The benchmark for global food commodity prices rose for a third consecutive month in April, hitting its highest level since early 2023, as Middle East supply disruptions, elevated energy costs, and tightening supplies of certain agricultural products appear to be driving the next leg higher in global food prices.

This is a major risk we have warned about throughout the U.S.-Iran war, as energy and supply chain disruptions spread quickly through fertilizer, diesel, freight, biofuels, grains, and vegetable oils. We even treated readers to a special food debate late last week to examine how the conflict could produce a broader food-inflation shock later this year.

The United Nations’ Food and Agriculture Organization’s FAO Food Price Index, which tracks monthly changes in the international prices of a basket of globally traded food commodities, averaged 130.7 in April, up 1.6% from its revised March level and 2% higher than a year ago. This places the global food index at its highest level since February 2023.

The largest move in the food index came from vegetable oils, where prices jumped 5.9% to the highest level since July 2022. Palm, soy, rapeseed, and sunflower oils all rose, supported by stronger biofuel demand, higher crude prices, and tight Black Sea supplies.

“Despite the disruptions linked to the crisis in the Strait of Hormuz, global agrifood systems continue to show resilience. Cereal prices have increased only moderately so far, supported by relatively strong stocks and adequate supplies from previous seasons. Vegetable oils, however, are experiencing stronger price increases, driven largely by higher oil prices, which are increasing demand for biofuels and putting additional pressure on vegetable oil markets,” said FAO Chief Economist Máximo Torero.

Here is how the other subcomponents performed last month:

The FAO Cereal Price Index rose by 0.8 percent from March and was up 0.4 percent from a year ago, reflecting higher prices across major cereals, except sorghum and barley. World wheat prices increased by 0.8 percent, due to concerns over drought in parts of the United States of America and a higher likelihood of below-average rainfall in Australia. The increase was further reinforced by expectations of reduced wheat plantings in 2026, with farmers shifting to less fertilizer‑intensive crops amid high fertilizer prices – driven by elevated energy costs and disruptions associated with the effective closure of the Strait of Hormuz.

Global maize prices increased by 0.7 percent, underpinned by seasonally tighter supplies and weather-related concerns in Brazil, as well as dry conditions affecting sowing in parts of the United States of America. Additional upward pressure came from firm ethanol demand amid elevated crude oil prices and ongoing concerns over fertilizer affordability. By contrast, world sorghum prices dropped by 4.0 percent, largely due to weaker global import demand and improved supply prospects in key producing and exporting countries.

The FAO All Rice Price Index rose by 1.9 percent in April, driven by higher Indica and fragrant rice prices, reflecting increased production and marketing costs in most rice-exporting countries following the surge in the prices of crude oil and its derivatives.

The FAO Vegetable Oil Price Index increased by 5.9 percent from March, reaching its highest level since July 2022. The rise was driven by higher prices of palm, soy, sunflower and rapeseed oils. International palm oil prices rose for the fifth consecutive month in April, largely underpinned by prospective stronger demand from the biofuel sector, supported by policy incentives in several producing countries and higher crude oil prices. Additional upward pressure stemmed from concerns over lower production in Southeast Asia in the coming months.

The FAO Meat Price Index reached a new record high in April, rising by 1.2 percent from March and 6.4 percent from a year ago. World bovine meat prices climbed to a new peak, underpinned by higher export quotations in Brazil amid limited supplies of slaughter-ready cattle, reflecting ongoing herd rebuilding.  Pig meat prices also rose, driven by firmer quotations in the European Union amid rising seasonal demand, though partly offset by lower prices in Brazil due to ample supplies.

By contrast, the FAO Dairy Price Index declined by 1.1 percent from March, mainly reflecting lower international quotations for butter and cheese amid abundant milk supplies in the European Union and stronger-than-expected late-season output in Oceania.

The FAO Sugar Price Index also dropped, down 4.7 percent from March and as much as 21.2 percent from a year ago. The decrease was largely driven by expectations of ample global supplies in the current season, reinforced by improved prospects in key Asian producing countries, notably China and Thailand. The start of the new harvest in Brazil, the world’s largest sugar producer, further contributed to the downward pressure on sugar prices.

The question now is whether the latest rise in global food prices marks the early stage of a much larger move higher, as surging diesel and fertilizer costs begin to filter through the agricultural complex.

How Bad Will It Get? Watch the food debate here.

Authored by Lance Roberts via RealInvestmentAdvice.com,

💰 Earnings Estimate Revisions Are Very Optimistic

Last week, we discussed the S&P earnings record and why such record earnings could be a warning for the market. I want to continue that discussion by focusing not only on what has happened but also on what is expected to happen in the future. While the Q1 2026 earnings results are spectacular, so far, the earnings estimate revisions behind them are the real story.

The first-quarter 2026 earnings season is delivering results that Wall Street rarely sees. With roughly two-thirds of the S&P 500 having reported, the blended growth rate has climbed to 27.1% year-over-year, more than double the 13.2% that consensus modeled at the end of the quarter on March 31. If that figure holds, it will be the strongest year-over-year print since the post-COVID rebound quarter of Q4 2021. 84% of companies have beaten EPS, 81% have beaten revenue, and the average earnings surprise sits at 20.7%, nearly three times the 5-year average of 7.3%.

That’s the surface story. The more interesting question, and the one investors should be asking, is why analysts were so wrong heading in, and what it means that they’re now revising earnings estimates higher with a velocity that has almost no historical parallel.

Look at Morgan Stanley’s chart of consensus 2026 earnings estimate revisions versus history. In any normal year, by the time Q1 earnings season rolls around, analysts have been quietly walking earnings estimates down for six months. The historical median revision pattern drifts from 1.00 in January to roughly 0.92 by year-end. Two years of cuts. That’s the analyst playbook. Start the year too optimistic, get reset by reality, and end the year right.

This year is doing the opposite. The 2026 earnings estimate index cratered to 0.96 last summer during the Iran shock, then turned vertical. By May, it’s broken above 1.06. We’re looking at a roughly 14-point swing in earnings estimates relative to the historical pattern. That is what Morgan Stanley calls “fairly unprecedented,” and that’s analyst-speak for something they don’t have a clean comparison for.

The Mag 7 alone moved from a 22.4% expected growth rate at the end of March to a 61% blended print today. Four of the top five contributors to S&P 500 earnings growth this quarter are Alphabet, NVIDIA, Amazon, and Meta. The same four names driving index returns are now driving the earnings estimate revisions. That’s not a coincidence, and there is more to this story as noted by Sage Road Research:

“The AI distortion goes beyond stock prices to profits. Total S&P 500 earnings are on track to rocket 27% higher in the first quarter, FactSet estimates. But profits for the Mag-7 alone will be up 61%; for the other 493, just 16%, a figure itself inflated by semiconductor companies like Micron. This is skewing the division of the economic pie between capital and labor. As profits gallop ahead, labor compensation (wages and benefits) grew just 3.1% annualized in the first quarter, and actually shrank 0.5% after inflation, the Labor Department reported Thursday. Labor’s share of total business-sector output fell to 54.1%, the lowest since records began in 1947.” – @TrevorNoren

So, if it isn’t consumers’ and subsequently economic growth, driving earnings estimate revisions, then what is?

