The monopoly round has a lot of content, as always. A judge recently gave Trump’s FCC Chairman Brendan Carr the middle finger and banned a large media conference, Israeli Defense Force soldiers are concerned about gambling with their military careers, and Australia has banned social media for children under 16 with dramatic results.
But before I get to the full circle, I want to focus on something obvious, but still important to point out. And that is, the historical supply shock caused by the war in Iran is causing the prices of all kinds of goods to rise. It also increases the cost of money by raising interest rates, sending financial markets into turmoil.
Many of the effects of this supply shock are negative, and global living standards will decline. But there is one point. Unlike previous financial crises, the wealthy and politically connected are not immune. For example, there is a decline in merger funding, which will destroy partnerships such as Paramount-Warner. And this fear is likely to discredit political leaders around the world, especially those associated with the man who started this war – Donald Trump.
And we are only at the beginning. Let’s dive in.
Every month, the University of Michigan releases customer feedback numbers. On Friday, the feeling comes out for the first time since the start of the Iran war. And it has shown the lows typically seen during a great recession. Joanne Hsu, director of research, noted that “the decline was seen across age groups and political parties,” and was particularly large among “middle- and upper-income and affluent consumers.” In fact, common people understand this war as bad for their pocket books.
And they expect price increases. Inflation expectations have risen, “from 3.4% in February to 3.8% this month, the largest one-month increase since April 2025.”
The community is right. Prices are going up.
20% of the world’s oil production, as well as large parts of gas, and fertilizers, come through the Strait of Hormuz. And that waterway is almost closed, there is a small fraction of normal traffic. And that hits America, even though the US has our own domestic supply of oil and gas. The price of gasoline, an oil product, rose by a dollar last month. So are diesels the rising of the clouds. These are important transportation costs, which go into everything that moves physically.
There are also cleaners that clean the oil and gas out of the fuel. Let’s start with something that is used in almost everything – plastics. On Tuesday, the chemical giant Dow published doubled the increase in the price of polyethylene resin in North America, contributing mainly to packaging, plastic bags, soap bottles, cups, jars, car fuel tanks, clear food packaging, synthetic fibers, etc. Everything from meat to fruit is wrapped in plastic. For the frame of reference, the world usage 600 billion plastic bottles for water alone.
Unplanned ingredients such as flame retardants are rising in price, ink manufacturers said they find is ready to raise what they charge, and the food company Ecolab se mountain climbing prices. Even the US Post Office has made history 8% electricity charge in packages.
Are price increases necessary? Maybe. But as we have seen in the case of Covid greedflation, it is also a good reason to make some profit. For example, the Dow jumped 6% when it announced the plastic price hike, and its stock is up 25% since the war. I think the Dow is holding its bullish end of its range for what is “necessary.”
Some of the price increases have nothing to do with Iran, but are done through the use of market forces.
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Netflix, which has clear market power, has recently raised its rates by $1/month for its advertising, and $2/month for its categories without advertising, which is more than 10% in total. Wall Street analysts called that they promote “good news” and “welcome relief for investors.” Video service subscription department of the Consumer Price Index increased by 15.2% last year.
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Utilities, with inflated prices in a strange way last year, and they continue to do so. Very few use oil directly, and most of the natural gas they use comes from the US.
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General electronics manufacturers I have been warning of 20% increase in price due to data center AI demand for memory chips. Sony is here now charge $650 for its PS5 gaming console, down from $550, due to higher DRAM prices. The critics are already here expect Nintendo and Microsoft to follow.
I think we’re going to see a lot more here, in informal areas like uniforms, security services, waste disposal, industrial emissions, and among economic ants throughout the economy.
Then there is the cost of money, or the interest rate, which is the key to Wall Street. Trump’s main economic policy has been to keep interest rates low, and they are in a real battle with the Federal Reserve over how to do that. The specific rate they care about is the 10-year Treasury note, the rate at which the government lends to investors over a ten-year period. That tool is, to follow to Trump’s Secretary of the Treasury, Scott Bessent, “it is probably the most important measure in the country, since mortgages and money creation depend on it.”
