America’s Pandemic Car Bubble Is Now Trapping Buyers in Debt
The average amount a borrower with negative equity carries on a vehicle has jumped more than 40% since 2021
- About 30% of car buyers trading in vehicles in the first quarter had negative equity, owing an average of about $7,200 on their old loans.
- High pandemic-era car prices and elevated interest rates caused negative equity, leading to longer loan terms for buyers.
- A 2024 study found borrowers rolling over negative equity were more than twice as likely to face repossession within two years.
Doug Horner has seen plenty of customers walk into his northeast Ohio Mercedes-Benz dealership who owe more on their trade-ins than those cars are worth. But being $40,000 underwater on a pickup truck is a scary sign of a growing trend.
A prospective buyer recently sought to trade in a Ford F-150 Lightning for a Mercedes GLE Coupe, but that potential customer owed about $87,000 on the pickup truck. Horner estimates the Ford pickup truck was worth about $47,000—leaving the buyer well underwater.
“This is a battle that we’re fighting every day,” Horner said in an interview.
More Americans turning in their cars to buy new ones are encountering a difficult reality: Their vehicles aren’t worth what they owe.
About 30% of borrowers in the first quarter who traded in a car to buy a new one had negative equity, whereby they owe more on their loan than their car is worth, according to car-shopping website Edmunds. Those borrowers owed about $7,200 on average before getting a new loan, a 42% jump compared with the same period five years prior.
“The higher it goes, the chances are that people are never going to get themselves out of the situation,” said Jessica Caldwell, head of insights at Edmunds.
About a third of Americans trading in an older car have negative equity, which has been typical in the industry for years. But the average amount Americans are underwater has skyrocketed, Edmunds said, as buyers try to unload cars bought during the pandemic at high prices.
The increased level of negative equity represents another strain on an auto market already under pressure from pricey vehicles and elevated interest rates.
To offset those costs, more car buyers are taking on longer loan terms to keep monthly payments digestible. In the first quarter, the average loan was 70 months on new cars, according to Edmunds data. Car payments in excess of $1,000 are no longer uncommon and can stretch out more than eight years.
But consumers who are underwater on their loan end up paying more on average after rolling over the negative equity into their next car, compounding their debt even more.
The current situation dates to the pandemic’s semiconductor supply crunch, which led to a severe shortage of new cars available on dealer lots. Vehicle prices soared in response, and buyers—who either had the disposable income to spend or lacked other transit options during lockdowns—were willing to pay up.
“You had a lot of dealerships in the Covid era that were overcharging, to say the least,” said Eric Frehsée, president of the Tamaroff Group in the Detroit area. “You’re seeing a lot of those cars coming back and there’s a lot of negative equity because of that.” Frehsée said that his dealerships opted not to charge over sticker prices during the pandemic.
In 2026, buyers with negative equity financed an average of nearly $56,000 for a new car in the first quarter, about $12,000 more than the typical new-vehicle buyer, Edmunds said. That translates to a monthly payment averaging $932 for negative-equity borrowers, the highest level ever recorded. In April 2021, the average new car cost about $41,000.
At the same time, the situation reflects another sign of the current K-shaped economy, where affluent individuals are thriving while others struggle. Even with the increased level of negative equity, the average trade-in equity for a car in March exceeded $6,800, according to JD Power.
“The average consumer is in a good position when buying a vehicle,” said Tyson Jominy, JD Power’s senior vice president of data and analytics. Borrowers with negative equity, however, can have a difficult time securing a loan for a new car, and it could put them at greater risk of falling behind on their payments, studies show.
Consumers who rolled over negative equity from a prior vehicle loan were more than twice as likely to wind up having their car repossessed within two years, compared with those who netted money on a trade-in, a 2024 study from the Consumer Financial Protection Bureau found.
More borrowers have been defaulting on their loan payments, which typically results in a repossession. Default rates on car loans in March rose to the highest levels seen since 2010, according to Cox Automotive, an industry-research firm.
The auto industry has already been grappling with the potential woes of higher gas prices because of the war in Iran. Auto executives have said they don’t expect sales to be significantly affected by the conflict unless it continues for months.
Caldwell said that higher negative equity amounts are likely to persist in coming months. Amid the pandemic and the semiconductor crisis, interest rates rose, she said, meaning borrowers have continued to pay higher costs to take on new car loans.
“We know that people paid an increased price either way,” she said. “I don’t think it’s going to go back down.”
Defence stocks give back gains as investors buy rumour but sell war
Production bottlenecks and uncertainty over US munitions funding weigh on stock prices for weapons makers
Production bottlenecks and uncertainty over the US’s military budget have led investors to sell global defence stocks despite ongoing conflicts in the Middle East.
Share prices of leading American defence primes Lockheed Martin, Northrop Grumman, RTX, L3Harris and General Dynamics have all fallen since the US bombed Iran at the end of February, despite the military’s massive expenditure of ordnance over the past two months drawing attention to mounting production backlogs.