What’s Actually Driving the Upside

Three things are happening at once, and we have to separate them.

First, the AI capex cycle is finally showing up in the income statement. Hyperscalers have spent the better part of two years building out compute. The revenue is now landing. Communication Services is reporting +53% earnings growth, Tech is at +50%, and Consumer Discretionary is at +39%. Those aren’t soft beats. They’re the result of capex that was already locked in before the quarter started.

Second, margins are at a record. The blended Q1 net profit margin came in at 14.7%, the highest reading in over 15 years. That’s the real engine behind the surprise factor. Revenues grew 11.1%, which is solid but not extraordinary. The gap between 11% revenue growth and 27% earnings growth is operating leverage. A company that cut 8% of its workforce in 2023 and held headcount flat through 2025 is now monetizing every dollar of incremental revenue at a much higher incremental margin.

Third, breadth in Q1 results is finally improving. The Deutsche Bank charts make this point clearly. Earnings growth for the median S&P 500 company is now in the double digits, the highest reading in four years. All eleven sectors are tracking positive growth for the first time since 2022. Margins for “the rest” of the index, the 493 names outside the Mag 7, are turning higher after a steady three-year decline. Operating cash flow for non-financial corporates is running near 20% year-over-year. Q1 results are genuinely broader than they have been in years, and that deserves credit. But there’s an important asterisk on this point that I’ll address in the next section.

The Asterisk on “Broadening”

Now we have to separate two things that get confused in the headlines. Q1 reported earnings broadened, but the forward-year earnings estimate revisions did not. Those are different statements about different time horizons, and the difference matters.

Goldman Sachs published a chart in early May that quantifies the gap. The bank tracks a basket of AI infrastructure stocks (S&P 500 constituents in their AI Semiconductors, AI Data Centers, and Power Up America baskets) and compares it to the broader index on cumulative 2026 EPS revisions since December 2024. The numbers are striking.

AI infrastructure stocks have seen 2026 earnings estimates revised higher by 55% since December 2024. The full S&P 500 is up 7%. The S&P 500 ex-AI infrastructure is down 1%. Read that last figure twice. Strip out chip designers, hyperscaler infrastructure, AI data centers, and the power and grid names that feed them, and the remaining 470-odd companies in the index have collectively had their 2026 earnings estimates revised lower over the past 17 months. Not flat. Lower.

This is the cleanest picture of concentration risk you’ll see this cycle. The narrow-market critique, which has been valid for 2 years, isn’t going away, even after Q1 results came in. It’s hiding inside the index math. Mega-cap AI names have absolute earnings dollars so dominant that even modest forward growth in their numbers swamps the rest of the 500. When analysts publish their 2026 earnings estimate consensus forecast for the index, they’re effectively publishing a forecast for roughly 30 companies. The other 470 are a rounding error to the headline.

“Strip AI infrastructure out of the index, and 2026 estimates are actually lower than they were 17 months ago.”

The implication for portfolio construction is direct. If you own a market-cap-weighted S&P 500 index fund, you don’t own the diversified earnings stream the marketing material implies. You own a concentrated AI infrastructure bet wrapped in a passive vehicle. The two largest holdings in the SPY are Nvidia and Microsoft. Apple, Amazon, Meta, Alphabet, and Broadcom round out the top eight. Seven of the top eight names are direct AI infrastructure plays. That’s not diversification. That’s a thematic fund with 490 other names attached for legal reasons.

None of this is bearish on AI itself. The capex cycle is real, the earnings growth is landing, and the demand picture remains durable. The point is more subtle. The index’s strength masks the weakness of its components. If AI infrastructure names hit a single quarter of disappointment, whether from capex digestion, an export control surprise, or simple revenue deceleration, there’s no second engine in the index to absorb the impact. Equal-weighted measures of breadth being healthy on Q1 results don’t fix the forward-revision concentration problem. They are two different problems.

Here is What Nobody Wants to Talk About

Here’s where I have to put the brakes on. When earnings estimates are revised this hard, this fast, you have to ask whether the market is pricing the beat or the trend. Because historically, vertical earnings estimate revisions are a late-cycle phenomenon, not an early one.

Notice the long-term S&P 500 earnings growth estimate chart. The current reading sits near 19%, the highest print since 2000. The chart’s prior peaks tell a story. The “New Economy” peak in 2000. The “Tax Cuts” peak in 2018. The “COVID” rebound peak in 2021. Every one of those readings was followed by a meaningful drawdown in equities and a sharp downward revision cycle in earnings within twelve to twenty-four months. Forecasts above the long-term trend channel have a poor history.

“When everybody is revising higher, the marginal trade is no longer to buy the beats. It’s to fade the next miss.”

The other tell is the divergence between hard data and earnings. ISM Manufacturing is sitting in the low 50s, barely above the contraction line. The S&P 500 is up roughly 19% year over year. That gap historically closes one of two ways. Either ISM rallies into the high 50s as the cycle accelerates, or earnings get marked down to meet the macro. The latter has happened more often than the former at this point in a cycle.

This Summer is Where Headwinds Rise

There’s a calendar problem stacking up behind these numbers. The Q1 print benefited from easy year-over-year comparisons. Q2 won’t have that tailwind. By the time July prints arrive, the comparison base resets to 2025’s stronger second-quarter results, which means the same level of underlying earnings translates into a much smaller growth rate. That mechanical effect alone could pull the headline growth rate from 27% back into the low double digits, even if absolute earnings keep climbing. Markets don’t always distinguish between “growth slowing” and “earnings missing.” They tend to react to the headline number first and sort it out later.

Then there’s the bond market setup. The 10-year is still trading near 4.4%, the front end is pricing barely two cuts for the rest of the year, and core inflation has been sticky in the high 2s for six months. If the AI capex cycle keeps running hot, that’s incremental demand for chips, electricity, and skilled labor, all of which feed into the inputs the Fed watches. The risk isn’t a recession scare. It’s a “no cuts, maybe a hike” repricing that historically chops 5% to 8% off equity valuations in short order.

Positioning is the other variable. Sentiment surveys are stretched. Equity allocations among retail and institutional investors are at multi-year highs. CTAs are max long. When everyone is on the same side of a trade, and the data starts to disappoint, price discovery is brutal because there are no marginal buyers left to absorb the unwind.