The Iran war has disrupted their strategy, with the 10-year yield jumping from 3.96% in late February to 4.42% on Friday. The results are just beginning. Loan rates have increased, the the cost of buying a home is higher, and as a result, mortgage applications are down. In financial markets, many shadow banks – Apollo Global Management Inc., BlackRock Inc. and Ares Management Corp – have told investors they would not get their money back. These companies often borrow money for acquisitions, which means the merger and acquisition market can be challenging.
Take one of our favorite blockbusters, Hollywood Studio Paramount’s attempt to buy Warner Brothers. The $110 billion deal was financed by Oracle billionaire Larry Ellison, a large amount of US private funds and banks, and the Saudis and Qataris. When Ellison made the first request, his net worth it was 388 billion dollars, which is an alarmingly high number. However, Oracle stock is already declining. He now has “only” $188 billion, a drop of more than half since last September, and a drop of $60 billion this year alone.
Ellison had it with He pledged 30% of his Oracle shares as collateral for loans for his luxury lifestyle, such as having different islands and large yachts, as well as the original purchase of Paramount. He pledged $40 billion to restore the Warner deal. In other words, the sponsors of Hollywood’s publicity – Larry Ellison, US private funds, and Arab investors – are all in financial trouble now. Will that derail the Warner deal?
Another way to determine whether investors think the sale will pass is to look at the difference between the stock’s price and the stock’s current market price. If the bidders are fully confident that the deal will close, there should be no difference. After all, if someone bids $10 for a stock and that’s a guaranteed price, why would anyone sell their stock for less than that? However, if there is concern that the deal will not close, investors will seek a discount. They can only pay $9 even though the fee is $10. In general, the bigger the discount, the less confidence closes.
When Paramount won the auction, the asking price was $31 but the stock was selling for $29. It’s a reasonable discount, enough to suggest that there is skepticism among arbitrage experts. Since the start of the Iran War, however, Warner’s stock has fallen to more than $27. Despite this significant discount, a whole host of insiders, including Warner CEO David Zazlov, have sold large parts of their property. It appears that Warner’s investors are not as confident that the deal closes as they say publicly.
Now, if that agreement cannot be closed, there are many things that will go wrong in terms of financial pipelines. So watch it carefully.
Like you, I feel overwhelmed at the moment. It is impossible to understand the full implications of the supply chain crisis and political change as we see it unfolding, and it is clearly still in its infancy. The Dow is down just 10%, while a similar supply shock in the 1970s led to a 50% drop. We haven’t seen deficits in America, deficits are starting to hit Asia and Europe. But they will be there Here in the near future.
However, the entire leadership team may be fundamentally criticized. of Trump net clearance value he is at a record low for his second term, but is still close to 40% approval and 60% disapproval, which are typical ranges for an unpopular Presidency. That’s about as bad as things get, his agency is on the run, and politics is getting weirder.
It is always possible to have some kind of peace. Or another angle I don’t see. But other than that, I’m not sure how an angry country responds to disrespectful leadership, a wounded Wall Street, millions of desperate people, and a struggling military. None of us had seen anything like it before.
Meanwhile, what are you noticing in your neck of the woods? Do you see prices changing? Are people still spending money? Are there jobs? What’s it like out there?
And now, the rest of the monopoly round-up. Many important stories. The judge gave the middle finger to Trump’s chief media officer, Brendan Carr, when Trump’s aggressive efforts to reward companies for blocking Jimmy Kimmel failed. It appears that this judge, at the urging of Democratic state attorneys general, may block the Nexstar-TEGNA merger. In other words, the Democrats really did something good and brave to deal with the power of business, and the judge responded well to it. Weird, I know.
Also, the Colorado House passed the first bill prohibiting the price of surveillance, Australia banned social media for children under 16, and courts nailed Meta and Google for poor product design. In less good news, the Fed allows Morgan Stanley to take $85 billion of taxpayer money and bet on it, Americans are obsessed with porn, and Trump now has some Democratic allies to pass bad AI laws. Oh and Israeli soldiers are now betting on war in the forecast markets.
Read more about this very strange time.
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