“[The US has] burned through munitions much faster than we can produce them. Defence companies may get some money up front, but they don’t typically profit until they deliver,” said Steven Grey, chief investment officer at Grey Value Management, which has positions in several global defence stocks.
“If that delivery takes time, why should stock prices have risen more than they already have on profits that won’t be realised for years?”
Lockheed Martin, Northrop Grumman and RTX’s stock all increased by about 50 per cent in the year up to the outbreak of the conflict, powered by US President Donald Trump’s budget request last year boosting defence spending, as well as ongoing turmoil in Ukraine and the Middle East.
Melius Research analyst Scott Mikus said RTX, whose defence subsidiary Raytheon produces the Tomahawk missile, “is poised to be an outsized beneficiary of the war in Iran and higher defence budgets”, noting the Pentagon’s 2027 budget request calls for a 189 per cent increase in missile procurement funding.
Meanwhile, as the prime contractor for the B-21 bomber and the Sentinel intercontinental ballistic missile, Northrop Grumman was likely to benefit from rising geopolitical tensions leading to increasing nuclear proliferation, Mikus said.
Both companies reported first-quarter sales increases on Tuesday, citing robust demand for their defence systems. “Our defence systems business growth is fuelled by the growing demand for solid rocket motors, smart munitions, ammunition and tactical missiles,” Northrop Grumman chief executive Kathy Warden told investors.
Since then, however, both companies’ shares have fallen about 10 per cent, while shares in Lockheed Martin have fallen roughly 5 per cent.
Funds have also flowed out of defence-oriented ETFs as investors pivoted towards “safe haven” sectors, such as energy and utilities, defying expectations that the war in the Middle East would turbocharge American defence stocks. Almost $1bn has been withdrawn from the $14bn iShares US Aerospace & Defense ETF, which is weighted towards the biggest US defence primes, since the conflict began.
“It is what we call a ‘buy the tension, sell the war’ dynamic,” Mikus said, noting that similar market dynamics had played out in the aftermath of Russia’s full-scale invasion of Ukraine in 2022 and the US-led invasion of Iraq in 2003.
The US military is estimated to have used about 1,000 Tomahawk missiles against Iran over the past two months, about 20 times the 58 Tomahawks funded out of this year’s US Navy budget.
Ron Epstein, a defence and aerospace analyst at Bank of America, said the need to replenish US stockpiles would only increase backlogs that leading defence companies were already struggling to address due to their limited production capacity, helping investors to shrug off the conflict.
“The top-line growth for these defence companies is not going to be constrained by demand, but by capacity,” he said.
In April, Trump released a budget proposal seeking a 50 per cent rise in the US defence budget to $1.5tn for 2027. But analysts said investors remained wary of the $1.5tn proposal’s prospects given the political opposition it faces.
“The $1.5tn budget has not been priced in because investors know there’s a long way to go,” said Epstein. “It’s a very unpredictable process in and of itself, and then you have midterm elections coming up that make it even more so.”
Senior Trump administration officials, including defence secretary Pete Hegseth, have coupled their demands for higher defence spending with sharp criticism of big contractors for delayed and over-budget programmes, pledging a radical overhaul of Pentagon procurement practices.
The administration recently held talks with General Motors and Ford to discuss how the Detroit automakers could contribute to US weapons supply chains.
The prominence of drones and autonomous missiles during the Iran conflict has also fuelled speculation that large contractors could miss out amid a pivot towards a new generation of low-cost defence technologies.
Investors have similarly cooled on European defence stocks in recent weeks. MSCI’s Europe Aerospace and Defense index dropped 9.2 per cent in March, its biggest monthly decline in five years.
Shares in recently listed Czech arms maker CSG have dropped almost a third since the conflict began, while Germany’s Rheinmetall and Renk are down about 10 per cent, and Sweden’s Saab is about 12 per cent lower. Shares in Thales slid on Tuesday after the French defence and technology group disappointed with a mixed outlook.
Robert Stallard, analyst at Vertical Research Partners, said it “could link back to war-related uncertainty, and some concern that we are seeing ‘peak defence’”.
“Where is your upside to a plus-50 per cent annual DoD budget request, with an unexpected military conflict on top?” he said. “Similarly in Europe, there continue to be periodic concerns over the impact of ‘peace in Ukraine’ and what that could do to the regional defence spending trajectory, especially for cash-strapped countries like France and the UK.”
Marketing collective The Independents explores $1bn stake sale
Paris-based group in talks with its investors amid slump in high-end market
Luxury marketing collective The Independents has held talks with its investors over selling a stake in the business for more than $1bn, despite the slump in the high-end market.
The Paris-based group, which counts Céline, LVMH, Saint Laurent and Cartier as clients, has appointed US investment bank LionTree to review its options, according to three people close to the situation.
This could include the sale of a stake in the company, they said, although no decision had been taken about the size of any equity sale.
“The Independents are exploring avenues to bring additional investors into the company,” said a person with knowledge of the negotiations.