Institutions Are On Risk Watch

The most useful way to gauge the risk landscape is to look at what institutional trading desks are actually doing, not just what they’re saying. The substance of the conversations across the buy-side and the dealer community is converging on a single posture: stay long, but explicitly hedge. The same desks publishing constructive twelve-month equity targets are simultaneously paying for downside protection in size. That’s the tell.

Five points are worth laying out.

• First, positioning. The Nasdaq 100 just delivered its biggest monthly gain in over 23 years. A move of that magnitude has consequences for who is left to buy. Systematic strategies (CTAs, vol-target funds, risk parity) have completed their re-risking. The buy-the-dip retail bid has been engaged since the March lows. Discretionary trading desks are now running long exposure at around +6 on a -10 to +10 scale, up from -4 at the March lows. The marginal buyer in this tape has already shown up. From here, the question is who steps in if the data disappoints.

• Second, the fundamental catalyst stack is largely behind us. The fiscal pulse that supported corporate margins is fading. The Q1 EPS print of 27% will not repeat against tougher comparisons. The operating leverage that drove the surprise factor cannot keep expanding indefinitely. The combination means the next four quarters of earnings reports face a higher bar with less wind at their backs.

• Third, the Strait of Hormuz is still live. The tape has effectively forgotten last summer’s oil shock. That’s how markets work. We discount tail risk after the immediate catalyst passes, but the underlying geopolitical setup has not materially improved. A single headline can reprice oil 4% in a session, and equities are positioned for a benign energy backdrop that may not hold.

• Fourth, the Fed is constrained. Last week’s hawkish hold told us where the committee sits when core inflation prints closer to 3% than 2%. The base case for cuts in September and December assumes labor market softening that has not yet arrived. If those cuts get pushed, the equity multiple has to absorb the disappointment, and historically that costs the index 5% to 8% in short order.

• Fifth, narrow breadth is a real risk that history takes seriously. Most standard measures of S&P breadth are exceptionally thin right now. Nine of eleven sectors are positive on the year, which sounds healthy on the surface, but participation under the index headline is concentrated in a handful of mega-cap names. The strongest historical conclusion isn’t that narrow breadth is bearish (because, for two years, it hasn’t been), but that it raises the probability of a momentum rollover when the rotation eventually breaks. You don’t pick that fight. You do prepare for it.

Here’s the practical math that ties this back to portfolio action. One-month at-the-money puts on the S&P 500 are currently priced at less than 2% of the spot price. For investors carrying meaningful long exposure into a summer with the stack of risks described above, that’s compelling risk transfer. The same institutional desks publishing constructive twelve-month equity views are paying for that protection right now. They call it “the cost of a good night’s sleep.” That phrase belongs in every portfolio review this quarter.

🔑 Key Catalysts Next Week

After two weeks of Magnificent 7 earnings and payrolls data, the calendar pivots back to the macro gauntlet that will define the Fed’s June path. Tuesday’s April CPI, Wednesday’s April PPI, and Thursday’s April Retail Sales create a three-day inflation-consumer trifecta that will either confirm or break the “higher for longer” trade heading into the June 16 FOMC meeting. This week isn’t about individual stocks; it’s about the price level and the consumer’s willingness to pay it.

Tuesday’s April CPI is the week’s anchor. March ran hot with the headline at +0.4% MoM and the core reading rising +0.3%. That reflected the first full month of the Iranian oil shock and the broadened tariff regime. April is the second month of that regime, and the question is whether the acceleration was a one-month spike or the beginning of a new trend. Energy prices eased modestly in late April as Iran ceasefire talks gained traction, potentially providing a one-month offset. But core goods, where tariff passthrough lives, won’t have that benefit. Used car prices, which had been masking tariff pressure in prior months, are no longer declining. Shelter costs remain stubbornly elevated. If the headline comes in above +0.3% MoM or core reaccelerates, summer rate-cut expectations are dead.

Wednesday’s PPI doubles down. Producer prices feed directly into the PCE calculation that the Fed actually targets. March PPI printed a blistering +0.7%, the hottest monthly reading in over a year. April PPI tells us whether the upstream pipeline is still pressurized or whether oil’s modest pullback and easing supply chains provided relief. A PPI-to-CPI passthrough story is forming: if producers are absorbing cost increases now, margins will compress, and earnings will be revised down. If they’re passing them through, consumer inflation stays elevated, and the Fed stays on hold. Either outcome is negative for someone.

On the earnings side, this is the bridge week between Big Tech and the Nvidia event on May 20th. Cisco, on Wednesday after the close, is the enterprise IT capex bellwether. AI-driven switching demand, progress on Splunk integration, and the order backlog will tell us whether corporate technology spending is holding up or pulling back amid macro uncertainty. Alibaba Wednesday morning is the China read on cloud and AI revenue from the Qwen model, quick commerce investment, and tariff/trade war impact on cross-border commerce. Applied Materials on Thursday after the close is the semiconductor capital equipment signal ahead of Nvidia, its $5 billion EPIC platform bet, and wafer fab equipment orders are the leading indicator for chip manufacturing capacity expansion.

CPI will tell us where inflation is, while PPI tells us where it’s going. Retail Sales on Thursday will tell us whether the consumer breaks before the Fed blinks. Three data points, three days, one narrative. If all three run hot, the “higher for longer” trade hardens into “higher for the foreseeable future,” and risk assets may begin to reprice. This is why we continue to suggest maintaining portfolio management practices carefully.

What Should Investors Do Now

Q1 was a genuinely strong quarter. Margins are real. Cash flow is real. The broadening is real. None of that is in dispute. What’s worth disputing is the assumption baked into consensus. An 18.6% full-year forecast assumes the run rate from Q1 just delivered continues for three more quarters, with no margin compression, no demand weakness, and no AI capex digestion. That’s a stack of optimistic assumptions, and the historical record on stacks like that is unkind.

For investors, the playbook into summer is unchanged in direction but tighter in execution. Trim into strength rather than chase. Reduce concentration in the names that have done the most work, especially where position sizes have crept up from price appreciation rather than active accumulation. Add hedges, not insurance you’ll never use, but actual collars or put spreads on the largest exposures. Keep dry powder for the first material disappointment, because it always comes, and the names worth owning rarely go on sale during euphoria.

The setup that worries me isn’t that earnings are bad. It’s that they’re so good the bar has been raised to a level that historically marks a peak, not a launching pad. When everybody is revising higher, the marginal trade is no longer to buy the beats. It’s to fade the next miss. That moment usually arrives without warning, and the pattern has held in every prior cycle that produced a chart like the one in front of us today.

Stay long, but stay hedged. The asymmetry has shifted.

In a revelation sure to outrage Baghdad and broad swathes of the Iraqi public, Israel established a secret military base in Iraq’s desert region to support air operations against Iran, related to the start of Trump’s Operation Epic Fury, The Wall Street Journal reported Saturday.

