percent. While this was not a significant increase, it was enough to cause a pullback in refinance applications,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications had their strongest week in over a month, up 2 percent, and the average loan size increased to its highest level in two months at $433,400. Prospective buyers appear to be less sensitive to rates at these levels and are more active, bolstered by more inventory and cooling home-price growth in many parts of the country.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.69 percent from 6.68 percent, with points remaining unchanged at 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 25% year-over-year unadjusted. 
Red is a four-week average (blue is weekly).  
Purchase application activity is still depressed, but above the lows of October 2023 and slightly above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index decreased after picking up a little recently with lower mortgage rates.

Trump Mulls Travel Ban for EU Officials Over 'Orwellian' Censorship Law

President Donald Trump is weighing a travel ban on European Union officials behind the bloc’s Digital Services Act (DSA), a sweeping online regulation that the White House claims is designed to censor Americans.

According to sources familiar with the matter cited by Reuters, the State Department is considering visa restrictions targeting senior EU policymakers responsible for the legislation. A decision hasn’t been made, but discussions inside the administration intensified after a high-level meeting last week. 

The move would directly punish foreign officials for domestic policies Washington says undermine U.S. free speech rights.

The EU’s DSA aims to compel tech giants to crack down on illegal content, but the Trump administration argues the policy amounts to government-driven censorship, accusing Brussels of forcing U.S. companies to muzzle American users under the guise of combating misinformation.

“We are monitoring increasing censorship in Europe with great concern but have no further information to provide at this time” a State Department spokesman told the Telegraph. 

An EU Commission spokesman fired back, rejecting the claims as “completely unfounded,” insisting that the DSA "sets out rules for online intermediaries to tackle illegal content, while safeguarding freedom of expression and information online." 

Tariffs, Tech, and Tensions

Relations between the Trump administration and the EU have grown increasingly strained, fueled by threats of tariffs and disputes over tech regulation.

Reports earlier this month revealed the U.S. government urged European diplomats to lobby against the DSA, intensifying a battle over who sets the rules for online speech.

Secretary of State Marco Rubio has previously threatened visa bans for people who censor speech by Americans, including on social media, suggesting the policy could directly target foreign officials regulating U.S. tech companies.

Vice President JD Vance has also repeatedly slammed European regulators, accusing them of “censoring” Americans. In a speech at the Munich Security Conference in February, he accused EU leaders of suppressing the speech of groups such as Germany’s Right-wing AfD party.

UK’s 'Orwellian' Online Safety Act

Tensions aren’t limited to Brussels. The Trump administration has also targeted the UK’s Online Safety Act, calling it “Orwellian.”

During Trump’s visit to Scotland last month, British Prime Minister Keir Starmer defended the legislation, insisting London remains committed to protecting free speech while tackling online harms.

The debate is expected to intensify next month when Nigel Farage testifies before Congress on threats to free expression in Britain. Farage is set to highlight the case of Lucy Connolly, who was jailed for 31 months over a social media post related to the Southport attacks, before being released earlier this month.

Lucy Connolly with her husband Ray. Mrs Connolly was jailed after a social media post Credit: Heathcliff O'Malley for the Telegraph

For now, no sanctions have been formally imposed. But if the administration follows through, it would represent a historic clash between Washington and Brussels over free speech, tech regulation, and sovereignty.

Tyler Durden Wed, 08/27/2025 - 05:45

Ukraine Belatedly Confirms Russian Troops Have Breached Central Oblast & Industrial Heartland

Several more villages fell to the Russian army in Donetsk at the end of last week, and the battlefield momentum has continued into Tuesday, as Ukraine has acknowledged for the first time that Russian troops have entered the neighboring Dnipropetrovsk region.

Dnipropetrovsk is a central oblast which has long been spared from the main fighting. Russian forces have penetrated this strategic area, which suggests the war is still expanding, significantly beyond the annexed four territories. It is known as the industrial heartland and key production hub of the country.

City of Dnipro, Ukraine. via World Atlas

"Yes, they have entered, and fighting is ongoing as of now," a Ukrainian military spokesman for the Dnipro Operational Strategic Group of Forces told AFP.

Moscow had first announced it breached the region back in July, but Ukrainian officials had not acknowledged it until this week. Russia also says it has fully captured the villages of Zaporizke and Novogeorgiivka - something which Ukraine's military leadership is disputing.

But Reuters is confirming, writing, "Russia has captured two villages in Ukraine's southeastern Dnipropetrovsk region, Ukrainian open-source researchers confirmed on Tuesday, as Kremlin troops press an offensive amid a stalling diplomatic effort to end the war."

"Ukraine's outmanned and outgunned military has struggled to fend off grinding Russian advances in much of the east as Moscow increases pressure on Kyiv to give up territory in any peace negotiations," the report adds.