Two of the people familiar with The Independents, where revenues reportedly totalled £600mn last year, said investors had been sounded out for their interest in a majority stake valued at more than $1bn.
The company operates about 20 creative agencies such as Italian brand-building firm Karla Otto and events and design group K2. It has about 1,200 employees working in offices from London and Los Angeles to Hong Kong and Dubai.
The Independents and LionTree declined to comment.
The company is owned by its co-founders including Isabelle Chouvet, alongside French media tycoon Stéphane Courbit’s Banijay Group and private equity firm TowerBrook.
Banijay has an option to convert its minority holding into control of the business, according to the people familiar with the matter. Banijay has until June to decide whether to take up this option, one said.
The talks also involve RedBird IMI, the investment group that merged its All3Media TV business with Paris-based Banijay Entertainment this year, the people added. Banijay and RedBird IMI declined to comment.
People familiar with the talks said the sale process had been complicated by the steep challenges facing the luxury market.
Upmarket fashion labels have suffered sharp falls in their valuations due to the impact of the Iran war on key Middle East markets and slowing Chinese demand.
LVMH, the world’s largest luxury group, last week blamed the conflict for its flatlining performance in the first quarter of 2026, with like-for-like sales up just 1 per cent compared with a year ago.
Courbit and TowerBrook led a $400mn investment round for The Independents in 2023, during a post-pandemic boom for the luxury market, to accelerate its development and international expansion.
That fundraising allowed a buyout of private equity group Cathay Capital, which acquired its stake when The Independents was founded in 2017.
China’s smartphone king takes on Elon Musk in Europe with premium EVs
Xiaomi wants to expand on the continent as demand for its cars outstrips production
Just two years after building its first car, China’s largest smartphone maker has already delivered 650,000 electric vehicles — on par with the number of Tesla vehicles sold last year in the world’s largest automotive market.
Xiaomi founder Lei Jun, who has earned comparisons with Steve Jobs, now aims to take on Elon Musk’s company in Europe with its premium EVs known for their breakneck acceleration and advanced features that even Ford chief Jim Farley fell in love with.
Since Lei announced his plan to build a car in 2021, Xiaomi stunned the global car industry with the launch of its first model — the Speed Ultra 7 sports sedan — just three years later with 50,000 being snapped up in the 30 minutes after orders opened.
After the SU7 became one of China’s best-selling cars, its second model, the $35,000 YU7 that rivals Tesla’s Model Y with designs resembling Ferrari’s Purosangue model, received 200,000 pre-orders in just three minutes at last year’s launch.
At the annual Beijing car show on Friday, Lei said the new YU7 GT model “can match the standards of a top-tier German car”. The model, expected to be launched in late May, was the first vehicle developed with its European engineers.
“In just five years, Xiaomi has achieved remarkable milestones,” the 56-year-old chief executive said. “Yet even today, many people still don’t fully understand Xiaomi cars, and some even hold certain biases.”
At a time when China’s crowded car industry is wrestling with overcapacity at its factories, demand for Xiaomi’s EVs has outstripped its ability to make them despite building 410,000 vehicles last year at its new factory in Beijing.
Since Xiaomi was founded in 2010, its revenue has grown rapidly, hitting Rmb457.3bn ($67bn) last year.
Yet analysts said the company was not immune to the intense price competition that has eroded profits and sales at BYD and other mass-volume brands, driving them to seek growth in international markets.
Following explosive expansion in the past decade, sales growth of EVs in China is also expected to slow. “They need to find a growing market elsewhere and it’s a rational decision made by Xiaomi,” said Ernan Cui, analyst at consultancy Gavekal Research.
Xiaomi is Europe’s third most popular smartphone brand. Citing its experience of selling consumer electronics overseas, Cui added: “Xiaomi has a stronger global sales branch than the EV start-ups in China, while its products are more competitive compared to traditional carmakers.”
Lei Xing, founder of Chinese consultancy AutoXing, added Xiaomi’s main rivals would be Tesla, Porsche, BMW and Mercedes-Benz. “There is a brand foundation for consumer electronics in Europe, which is a significant advantage to other Chinese brands,” he said.
Xiaomi has not revealed which European market it will first enter but it established an EV research and development centre in Munich last year, hiring more than 75 engineers. Many Chinese brands have rapidly expanded into Europe with prices roughly double those in China, yet they remain affordable due to advanced software.
“The European market really matters to us,” its chief marketing officer Xu Fei said in her first presentation of strategy to the international media ahead of the Beijing auto show. “We would like to really provide products with better quality and high performance.”
At its only EV factory in China, Xiaomi has deployed its own manufacturing methods and materials to bring down production costs while strengthening the durability of its vehicles. The plant, which produces a car every 76 seconds, has a 91 per cent automation rate with hundreds of robotic arms to assemble the cars while “autonomous mobile robots” carry car parts around the factory.