Israeli forces even at one point launched airstrikes early in the conflict on Iraqi troops who approached the site and risked exposing it, per sources cited in the report. The outpost was reportedly erected under extreme secrecy shortly before the US and Israel launched the surprise, unprovoked aerial bombardment of Iran, and at a moment Tehran thought it was negotiating with Washington.

The WSJ further said the secret base was placed there with US awareness and used it as a logistics hub for Israeli air force operations, further with Israeli special forces operating. 

According to details in the report, the site was to assist in any emergency special forces operations connected with the bombing raids on nearby Iran:

Search-and-rescue teams were positioned there in case Israeli pilots were downed. None have been. When a U.S. F-15 was shot down near Isfahan, Israel offered to help, but U.S. forces managed the rescue of two airmen themselves, one of the people said. Israel did carry out airstrikes to help protect the operation.

The Israeli base was almost discovered in early March. Iraqi state media said a local shepherd reported unusual military activity in the area, including helicopter flights, and the Iraqi military sent troops to investigate. Israel kept them at bay with airstrikes, one of the people familiar with the matter said.

In the end, no rescue missions became necessary, or at least as far as public awareness goes. There may be much that happened related to the outpost which remains classified, however.

The report further describes that after a US F-15 fighter jet was downed near Isfahan, Israel offered assistance, but US forces recovered the two crew members on their own. Strangely, the Pentagon has still issued nothing confirmable related to that operation, and not even the identities of the rescued pilots are as yet known.

The base almost was exposed in early March after Iraqi state media reported that a shepherd spotted suspicious military activity in the area, including helicopter movements, triggering an Iraqi military investigation.

Certainly if Iraqi forces had discovered it, the base would have been immediately attacked, especially by pro-Iran paramilitary forces.

The blue lines on the Israeli flag symbolize the Nile and Euphrates rivers – the borders of the biblical “Greater Israel”

In other news, Israel maintained a secret base inside Iraq and attacked Iraqi soldiers when they attempted to investigate it https://t.co/sHoetrHrOC

— Max Blumenthal (@MaxBlumenthal) May 9, 2026

As the WSJ story becomes more well-known inside Iraq this weekend, rising anger and outrage is expected, at a sensitive moment that a new future Iraqi prime minister has been tapped.

“This reckless operation was carried out without coordination or approval,” Qais Al-Muhammadawi, deputy commander of Iraq’s Joint Operations Command, told Iraqi state media following the March incident.

Early Sunday morning, the Dutch-flagged cruise ship MV Hondius, anchored off Spain’s Canary Islands, began evacuating passengers after a deadly hantavirus outbreak triggered a multinational public health response and put global health authorities on red alert.

“The docking took place at 6:30 a.m. and has been a success in spite of all the adversities,” Health Minister Mónica García said in a statement quoted by Bloomberg News.

Health officials have found that “all passengers are asymptomatic,” García added.

The U.S. government is evacuating American passengers from a cruise ship tied to a deadly hantavirus outbreak. A CDC team is currently in the Canary Islands assessing potential exposure and monitoring needs.

Passengers will be flown back to the U.S. on a medical repatriation… pic.twitter.com/CSrpbpMXLR

— Breaking911 (@Breaking911) May 10, 2026

Ship-tracking data show that the Hondius was anchored in Granadilla Port, Tenerife, and has since docked.

Last week, the World Health Organization identified eight hantavirus cases linked to the cruise ship: five suspected and three confirmed by laboratory testing. This includes three deaths. There were 149 passengers and crew members on the ship before the evacuation.

The outbreak appears to have started after a Dutch man and his wife traveled in South America, then boarded the Hondius in Argentina on April 1. Both died weeks later.

The New York Post identified patient zero as ornithologist Leo Schilperoord, who was on a multi-month birdwatching trip in South America with his wife, Mirjam Schilperoord. Both died.

Hantavirus is typically spread through rodent droppings or contaminated dust. People can inhale contaminated particles when rodent waste is disturbed. Symptoms may take weeks to appear, making containment and monitoring difficult.

On Friday, President Trump was questioned by reporters about the virus-plagued cruise ship. He said the situation is “very much under control.”

Polymarket odds of a hantavirus pandemic have remained under 10% for the last several days.

We questioned at the end of last week whether the vaccine stock trade was back, with Moderna conveniently announcing it was working on a vaccine.

The story count for “pandemic” in Bloomberg news stories remains well below the highs of the Covid-era mass hysteria driven by corporate media.

Will WHO create mass hysteria? That is the question.

Authored by Wolf Richter via Wolf Street,

Late last year and early this year, the story was that dropping mortgage rates, powered by big rate cuts from the Fed, would unleash demand in the housing market in the spring – the key spring selling season – and that sales volume would take off and that Realtors’ commissions would rocket to the moon.

And so that didn’t happen. Inflation has been reheating for months before the war and before the energy price spike. The energy price spike in March and April then added to that resurgence of inflation. The Fed is now talking about a possibility of rate hikes as next move. And longer-term Treasury yields, such as the 10-year Treasury yield, rose in March and April in response to inflation fears. Mortgage rates, which track those Treasury yields but are higher, rose back to the 6.5% range. And the housing market remained in the same-old-same-old frozen pattern that it has been in for four years after the price explosion from mid-2020 through mid-2022. And it continued in the latest week.

Mortgage applications to purchase a home – a measure of demand that may become actual home sales in the future, so a forward-looking indicator of home sales – dipped in the current survey week and remained near rock-bottom levels, down by 34% from the same week in 2019, according to data by the Mortgage Bankers Association today. That level of mortgage applications is below even the collapse of mortgage applications during the lockdown in the spring of 2020.

The average weekly mortgage rate for conforming 30-year fixed mortgages rose to 6.45% in the latest reporting week, according to the Mortgage Bankers Association today.

For the past 7 weeks, this measure of mortgage rates has been back in the middle of the 6-7% range, the range it has been in since September 2022, except for some breakouts to the upside.

These mortgage rates are not high in a historical context; they’re only high in the context of the Fed’s QE which started in 2009 and took on mega-proportions during the pandemic.

Under its QE programs, the Fed bought trillions of dollars of securities, including mortgage-backed securities (MBS), which repressed mortgage rates below 3%. But this massive amount of reckless money printing was part of the toxic mix at the time that triggered the worst inflation in 40 years. With mortgage rates below 3% and inflation at 9% – negative “real” mortgage rates, better than free money – home prices exploded and are now too high. And that inflation has refused to go back into the bottle.

Pending home sales for March – deals that were signed in March but haven’t closed yet – also remained at rock bottom, down by 30% from March 2019. In January, they’d dropped to a record low in the data by the National Association of Realtors going back to mid-2010, and in February and March, they inched up from that record low.

And the much-hyped spring selling season has turned into the fourth dud in a row: 2023, 2024, 2025, and 2026.

