Cover Story:
-Harvard University has been facing significant financial challenges due to the Trump administration's refusal to allow it to interfere in its management. The administration has frozen $2.2B in multiyear grants to Harvard, and the federal government is reportedly granting billions more in funding to the school. Additionally, Harvard receives tens of millions of dollars from other government agencies that have already been cut or are at risk. A proposed hike in federal tax for Harvard and other large endowments is also expected to be significantly impacted. The Trump administration has requested that the Internal Revenue Service revoke Harvard's tax-exempt status. This slashing and burning is altering Harvard's profit and loss statement, raising questions about the investment strategy at the endowment.
Interview:
-Ted Leonsis, a former AOL executive, has acquired several sports teams in Washington, D.C., including the Washington Capitals, Wizards, Mystics, and AFL. He founded Monumental Sports and Entertainment in 2011, which is now an $8B enterprise. Leonsis suggested adding another team to Monumental's roster and investing $300M in upgrading the Capital One Arena, Washington's nearly 30-year-old arena. The company is also investing in the expansion of Monumental Sports Washington, which was bought from Comcast in 2022.
Tech Trader:
-Nvidia and AMD are facing charges due to a US rule limiting chip sales to China, which is aimed at breaking the country's dependence on technology from the rest of the world. The transition has begun with Chinese restrictions on local and central government purchases of new PCs and servers, putting non-Chinese chip manufacturers at risk. The trade war between Beijing and Washington has resulted in collateral damage to chip makers, software companies, and the production of devices like iPhones. There are 18 central processing unit chips approved for Chinese governments, none of which are from Intel or AMD. Microsoft's Windows operating system and Oracle's database software are the leading edge of the problem for US software companies.
The Trader:
-United Airlines Holdings' first-quarter report showed that any numbers are better than no numbers at all. Tariff chaos has caused consumers and corporations to pull back sharply, with uncertainty impacting profits. Delta Air Lines pulled its full-year guidance on April 9, stating growth has stalled due to trade war worries. United offered two forecasts: one for a stabilized tariff situation and another that handicaps a recession. The company reiterated its guidance for earnings per share between $11.50 and $13.50 for the former scenario and $7 to $9 for the latter.
Features:
-Bonds are attracting investors with lower prices and higher yields due to the US economy's potential recession. Yields on municipal bonds, junk bonds, mortgage securities, and preferred stock are higher than at the start of 2025. Investors can find yields of 8% on junk bonds, 7% on preferred stock, close to 6% on government-agency mortgage securities, and almost 5% on high-grade, long-term municipal bonds. Most U.S. treasuries yield more than 4%, with 20-year and 30-year bonds yielding nearly 5%. These yields are particularly attractive with inflation below 3%. The Federal Reserve is expected to cut short-term interest rates by 0.75 to one percentage point by year-end due to weaker growth.
European Trader:
-Eli Lilly's CEO, Dave Ricks, has pledged to manufacture its experimental weight-loss pill in the USA amid President Donald Trump's reshoring push. The new treatment, orforglipron, an oral GLP-1 receptor agonist, cleared a late-stage clinical trial, showing "statistically significant efficacy results" and a safety profile consistent with injectable obesity drugs already on the market. Lilly stock closed up more than 14% on Thursday, while shares of Novo Nordisk fell. Orforglipron is seen as an answer to Novo's popular injectables Ozempic and Wegovy injectables, approved for Type 2 diabetes and chronic weight management. Lilly expects to file for regulatory approval for it as an obesity treatment by the end of the year and for diabetes treatment in 2026. If Lilly produces the new drug in the U.S., it could avoid paying taxes on pharma imports.
-The European Central Bank (ECB) has reduced its benchmark lending rate by a quarter-point, marking the seventh cut since lowering borrowing costs in June. The reduction also reduced the deposit rate to 2.25% from 2.50%, down from 4% when the bank began cutting. ECB President Christine Lagarde stated the vote was unanimous but left options open for future cuts to support the euro zone economy amid President Trump's tariffs. The ECB is more likely to cut rates than the Federal Reserve due to the risk of slower growth in Europe and the danger of a boost to inflation. European inflation reached an annual rate of 2.2% in March, approaching the ECB's 2% target. The ECB stated that the disinflation process is well on track, with both headline and core inflation declining in March.
Emerging Markets:
-No update
Commodities:
-The US's issue with rare earths is a result of a trade war between the US and China. The US is charging tariffs of 145% on most goods from China, while Beijing charges 125% on US goods. China has also stopped taking deliveries of Boeing jets and restricted exports of rare-earth metals. These metallic elements are used in computer displays, lasers, electric motors, and missile guidance systems. China dominates mining and processing, and an F-35 has over 900 pounds of rare earth metals in it. The issue is not a five-alarm fire, but more like a kitchen fire where a homeowner doesn't have a fire extinguisher under their sink. In such cases, homeowners should consider purchasing a fire extinguisher to prevent future home fires.
Streetwise:
-The IRS has recently started a strategic Musk-sizing of 30% to 40% of its staff, making it difficult to report Congress. The scheme found is an explosive gimmick, as described in a blog post from the nonpartisan Committee for a Responsible Federal Budget. Budget reconciliation, a process similar to panda breeding, can be used to push important fiscal legislation through the congressional E-ZPass lane without getting stalled by a Senate filibuster. It was once deployed jointly by both parties but has mostly been used during periods of one-party control over the past 25 years. The Byrd Rule, which prohibits reconciliation for anything that permanently raises deficits, raises questions about its effectiveness.