In terms of design, the company still looks to rivals such as Tesla and Porsche. But European carmakers lacked “smartness of the car” and the ability to connect EVs with a wider ecosystem including to Xiaomi’s smartphones and home appliances, Xiaomi’s chief financial officer Alain Lam recently told Nicolai Tangen, the head of Norway’s $1.8tn oil fund.
Noting frequent visits by European carmakers to its factory, Lam added: “I think you’ve already seen . . . European collaboration with the Chinese players . . . I think that’s what’s going to be helpful in driving the industry forward.”
But analysts say it will be challenging for Xiaomi to export its success in China to European markets where there is still strong brand loyalty especially for premium German brands.
In the first three months of the year, Chinese brands had 8.6 per cent of the new car market in the UK and Europe, but the share was much lower in countries such as Germany and France, according to Schmidt Automotive Research.
“The rite of passage to enter the premium market is extremely long,” said Schmidt’s founder, Matthias Schmidt. “Xiaomi can still be a success in Europe, but more likely at the expense of volume carmakers rather than German premiums.”
Chinese regulators last year tightened oversight of the deployment of unproven self-driving technologies after three people were killed in a crash involving a Xiaomi SU7 with semi-autonomous driving capabilities.
Chris Liu, a Shanghai-based analyst at consultancy Omdia, said Xiaomi would also lose the advantages it enjoys, such as supplier co-ordination, which have allowed the Chinese group to develop a car with advanced features so quickly and cheaply.
“A lot of their competitiveness is tied to China’s ecosystem and that’s not easily portable to Europe,” Liu said.
Germany's Debt Spiral Warning Ignored As Berlin Doubles Down On Spending
Finance Minister Lars Klingbeil is a sensitive character. Such personalities tend to react irrationally and extremely defensively to criticism. They are prone to resentment and quick retaliatory reflexes.
So it was only a matter of time before the Federal Court of Auditors, too, felt the cold anger of the thin-skinned Social Democrat. Late last year, criticism from the auditors was promptly followed by a budget cut imposed by the Finance Ministry. The move was meant as a public warning shot across the bow of the recalcitrant watchdog, which traditionally plays the role of post-mortem critic. This comes with the unpleasant habit of describing the state of public finances as they actually are — not as Berlin prefers to imagine them.
The Court’s budget was subsequently reduced from €52 million to €47 million, officially on efficiency grounds. What Klingbeil failed to achieve, however, was to silence the auditors entirely.
It has become a bad tradition: as in every year, the Court again warned of an ever-accelerating debt spiral and a fiscal policy that appears to have lost all restraint. The state is living beyond its means, said President Kay Scheller. On the contrary, one might reply: this state is living beyond our means.
The current draft budget foresees total spending of €630 billion, with nearly every third euro financed through borrowing. By 2029, another €850 billion in new debt is planned — pushing visible public debt to €2.7 trillion, or roughly 67% of GDP.
Unfortunately, the Court’s analysis of debt dynamics remains superficial. In its assessment, however, it aligns with recent criticism from the Ifo Institute.
Both institutions criticize how the state handles new debt. We know from Ifo analysis that roughly 95% of the funds from special off-budget vehicles have been diverted to cover deficits across various layers of the welfare state. Germany is not investing — and the private sector is now running on negative net investment, effectively consuming its capital base.
Dig deeper into Germany’s debt swamp and it becomes clear why Berlin consistently avoids the issue.
A recent Ifo paper calculated non-contributory benefits in the statutory pension system. Economists concluded that these hidden costs could amount to as much as 50% of GDP in the long run. This explains why the overstretched state apparatus now acts merely as a firefighter, no longer capable of maintaining infrastructure. Even Scheller’s call to raise the public investment ratio from 8% to 10% is unlikely to materialize.
One can almost be grateful that the Court of Auditors is among the few institutions still attempting to describe the fiscal reality. Yet even it avoids addressing the root causes — deindustrialization, overstretched public finances, and structurally broken budgets at all levels of government. Unsurprisingly, Scheller and his team also steer clear of politically sensitive issues such as open-border policies, which are pushing the welfare state toward implosion.
There is no mention of the costs of the self-destructive Ukraine war, nor any call to halt funding for the sprawling NGO complex or dismantle the green subsidy machine.
The debate misses the core issue. The state is operating an unlimited welfare machine while committing itself to building eco-socialist economic structures. Under such conditions, a return to a lean state is impossible.
Those calling for a return to sound fiscal policy without naming the underlying causes only make it harder to reverse the ideological crash course. Their superficial criticism suggests that the current trajectory can be maintained with cosmetic reforms. The design of the state itself is not to be questioned.
Pressure for change will only arise when rising public debt — largely financed through new bond issuance — drives up refinancing costs. If bond markets eventually turn against Germany’s debt binge, the European Central Bank will likely step in as lender of last resort, pushing inflation sharply higher.
Already, around 8% of federal spending goes toward servicing interest on the growing debt pile.