Mortgage applications to refinance a home instantly react to even small changes in mortgage rates. A dip in mortgage rates unleashes homeowners like a coiled spring to refinance a mortgage at even a slightly lower rate. And when mortgage rates rise after that dip, demand re-fizzles. These dynamics have been repeated several times since mid-2024.

Refis do nothing for the housing market, though they’re crucial for the income of mortgage brokers and lenders. But they may have a positive impact on consumer spending when they lower the mortgage payments and leave borrowers more money to spend on other stuff; or when they’re cash-out refis, the proceeds of which might then be used to pay down more expensive debts, or might be used for spending projects.

The up-front fees to be paid by homeowners when they refinance a mortgage – typically 1% of the mortgage balance – are generally added to the loan amount where they’re largely out of sight but increase the payment, which reduces the advantage of lower mortgage rates.

Homeowners can do a breakeven analysis with online calculators or through brokers and mortgage lenders, to see if refinancing a mortgage is worth it. When mortgage rates briefly drop and the breakeven analysis tilts their way, they pull the trigger, thereby creating these curious spikes in refis.

But even these spikes in refis since mid-2024 were relatively low compared to the two-year refi boom from early 2020 through 2021 when the Fed’s QE repressed mortgage rates below 3%, and everyone and their dog refinanced into these low-rate mortgages.

And now they’re part of the “lock-in effect,” when these homeowners avoid buying a new home, and thereby selling their current home, because the new home’s much higher price would have to be financed at a much higher mortgage rate, and that math doesn’t work very well for many people. But life does happen. My analysis: Update on the “Lock-in Effect” in the Housing Market: Below-3% & 4% Mortgages Fade Very Slowly

This longer view demonstrates the inverse relationship between mortgage rates (blue) and applications to refinance a mortgage (red):

In case you missed it: New Single-Family Home Prices Drop Further amid Inventory Glut. But Lower Prices Beget Higher Sales

Full-fledged war has returned to Lebanon as the government has announced that at least 23 people have been killed by Israeli airstrikes on Saturday alone. 

Stretching back into Friday, this brings the total death count to at least 50 killed over the past 24 hours of Israeli bombings, also as Lebanon’s National News Agency (NNA) late on Saturday said rescue operations were still ongoing for bystanders missing underneath the rubble.

Heavy bombing has not ceased in southern Lebanon, as the Israeli military says it’s trying to root out and destroy Hezbollah, including raids on the districts of Nabatieh, Bint Jbeil and Sidon, among others. Several were also killed in Tyre on Friday.

But Israeli forces have also absorbed casualties, with The Times of Israel describing the following serious drone strikes launched from Lebanon:

On Saturday, the terror group launched several salvos of explosive-laden drones and rockets at Israeli forces. One drone struck Israeli territory, close to the border with Lebanon, seriously injuring a reservist soldier and moderately wounding a reservist officer and another reservist soldier.

The troops were taken to Galilee Medical Center, which said the seriously wounded soldier underwent surgery and was now stable in the intensive care unit. The moderately wounded troops were scheduled for surgery later.

In another incident, the military said an explosive drone struck an unmanned engineering vehicle in southern Lebanon, causing damage. No injuries were caused.

There are reports of the IDF issuing evacuation orders for various areas, only to attack the so-called safe zones. For example the below comes via Israeli sources:

“In light of the Hezbollah terror organization’s violations of the ceasefire agreement, the IDF is forced to act against it with force and does not intend to harm you,” warned army spokesman Col. Avichay Adraee.

Meanwhile, Lebanese media reported that Israeli airstrikes on Saturday killed at least 12 people, including in areas where no evacuation orders were issued.

Starting in late April a 10-day ceasefire brokered by Washington took effect, even as Israeli forces remain deployed in a strip of Lebanese territory several miles deep along the border. That appears to be effectively collapsed, also as Israel has been upping its targeting of Beirut suburbs of late.

Israel calls the Lebanese strip of land now occupied by IDF troops a ‘buffer zone’ – but Lebanon sees it as a land grab. Lebanese Parliament Speaker Nabih Berri, a Hezbollah ally and leader of the Amal Movement – which is the other big Shia organization in Lebanon – has recently stated that if Israel “maintains its occupation, whether of areas, positions, or by drawing yellow lines, it will smell the scent of resistance every day.” He added: “If they insist on remaining, they will face resistance, and our history bears witness to that.”

Israeli airstrikes on vehicles south of Beirut killed 4 people, while strikes in southern Lebanon killed at least 13, state media and the Health Ministry said.

Iran war: https://t.co/GEBscM5Zz2 pic.twitter.com/6mHpjCkVis

— Sky News (@SkyNews) May 9, 2026

Lebanese officials have also charged Israel with trying to erase the Lebanese presence in southern Lebanon in a genocidal act, or ‘cultural genocide’.

This after Israeli forces have carried out demolitions in southern villages, targeting what they describe as Hezbollah infrastructure embedded in civilian areas.

Submitted by Peter Tchir of Academy Securities

Winning? Do We Need To Understand UBI

Iran (and the potential for a deal) has continued to move markets. As the 30-year bond rose above 5% earlier this week, we got news that we have a new approach to resolving the conflict – a one-page MOU. Markets (ex-oil) rallied around various “deal” headlines all week.

Spider, Bret, and I spent some time discussing this on Friday’s Podcast – The U.S. Proposal to End the War (also available on Spotify and iTunes).

Information continues to leak out in dribs and drabs about how those negotiations are doing. There continue to be conflicting messages. In the back of my mind, I’m increasingly forced to remember what we mentioned at the start of the conflict – Iran has never won a war but has never lost a negotiation.

There was a time when that statement didn’t seem likely to be reflective of this conflict. From “unconditional surrender” to various other metrics (especially surrounding nuclear weapons capabilities) we seem to be drifting to – let’s open the Strait and figure out the rest later?

The U.S. has displayed exceptionalism on every military task that it has been asked to undertake during this conflict. While we have had a limited presence in the Strait, our maritime efforts have been successful in accomplishing the missions that have been defined. Yes, Project Freedom was short lived. Not so much because the U.S. couldn’t deal with the threat (we successfully defended ourselves against Iranian missiles, drones, and small boats), but because it became pretty clear that not many commercial vessels were ready, under current circumstances, to risk challenging Iran.

We did argue, earlier in the week, that the admin’s assertion that Iran only has a few weeks before its economy collapsed, was underestimating the Iranians. They in all likelihood have prepared for this economic pressure and likely have significant IOUs with countries like China (and possibly even crypto holdings) to survive months not weeks. A regime that will shoot 40,000 or more citizens in a week for protesting is not going to be overly concerned with “standard of living” issues. Finally, all the “hype” around the fact that Iran’s ability to store oil is running out and this is causing them to shut the pumps (resulting in long-lasting damages) seemed “optimistic” at best. Iran has been decreasing the pressure, reducing the flow, and giving more leeway to when their reservoirs fill up. They also have the ability to just pump oil back onto the sand (and there are some reports of oil slicks in the Gulf). So, yes, if they left their facilities on full pressure, and were worried about “dumping” oil, it might be a week or two before irreparable damage is done. But they aren’t doing that. Also, according to many in the oil industry, other countries in the region are employing the same tactics. It isn’t just Iran that faces an inability to load oil onto transportation systems (pipelines or tankers). Much of the region faces similar challenges from the inability/unwillingness to transit the Strait.