All that the exhausted Ukrainian military can do at this point is keep sending drones into Russian territory. This again happened overnight as Ukraine's special forces attacked logistical facilities in Crimea.

A Ukrainian military statement said facilities "that ensure the functioning and combat supply of the military units of the Russian army" were damaged and put out of commission.

President Trump is meanwhile still trying to strike a tone of cautious optimism when it comes to peace talks. On Monday he had confirmed speaking again with President Vladimir Putin.

"Every conversation I have with him is a good conversation. And then, unfortunately, a bomb is loaded up into Kyiv or someplace, and I get very angry about it," Trump told reporters.

Russian forces have seized control of two villages in Ukraine's Dnipropetrovsk oblast – Zaporizke and Novoheorhiivka – making them the first villages in that region to fall to Russia, according to the Ukrainian war tracking group @Deepstate_UA. pic.twitter.com/YPMzhFb69y

— Christopher Miller (@ChristopherJM) August 26, 2025

The White House still doesn't want to fully admit that Russia is winning the war, and that Kiev has no leverage. This means that realistically a swift ending would involve the US pressuring Zelensky to make serious compromises.

But by and large the Europeans are committed to seeing Ukraine stay in the fight. But this is a recipe for more death and destruction, and the war grinding on toward possible escalation with NATO.

Tyler Durden Wed, 08/27/2025 - 02:45

German Schools 'Dealing With Hell' Due To Mass Migration

Via Remix News,

German schools are dealing with “hell.”

That’s the conclusion reached by Die Welt newspaper, as cited by Hungarian outlet Mandiner.

Based on numerous case studies, it is clear that “far too many children are being sent to school who can barely concentrate and, above all, who do not speak German.” 

Families, children, and teachers are suffering the consequences of the bad policies from politicians. In short, they “have failed.” One major issue is the death of the German language itself, across Germany. 

In the Hemshof district of Ludwigshafen, for example, barely a word of German is heard. The students in the district’s Gräfenau elementary school are 98 percent migrants.

Welt indicates that plenty of Asian, African, and Slavic languages present, but as Germany has become a nation of migrants, the German language recedes.

“Italian, Greek, Turkish guest workers since the 1960s, and since 2015, the rest of the world,” Die Welt writes about the progression of immigration waves in the country.  

The school principal in the Hemshof district, Barbara Mächtle, has been vocal about the issues. 

For example, some 40 first-year students, a third of the year, may not be ready to enter the second grade. According to the newspaper, Mächtle “knows the tricks to cover this up, but he doesn’t use them.” For example, these children are enrolled in the second grade, but then “voluntarily drop out” on the first day of school. Machete refuses to play these games and will force these students to repeat the grade – “not to punish them, but to save them.”

Mächtle also dispels the illusion that being surrounded by German, migrant kids will “absorb it on their own.” She says there is no “language immersion” because children “hear everything except German.”

“No child here is swimming in German waters, they remain in their Arab, Turkish, Afghan pools,” and “at best they develop a basic slang, a German of 50-100 words, which is enough for the street and the schoolyard, but not for a profession that can be understood even partially,” Welt reports. 

And then there is the violence inflicting schools, which the paper calls a widespread fire, not just here or there. In 2024, the authorities registered 35,570 school violence incidents, an average of 97 per day; 743 of these involved a knife. Students also express their religion, Islam, “aggressively” in the classroom. As Remix News has reported, 40 percent of all violent crime in the German school system is from foreigners. In addition, many of the German students have a foreign background.

This has created a situation where teachers are expected to be social workers first, taking immense time away from their actual work as teachers. With these students, the parents are not doing their jobs in preparing children to behave properly in the classroom. 

It is no wonder teachers are leaving the field, and many are discouraged from entering, which is yet another major issue: a massive teacher shortage. 

In Germany, it is no longer possible to provide the current student population with trained teachers. In the countryside, people are not applying for teaching jobs, and in the cities, teachers cannot afford to pay the rent, so many people apply for teaching positions immediately after graduating, only to quickly fail.

“In the past 20 years, fourth-grade maths assignments were often purely text-based. Today, books are full of pictures to make understanding possible at all,” bemoans Andreas Baudisch, the principal of the Humboldt primary school in Mannheim.

“Basic operations are a great deal of work for many children. Many cannot formulate a complete sentence,” says the principal. There are some bright spots. Children from Indian families learn German better in four months than those born here because ‘they practice at home, they are interested in it,’ and this is something that is lacking in many other people who are second or third generation Germans living here.” 

Die Welt warns that no so long ago, these issues could only be found in troubled neighborhoods of Berlin, a situation that “horrified” people in the rest of the country.

“That’s over, Berlin is everywhere,” the paper writes.

Read more here...

Tyler Durden Wed, 08/27/2025 - 02:00