Meanwhile, the government has outlined how it intends to deal with the incoming debt crisis — by targeting households. Family co-insurance in public health care will be scrapped, as will income splitting for married couples. Inheritance taxes will be broadly increased, and expect debate over a wealth tax alongside significantly higher social security contributions.
Extraction via the CO₂ mechanism will intensify, and wealthy individuals and capable businesses will leave the country. This is not a theoretical scenario but the result of a political relapse into socialist ideology. The spiral of impoverishment is accelerating.
About the author: Thomas Kolbe, a German graduate economist, has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination
Barron's Weekend Summary:
Cover:
-Kevin Warsh testified before the Senate Banking Committee on April 21, asserting that the Federal Reserve is in need of reform and presenting himself as the solution. Nominated by President Trump to succeed Jerome Powell as chair, Warsh advocates for more aggressive monetary policy, including lower interest rates and a reduction in the Fed's $6.7T balance sheet. The conclusion of a criminal investigation into Powell's conduct has removed a key obstacle to Warsh's confirmation. While he has support among business and political circles, his proposed changes may face challenges amid persistent inflation and geopolitical tensions, particularly in relation to Iran. Current expectations suggest the Fed will maintain its interest rate range at 3.50% to 3.75% into 2027.
Interview:
-Rick Rieder, BlackRock's Chief Investment Officer of Global Fixed Income, shares insights on the Federal Reserve, bond-market prospects, and investment strategies in fixed income during an interview with Barron's Ben Levisohn and Lauren R. Rublin. Rieder, who oversees approximately $2.7T in assets and manages the iShares Flexible Income Active ETF (BINC), highlights current market conditions and potential investment opportunities. With a notable history in finance, including roles such as President of R3 Capital Partners and Vice Chairman for the U.S. Treasury, Rieder's extensive experience includes serving on various advisory committees, including those for Alphabet/Google and UBS. His notable accolades include being recognized by Morningstar for outstanding portfolio management and having multiple funds achieve Gold Medals for excellence in fixed income management.
Tech Trader:
-As Tim Cook steps down as CEO, Apple retains its status as the leading consumer electronics company, with 2.5B devices in use and a robust services business generating $109B in sales for fiscal 2025. However, under Cook's leadership, Apple has strayed from its core focus on user experience, a principle championed by Steve Jobs. Notably, newer interface changes and advertising in Maps have diluted this approach. John Ternus, the newly appointed CEO and a veteran of Apple's hardware design, is expected to realign the company with a strong emphasis on user experience. Cook transitions to executive chairman, allowing Ternus to focus on the essential integration of Apple's products and services while navigating global leadership challenges.
The Trader:
-Eli Lilly recently acquired Kelonia Therapeutics for $3.25B, with the deal potentially worth $7B contingent on milestones. Kelonia specializes in "In vivo CAR-T therapy," which offers an efficient method to treat cancer and is exploring applications for autoimmune diseases. While Eli Lilly’s stock initially dipped following the announcement, it has since rebounded slightly, although it is down 17% from a record high in November. Analysts have raised their sales and earnings forecasts, positioning the stock favorably at a multiple of 25 times expected earnings compared to the S&P 500’s 21 times. This acquisition further solidifies Lilly's presence in oncology, following its recent purchase of other companies in the same sector. Analysts express optimism, noting that this strategic move enhances Lilly's capability in cancer treatment.-Demand for retail goods remains strong despite geopolitical concerns and rising oil prices, with apparel stocks particularly appealing. EY-Parthenon's chief economist Gregory Daco notes that consumer spending continues to be resilient, even as sentiment readings appear bleak. Retail sales in March increased by 4% year over year, marking the fastest growth since November. A UBS survey reveals that U.S. consumers plan to spend 4.4% more on apparel and footwear in the next three months compared to last year. UBS analyst Jay Sole indicates that, despite the impact of Middle East conflicts and rising gas prices on consumer perceptions, the data suggests potential for increased spending. The retail sector's fundamentals are considered solid, and stocks are undervalued, trading at about 16 times expected earnings as opposed to the S&P 500's 21 times. This discrepancy could lead to higher stock prices if sales and earnings perform better than expected. Sole recommends several companies, including On Holding, Gildan Activewear, Burlington Stores, TJX Cos., Levi Strauss, and Signet Jewelers, as strong investment opportunities.
Features:
-Markets are displaying optimism despite the ongoing Iran conflict, with over 54% of participants in Barron's latest Big Money poll maintaining a bullish outlook for the next 12 months, an increase from 47% in the October survey. Bearish sentiment has decreased to 17%, and neutral responses dropped to 29%. Many investors perceive the market as fairly valued or undervalued, identifying opportunities in small-caps, international stocks, and notably, the energy sector. Conducted between March 25 and April 10, the poll garnered 105 responses from portfolio managers and strategists nationwide. However, concerns persist regarding geopolitical tensions, stagflation, and rising energy prices, with 59% noting these as primary worries. The average year-end target for the S&P 500 index was set at 7059, which is below Wall Street's consensus of 7460. -Investors are turning to trades like plumbing for job security amid AI disruption, while others can consider purchasing shares of Ferguson Enterprises, a leading plumbing distributor projected to increase by 25% over the next 12 to 18 months as it implements its growth strategy and expands market share. With over 35,000 employees and 1,700 locations, Ferguson serves a wide range of customers including contractors and DIYers through its online platform. Following its listing eligibility for the S&P 500 in August 2024, the company is generating substantial sales and is viewed as undervalued despite a recent earnings multiple increase to 23 times. Parnassus Investments, which owns a notable stake in Ferguson, praises the company’s disciplined management and capital allocation approach.