A deal would be good, but a good deal would be better.

We discuss our views, options, and even highlight a couple of possibly great outcomes in the podcast (linked above), but we do seem to be drifting towards expediency rather than something more comprehensive.

I am still in the camp that the U.S. will once again become frustrated with Iran and launch another set of attacks, to truly push this conflict to a conclusion that leaves the world much safer.

Do We Need to Understand UBI?

With the release of some formerly classified information, I probably should be talking about UFOs, but somehow I’m here thinking about UBI. UBI or Universal Basic Income is a topic I haven’t paid much attention to.

It reminds me a bit of some other economic theories that I paid little attention to, without doing much damage to my work. 

• Mint the Coin was a movement “predicting” or “encouraging” the government to mint a trillion dollar coin to avert the debt ceiling. It would get some traction periodically and every once in a while made me wish I spent some time even thinking about this “absurd” (in my opinion) “solution” to our debt ceiling.
• Brexit. Yes, Brexit eventually happened, but it took so long to play out (as does everything in Europe including their “inevitable” adoption of ProSec ) that it was at best an undercurrent of markets, and I would argue (as someone who largely ignored it), not an undercurrent to the global economy. Important for the U.K. for sure, but I think I saved myself a lot of time and effort by largely ignoring it.

The point here is that I’ve been “dismissive” of any conversation around UBI. The concept has seemed anti-capitalist and almost “un-American.” The U.S. has “safety nets” of all sorts. Every “capitalist” country has their own version of “safety nets” – some more robust than others. UBI always seemed “a step too far,” especially in the U.S., but I cannot help thinking about it, as I struggle to digest the data this week – the “hard” data as well as the anecdotal data.

For the second month in a row, we had (at least on the surface) very strong job growth – Back to Back Dingers.

If the only piece of economic data I had was the Establishment survey of jobs, I’d be pretty pumped for the economy.

But that is NOT the only piece of data we have. There are so many ways I could express concern, that it would take too long to write, and would become repetitive, so I will stick to what some other people said recently. Here are “paraphrased” comments that caught my attention:

• Recession-level demand slump in North America. (Whirlpool)
• Consumer sentiment is certainly not improving, and it may be getting a little bit worse. (McDonald’s)
• Consumers are literally running out of money toward the end of the month. (Kraft Heinz)

There are many stocks we can look to, in order to gauge the state of the consumer. HD (Home Depot), for example, is almost 25% off of its high from last October. LOW (Lowe’s) is off 20% from its high set in February. That tells me there is something off with the consumer (rather than something company specific). If people are not spending money on home improvement, that indicates a lack of optimism from consumers.

Since I’m not a huge fan (or even a small fan) of the various CONsumer CONfidence surveys, I feel almost bad referencing it for the 2nd month in a row. Yes, it hit all-time lows, but that isn’t what caught my eye. Okay, it caught my eye, but everyone saw that. This is the chart from that survey that I find most interesting.

Here we get the responses from the Republicans for the University of Michigan Survey. It is 85. Far above the 48.2 headline number (which is the one that set a new record low). At 85 it is well above the lows during the Biden administration.

But this is the lowest Republican sentiment while President Trump has been in office.

That, to me, is important.

I have never understood how or why Republicans and Democrats would have such a different view of the economy. Maybe, if somehow, it was picking up differences in regional economies (areas where Republicans reside are booming, and vice versa), but it seems counterintuitive that the difference on economic outlook is so tied to party. Which is why I largely ignore this entire CONsumer CONfidence set of data, but the recent erosion in the chart makes me think twice.

AI versus Affordability

I really, really, want to bring up the line from Apocalypse Now – “Charlie Don’t Surf.” Maybe I’ve been spending too much time fixated on the war.

But I really want to write something along the lines of “AI Don’t Spend.” Or “one person’s expense, is another person’s revenue.”

So far any concerns about job losses due to AI don’t seem to be showing up in the jobs data. This is likely because:

• The buildout of AI requires a lot of hiring. Not just making the components necessary to run a data center (chips, cooling, electricity, etc.) but also the actual construction of the data centers and all the “picks and shovels” around data center construction.
• AI, in most cases, seems to have slowed hiring, rather accelerated the firing of employees. Attrition is playing the biggest role in adjusting headcount to offset AI spending (and productivity, to the extent it is being productive).

I’m stuck believing that the pressure on the consumer, so far, is primarily due to affordability, rather than job losses.

Concern about the future of jobs or pay may be influencing consumer sentiment and spending (I’m going to keep making T-Reports so confusing that AI cannot replicate them any time soon), but the bulk of the issue is affordability right now. What the heck will happen if job losses, especially due to AI, increase?

Let’s use some “water” analogies here (to try to link into the surf comment).

• A rising tide lifts all boats. This is the sort of economic growth we are all used to. Everything does better. It doesn’t really matter what you do, or where you are, you do better. This economy does not currently have that “vibe” to me.
• We see who is swimming naked when the tide goes out. Always a good one, but not sure how relevant it is to today’s economy. I think we are more about all boats not lifting, than we are about a tide going out.
• If the water is rising and you are anchored to the ground, you are in trouble. Okay, I just made that one up. But we’ve all seen it in movies.
• The water level is rising in a room, where the “hero” cannot get out. There is real fear. If there wasn’t some fear of this, Harry Houdini probably wouldn’t be as famous as he is.

I think this latter analogy may be the most apt:

• The water is rising (affordability). More and more people are getting sucked into the daily, weekly, monthly, and annual struggle of making ends meet. If we want to go down the “k”- shaped analogy, more and more of the k is underwater. Maybe it was only the lower leg of the k that was struggling, but as the water rises (affordability), more of the k is being covered. We may well be into the upper leg of the k. I guess we better hope that is a K rather than a k where the upper leg is long and goes high, but I’m concerned it is not (I still stick with the i-shaped economy, where a handful is doing extremely well and the rest of us are seeing the water rise).

On that pleasant note…

Bottom Line

Anyone with a job that can be disrupted by AI should own AI stocks as a “hedge.” I cannot tell if I’m being facetious or serious, but it is something to think about.

It is too early to spend a lot of time trying to understand how UBI would work, but I suspect we will start hearing more about this rather than less as affordability remains an issue. The issue will decline once we get a deal with Iran, but the affordability issue is not going away (I restrained myself from calling it a crisis, but…).

On credit, I continue to think credit will do fine and like owning private credit as marks seem to be adjusting to a new reality. More for a “trade” than being married to the position. I will get a detailed report out this week, as I am actually not on the road this week!

On rates, our more detailed analysis from last weekend’s Living in an AI World stands. Largely rangebound, with 4.35% to 4.4% as the middle of the range on 10s.

Continue to focus on ProSec themes, here and in Europe. If we get a deal, expect the admin to turn more attention to things like electricity production and the processing, refining, and smelting of commodities (as well as their extraction). A lot is being done in the background, but the President remains a key driver and while his attention has been diverted, we haven’t seen as much progress on ProSec as we’d like (away from domestic-focused chip manufacturing). That should change!

Thanks for everything and best wishes to all the moms out there! Hope you and your family and friends have an amazing day today! (Hopefully, every day is amazing, but today everyone should focus on the importance of family, more than the average day, where things like “work” get in the way).

Summary

• Iran responds Sunday to US peace proposal, finally submitting something official to Pakistan. Details not initially disclosed. 

• IRGC new warning: will unleash “heavy attack” on US bases in region if more Hormuz aggression persists.

• The still not publicly seen Supreme Leader has met with a top Iranian military commander to talk ‘readiness’ against US-Israeli aggression.

*  *  *

Iran Finally Responds To US

After days of waiting, Iran has submitted its response to the latest US peace proposal to mediator Pakistan, despite the recent flare-up in renewed exchanges of fire in the contested Strait of Hormuz this past week.

“Iran has submitted its response to the latest US proposal to end 10 weeks of war, the state-run Islamic Republic News Agency reported on Sunday, without providing any further details,” Bloomberg confirms in a fresh headline. “Tehran hasn’t yet given any public indication it would accept President Donald Trump’s plan that stipulates Iran permits passage through the Strait of Hormuz and Washington ends its blockade on Iranian ports in the next month.”

This comes as Qatar’s PM has warned Iran that using the Strait of Hormuz as a pressure card, to choke the global economy, “would only lead to deepening the crisis” – and amid reports there could still be sporadic attacks on Gulf countries like the UAE. According to more of the limited details:

Sources in both camps have told Reuters the latest peace efforts are aimed at a temporary memorandum of understanding to halt the war and allow traffic through the Strait of Hormuz while they discuss a fuller deal, which would have to address intractable disputes such as Iran’s nuclear program.

The latest from Iran’s president:

President Trump told Fox News days ago, “They want to make a deal. We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make a deal.” He had said if this happens “it’ll be over quickly” and oil prices will plummet.

IRGC Fresh Warning on US Bases

Iran’s Islamic Revolutionary Guard Corps (IRGC) has warned any attack on Iranian oil tankers and commercial ships will be met with assaults on US bases and “enemy ships” in the region, Al Jazeera reports.

“Warning! Any aggression against the oil tankers and commercial vessels of the Islamic Republic of Iran will be met with a heavy attack on one of the American centers in the region and the enemy’s ships,” the IRGC Navy said in the statement.

“Iran will no longer allow passages that are harmful to its interests”

Brigadier General Akrami Nia, the spokesman of the Iranian army, says countries that comply with US sanctions against Iran will surely have problems crossing the Strait of Hormuz. pic.twitter.com/6EZ6NWsZse

— Press TV 🔻 (@PressTV) May 10, 2026

Tehran is accusing the US side of severely violating the ceasefire earlier this week, by firing on and disabling two Iranian-flagged tankers trying to reach Iranian ports. State media reviewed of these hostile incidents:

In a statement, the spokesman for Iran’s Khatam al-Anbiya Central Headquarters said the “aggressive, terrorist and marauding US military” had targeted an Iranian oil tanker sailing from Iran’s coastal waters near Jask toward the Strait of Hormuz, as well as another vessel entering the strategic waterway near the UAE port of Fujairah.

The spokesman also said civilian areas along the coasts of Bandar Khamir, Sirik and Qeshm Island came under aerial attacks carried out “with the cooperation of some regional countries.”

The IRGC further said it will respond “powerfully and without the slightest hesitation” to any aggression or attack. Indeed there are reports that during the past week’s skirmishes Iran fired on three US warships seeking to exit waters of Iran’s coast.

Ayatollah Meets With Military Commander

We reported earlier that in an official update Iran said that Supreme Leader Mojtaba Khamenei had been ‘moderately injured’ but is recovering, and he had met with the president of the Islamic Republic. On Sunday he also met with a top military commader, per state Mehr, which writes: “In a meeting with Leader of the Islamic Revolution Ayatollah Seyyed Mojtaba Khamenei, Commander of Khatam al-Anbiya Central Headquarters Major General Ali Abdollahi presented a comprehensive report on the preparedness of the powerful Armed Forces of the country to confront enemies’ strategic mistake.”

According to more of the state readout:

Abdollahi said “all fighters of Islam” possess high readiness in terms of morale, defensive and offensive preparedness, strategic plans, and the equipment and weaponry required to confront hostile actions by the “American-Zionist enemies.”

He warned that if the enemies commit any “strategic mistake, aggression, or invasion,” Iranian forces would respond “swiftly, intensely, and powerfully.”

The commander also assured the Leader that the armed forces would, “with full obedience” to his orders, defend “the ideals of the Islamic Revolution, our beloved land Iran, sovereignty, national interests, and the brave Iranian nation until the last breath and to the death.”

During the meeting, Ayatollah Khamenei praised the country’s armed forces and issued new directives for continuing action and confronting enemies decisively following the 40-day US-Israeli war against the country.

The Wall Street Journal wrote Saturday of the Ayatollah, “A government official claimed Khamenei, who hasn’t been seen in public since that attack, is now in good health.” However, there’s still a lot of speculation on his role in national decision-making, and over whether he will ever make a public appearance.

An Islamic Revolutionary Guard Corps-linked media outlet has signaled that submarine fiber-optic cables running through the Strait of Hormuz remain in Tehran’s crosshairs.

Tehran views Hormuz not only as an energy chokepoint but also as a digital chokepoint, with undersea cables beaming internet across the Gulf and into the global network.

Tasnim published an article titled “Three Practical Steps for Generating Revenue from Strait of Hormuz Internet Cables,” pointing out that Tehran must reassess how it exercises sovereignty over the strategic maritime chokepoint.

The IRGC-linked outlet said that submarine fiber-optic cables in the critical waterway facilitate more than $10 trillion in financial transactions each day, and claimed that Iran has been deprived of the economic and sovereign benefits tied to the digital economy.

Tasnim warned that any disruption, cut, or damage to these cables, whether from natural causes or ship anchors, could impose heavy losses on the world’s economy.