Europe:
-Amid global oil and natural gas price spikes due to war-related shortages, Texas is experiencing negative natural gas prices, particularly at the Waha pipeline intersection, where it trades at negative $7.05 per million BTUs. This situation arises from an oversupply of natural gas and insufficient pipeline capacity to transport it to demand areas like Asia and Europe. Although U.S. natural gas production is high, averaging 110 billion cubic feet daily, producers are cutting back output due to the inability to scale transportation quickly. Companies like EQT have begun to reduce production tactically, while others, such as Expand Energy, are facing declines. This paradox of demand and negative pricing underscores a significant challenge in the current energy landscape.
Emerging Markets:
-USA Rare Earth is rapidly establishing a complete rare earth supply chain, recently announcing a $2.8b acquisition of the Brazilian mining company Serra Verde Group, which controls the Pela Ema deposit of key magnetic rare earth elements. CEO Barbara Humpton emphasized the transformative nature of the deal, enhancing the company's goal of becoming a leading global producer in rare earth materials. In addition to this acquisition, USA Rare Earth is developing a mine in West Texas and has recently commissioned a magnet-making facility in Oklahoma, aiming to challenge China's dominance in rare earth processing, which currently controls 85% of global capacity. The acquisition involves a payment of $300M in cash and shares of common stock.
Commodities:
-The closing of the Strait of Hormuz during the Iran war has highlighted the vulnerability of the global supply chain, particularly concerning a worldwide sulfur shortage. Sulfur, a byproduct of oil and gas production, has seen curtailed shipments due to the conflict, leading to significant price increases—up 40% to approximately $600 per metric ton since mid-February. Economists Paul Bloxham and Jamie Culling emphasized that sulfur is vital for food production and metals mining. As a response to the shortage, countries like China are planning to limit sulfuric acid exports, exacerbating the situation. The impact extends to various sectors, including fertilizers and copper production, where a rise in sulfur prices is estimated to increase operating costs significantly.
Streetwise:
-The closing of the Strait of Hormuz during the Iran war has highlighted the vulnerability of the global supply chain, particularly concerning a worldwide sulfur shortage. Sulfur, a byproduct of oil and gas production, has seen curtailed shipments due to the conflict, leading to significant price increases—up 40% to approximately $600 per metric ton since mid-February. Economists Paul Bloxham and Jamie Culling emphasized that sulfur is vital for food production and metals mining. As a response to the shortage, countries like China are planning to limit sulfuric acid exports, exacerbating the situation. The impact extends to various sectors, including fertilizers and copper production, where a rise in sulfur prices is estimated to increase operating costs significantly.
FINANCIAL TIMES
-On Friday, the US Treasury Department's Office of Foreign Assets Control (OFAC) announced sanctions against China's Hengli Petrochemical Refinery, the country's second-largest oil refinery, due to its significant purchasing activities of Iranian petroleum amounting to billions of dollars. This action is part of a broader effort to target key entities supporting Iran's oil trade. In conjunction with the refinery sanctions, OFAC also designated 40 shipping companies and vessels associated with Iran's clandestine fleet responsible for the transportation of petroleum and petrochemicals. Treasury Secretary Scott Bessent emphasized the commitment to disrupt the network that facilitates Iran's oil sales and warned that any individuals or vessels involved in such covert operations could face US sanctions. This initiative demonstrates the ongoing strategy to isolate Iran economically and constrict its access to international markets.
-Officials from the US and Iran are scheduled to travel to Islamabad, igniting hopes for renewed negotiations between Washington and Tehran. US special envoy Steve Witkoff and Jared Kushner will depart for Pakistan to engage directly with Iranian representatives, as stated by the White House. However, Iranian officials quickly dismissed any plans for direct talks, asserting that Iran would convey its observations to Pakistan instead. Iranian Foreign Minister Abbas Araghchi arrived in Islamabad with a small delegation to prepare for a second round of peace talks, following earlier negotiations that produced a ceasefire agreement announced in early April. The outcome of these discussions is cautiously affecting oil prices, which had seen a rise amidst escalating tensions in the Gulf. Additionally, Hizbollah condemned a US-brokered pause in hostilities with Israel as meaningless, and the UK reaffirmed its claim over the Falkland Islands amid concerns over US policy shifts related to Iran.