“These cables, which are laid on the seabed using advanced technologies such as DWDM and double-armored standards, carry the bulk of international internet traffic, cloud synchronization, enterprise virtual private networks, voice traffic, and financial-payment networks. From the perspective of the digital economy, any disruption, outage, or damage to these communications highways, whether from natural incidents or ship anchors, can cause irreparable losses,” the outlet stated.

Tasnim lists three steps for how Iran should begin imposing fees on internet traffic routed through Hormuz:

1. Licensing and tolls: Iran should require telecom consortia and cable operators to obtain permits for laying and operating cables through the strait, with initial licensing fees and annual renewal payments.

2. Iranian legal jurisdiction over tech firms: Major technology companies using the cables, including Google, Microsoft, Amazon, and Meta, should be required to operate officially under Iranian law and cooperate with Iranian technology firms, knowledge-based companies, and media entities.

3. Iranian control over maintenance and repair: Iran should develop the technical infrastructure to control or participate in the maintenance and repair of the cables, turning cable servicing into both a revenue stream and a sovereignty tool.

Beyond the quest to charge data fees, Tehran has already imposed fees or tolls on vessels passing through the strait.

Last week, Iran’s newly created Persian Gulf Strait Authority pushed forward with a new protocol for commercial vessels transiting the strait. It’s unclear whether the protocol will incur a fee.

However, Iranians have made “demands for payments, payments for toll fees, as we say, for those vessels to be granted permission to sail,” Dimitris Maniatis, CEO of maritime risk consultancy Marisks, told CNN.

The direct result of Tehran’s attempt to position itself as the gatekeeper of the Hormuz chokepoint, across energy, freight, and potentially digital traffic, will be to accelerate global efforts to bypass the strait. That means rerouting pipelines, tanker traffic, commercial shipping, and eventually undersea cable infrastructure away from Iran’s strait.

That effort has already started:

• World Starts To “Build” Around Hormuz; Japan Buying UAE Oil Bypassing Strait As ADNOC To Spend $55 Billion On Pipelines

.  . .

Authored by Charles Hugh Smith via Of Two Minds,

We’ve come to an interesting juncture in history, interesting because while we’re being assured that AI will solve all problems, including any it creates, back in the real world, AI is incapable of fixing what’s broken because too many people are getting rich off the status quo, and since the status quo is the problem, those who own / control AI will use it to maintain the status quo, guaranteeing that what’s broken spirals into irreversible breakdown.

Richard Bonugli and I discuss what’s fatally broken in a new podcast on what it will take to become Bullish (32 min).

Let’s start with what’s “obvious”: letting what’s broken fester until it implodes the status quo is not bullish, and neither is substituting delusion and denial for a realistic appraisal of what’s actually broken–the essential observe and orient steps in the OODA loop (observe, orient, decide, act).

I’ve often described the two dynamics that are broken that AI can’t fix because those who own / control AI are using it to increase the asymmetrical distribution of wealth and income that are the source of breakdown. Consider healthcare. Everyone except the managers / owners / shareholders of healthcare / pharma cartels agrees healthcare is fundamentally broken and is bankrupting households, employers and the government / nation.

Those profiteering off the status quo healthcare system claim AI is going to reduce costs. They fail to mention this won’t reduce the price, it will only serve to increase their profits. Cut costs by replacing human labor with AI tools, yea, we reap even higher profits. Nobody is claiming healthcare will magically become affordable because a truly affordable healthcare system wouldn’t be as profitable because it wouldn’t be as open to exploitation, fraud, profiteering, extraction and parasitic pricing.

In the same way, AI can’t solve the other fatal dynamic–widening wealth and income asymmetry–because it’s widening the asymmetry to new extremes. The owners of AI are reaping vast fortunes while stripmining resources to run their AI data centers and laying off wage earners. Rather than fixing what’s broken in America, AI is accelerating the endgame of what’s broken.

Let’s run through why increasing numbers of online comments suggest burning the whole rotten healthcare system down and starting over. Healthcare insurance–which often turn out to be a profitable facsimile of actual insurance–has more than doubled beyond the official rate of inflation. If healthcare insurance had tracked inflation, it would cost $10,000 a year for family coverage in 2026. Instead, it costs $25,000+ annually.

Diagnosis: broken.

Regardless of how you toy with statistics, the reality is administrative costs / bloat / profiteering have soared. Diagnosis: broken.

Meanwhile, back in reality, rapidly aging populations are far from their peak demand for healthcare services. Check out the white line on this chart (courtesy of @econimica) of those aged 65+. While births collapse and the workforce is pressured by AI and the soaring cost of living, millions of elderly retirees are being added to the Medicare beneficiary pool. Diagnosis: broken.

Here is the chart of Medicare costs: parabolic. It’s nice we can borrow a few trillion every year, but can we borrow $5 trillion or more every year with no consequence? Diagnosis: broken.

Here is the chart of Medicaid costs: parabolic. Diagnosis: broken.

As for the health of the general populace: it’s been declining for two generations as our diet has shifted from real food made at home to ultra-processed goo and fitness has bifurcated into a thin layer of extreme fitness and a majority of the populace burdened with the complex ill health of poor diets, poor fitness and metabolic disorders.

Weight of the populace in 1985:

Weight of the populace in 2023:

Yes, now we have GLP-1 drugs that reduce weight and the diseases related to weight, but these drugs have side effects in many patients and they must be taken for life. Once the patient stops taking them, the weight returns.

Drugs that must be taken for life are not a substitute for being healthy. Healthy = not needing any medications.

Diagnosis of the healthcare system: broken. Prognosis: bifurcation: the rich will get “the finest care in the world,” and everyone else will be in a queue or denied care–basically the same result–or offered extraordinarily profitable meds and a spectrum of side effects.

What’s broken is the entire financial-economic system that distributes the pain and the gain: the pain of sharply higher costs of living and increasing financial precarity is distributed to the bottom 80% while the gains are distributed to the top 10%, with a dribble going to the cohort between 81% and 90% who own enough capital to support their claim to being “middle class.”

Note to America’s elites: when only the top 15% just below the top 5% qualifies as “middle class,” that’s not a middle class. I know, you don’t concern yourselves with such trivia: there are trillions of dollars to be reaped “solving problems” with AI.

The “problem” you can’t solve with AI is AI only “solves” the “problem” you see, which is how to increase your wealth and income before the bottom 80% awaken from the 24/7-hyped delusion that credit-asset bubbles (AI!) raise all boats and will continue to do so forever and ever.

Real life has diverged from that delusion, and the radioactive power of AI to extend that delusion has a short half-life. Refusing to recognize, much less actually fix, what’s broken hurries our collective rendezvous with consequences.

What would be bullish is actually fixing what’s broken. Promoting self-serving illusory “solutions” that only widen the asymmetries stretching the socio-economic fabric to the breaking point is not bullish.

New podcast: what it will take to become Bullish (32 min).

My book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)