-US prosecutors have terminated their criminal investigation into Federal Reserve chair Jay Powell, which may facilitate the Senate's confirmation of Kevin Warsh as the new central banker. Jeanine Pirro, the US attorney for the District of Columbia, announced via X that her office is closing the investigation regarding cost overruns in a Fed building project and is passing the matter to the central bank’s inspector general. This development could alleviate opposition from some Republican senators, notably North Carolina’s Thom Tillis, who had withheld support for Warsh pending the resolution of the Powell investigation. Tillis stated he would back Warsh following the Department of Justice's cessation of the investigation, which he characterized as a threat to the Fed's independence. This progress arrives shortly before Powell's term ends on May 15, amid President Trump's criticisms of Powell for maintaining interest rates.
-Google has announced a substantial investment of up to $40B in the AI start-up Anthropic, which includes an initial $10B upfront. This investment is part of Google's strategy to bolster support for Anthropic as it seeks the computing power necessary for its expansion, despite developing its own Gemini AI models. The deal values Anthropic at $350 billion pre-money and includes an additional $30 billion investment contingent on the start-up meeting undisclosed performance milestones. This transaction signifies a significant increase in Google's financial support for Anthropic amid competition with other AI firms like OpenAI. Google has collaborated with Anthropic since 2022, providing tensor processing unit chips and Google Cloud services, and plans to commence a project to bring 5 gigawatts of data-center capacity online next year, potentially worth around $200 billion over the next five years. Concurrently, Google continues to heavily invest in its Gemini models, which enhance functionalities in its search engine, Gmail, and other applications.
-US prosecutors have charged soldier Gannon Ken Van Dyke with using classified information to place profitable bets on the prediction market Polymarket concerning a mission to capture Venezuelan leader Nicolás Maduro. Allegedly using this information, Van Dyke made around 13 bets totaling $33,034, predicting outcomes related to US Forces in Venezuela and Maduro's departure, ultimately netting over $400,000. He transferred much of his winnings to a foreign cryptocurrency vault and an online brokerage account, attempting to conceal his identity following reports of suspicious trading activity linked to the mission. Acting US Attorney General Todd Blanche emphasized that federal laws regarding national security apply to prediction markets.
NEW YORK TIMES
-High-level nuclear diplomacy historically involves the U.S. Secretary of State, however, current Secretary Marco Rubio has been notably absent from critical international negotiations, including U.S.-Iran talks. Rubio missed recent meetings in Geneva and Doha and has not traveled to the Middle East since last October. His participation is limited due to his additional role as national security adviser, a position he has held for a year while also leading the State Department. In contrast, Secretary of State Antony J. Blinken during the Biden administration made extensive foreign trips. President Trump has delegated significant diplomatic efforts to associates, including Jared Kushner and Steve Witkoff, indicating a shift in traditional diplomatic roles.
-Jared Kushner and Steve Witkoff, U.S. negotiators, will travel to Pakistan to discuss the war in Iran, while Iranian Foreign Minister Abbas Araghchi is set to respond to a U.S. proposal for a peace deal. There were contradictory statements about potential meetings, with Iranian officials indicating that discussions may not take place. President Trump extended the cease-fire, but tensions continue over the Strait of Hormuz and Iran's nuclear program, complicating peace negotiations. The U.S. naval blockade of Iran will persist until an agreement is reached.
-China's ascent as an economic superpower is accompanied by its reliance on the dollar-dominated global financial system. The country aims to establish the renminbi as a globally accepted currency to enhance its trade autonomy and reduce American influence. This effort has gained traction amid geopolitical tensions, with adversaries increasingly using the renminbi to circumvent Western sanctions. China's long-term strategy to build international financial connections is yielding results, facilitating trade with nations like Iran that face restrictions. The U.S. dollar's dominance since World War II has allowed for significant American leverage, particularly through sanctions. Recent instances of transactions in renminbi highlight the emerging alternative to the established dollar system.
-Britain and Spain reacted negatively to a report suggesting the Trump administration may consider punitive actions against them for not fully supporting the war against Iran. An internal Pentagon email indicated potential measures, including withdrawing U.S. support for Britain's claim over the Falkland Islands and suspending Spain from NATO. Although the Pentagon did not confirm these options, press secretary Kingsley Wilson emphasized the need for allies to fulfill their commitments. This development raises concerns about trans-Atlantic relations, particularly regarding British sovereignty over the Falklands.
-This summer is expected to be costly and uncertain for air travel, particularly for European vacations due to volatile fuel prices linked to the Iran war. European airlines, such as Lufthansa and KLM, are cutting flights as fuel supplies dwindle. Airlines worldwide are raising fares and adding fees, leading to dim prospects for affordable travel. Travel expert Katy Nastro notes that this uncertainty resembles the challenges faced during Covid, indicating a tough year ahead for budget-conscious travelers.
-Defense Secretary Pete Hegseth stated that U.S. forces will maintain a blockade of the Strait of Hormuz indefinitely. Meanwhile, an Iranian official claimed that their fighters are ready to attack vessels in the strait. Both nations are vying for control over this crucial shipping route, with Iran permitting only certain ships to pass, while the U.S. Navy intercepts all incoming and outgoing vessels from Iranian ports. As a result, shipping operations in the area have significantly stalled, with most ships remaining idle due to fears of Iranian actions, including potential mine threats and attacks on commercial vessels.
-The Justice Department announced it is dropping its criminal investigation into the Federal Reserve and its chair, Jerome H. Powell, potentially allowing President Trump's nominee, Kevin M. Warsh, to secure confirmation. This decision followed a challenging court ruling for the inquiry, which examined whether Powell misled Congress regarding a $2.5B renovation project. Despite the investigation's conclusion, the Trump administration attempted to portray it as still active, citing an independent review by the Fed's inspector general.
-Shortly after a U.S. Special Forces member was charged with insider trading related to Nicolás Maduro's capture, the gambling platform Polymarket issued a statement affirming that "insider trading has no place" on its service, highlighting that the arrest demonstrates their system's efficacy. This sentiment mirrors the stance of various gambling companies, including DraftKings and FanDuel, which have recently emphasized their commitment to preventing illegal behaviors following high-profile insider trading cases. However, critics argue that such indictments do not address the broader issue of insider trading within gambling markets, as prediction markets and sports betting platforms are regulated differently.
-The U.S. government acknowledged that the Venezuelan government can now fund Nicolas Maduro's defense lawyers, a decision confirmed in a letter from U.S. Attorney Jay Clayton filed in Manhattan federal court. This concession follows a month after Judge Alvin K. Hellerstein questioned the rationale behind blocking the payments, suggesting a potential dismissal of the case if no action was taken. The Treasury Department has issued amended licenses permitting payments to Maduro and his wife Cilia Flores' defense team, leading them to withdraw their request to dismiss the indictment.
-The Trump administration announced a revival of the death penalty, allowing the use of firing squads and reintroducing lethal injection. Acting Attorney General Todd Blanche criticized President Biden's reduction of capital punishment, arguing it harmed victims and the rule of law. The Justice Department has approved the use of pentobarbital for federal executions and encouraged the Bureau of Prisons to adopt broader execution methods, reflecting practices in states that expanded their protocols amid challenges related to lethal injection drug availability.
-President Trump's disapproval rating has reached a peak in his second term, with Democrats gaining traction on economic issues and exhibiting greater voter motivation than Republicans. In response to mounting challenges, Republicans are likely to resort to negative campaigning, traditionally favored by Trump, to portray Democrats as elitists with soft stances on crime and cultural issues. Despite their struggles, the Republican Party benefits from a significant financial advantage of about $600 million over Democrats, enabling them to influence perceptions in battleground districts through targeted advertising and a negative campaign strategy.
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NY POST
-The White House is contemplating a takeover of Spirit Airlines as part of a strategy to utilize the airline's fleet for military operations, according to CBS News. President Trump might invoke the Defense Production Act to provide financial support to the bankrupt carrier for national defense purposes. The Pentagon would leverage Spirit's "excess capacity" for transporting troops and military cargo. However, this plan requires approval from Spirit's creditors. Spirit Airlines, known for its budget fares and bright yellow aircraft, has declared bankruptcy twice within the last two years and employs around 17,000 workers. The airline's efforts to recover financially are complicated by soaring jet fuel prices, which are significantly higher than its projected costs. Reports indicate that Spirit urgently needs assistance as it has missed interest payments, putting it on the brink of liquidation. Trump has shown interest in either bailing out or purchasing the airline, stating this would allow for a debt-free acquisition of valuable assets, anticipating profit once oil prices drop.
-Elon Musk announced that Tesla has officially begun production of its self-driving vehicle, the Cybercab, a project seen as crucial for the company's long-term recovery. In promotional videos shared on X, the Cybercab, which lacks a steering wheel and pedals, was showcased driving autonomously from the Gigafactory in Austin, Texas. Tesla labeled the vehicle as "purpose-built for autonomy." Despite the excitement around the Cybercab, Tesla's stock remains relatively stable, having decreased by approximately 14% this year. Musk is pivoting Tesla towards becoming a technology firm with a focus on artificial intelligence and robotics, in addition to self-driving cabs, with future plans for the humanoid robot, Optimus. The company has faced challenges with declining electric vehicle sales, prompting Musk to signal a future "significant increase in capital expenditures" as production and investment in advanced projects ramp up.
Inside Paris’ Most Fashionable Pilates Studio
Former football player-turned-fashion-photographer DeMarcus Allen has opened a wellness space that brings together sculpture, sound, scent, and sport.
DeMarcus Allen
Before he ever picked up a camera, DeMarcus Allen was playing ball.
A former college football player-turned-fashion photographer, his unlikely trajectory — from parole officer to shooting for the world’s leading magazines — has culminated in Dream Seven, a light-filled Paris wellness studio where sculpture, sound, scent and sport meet.
Dream Seven is just steps from Paris’s grand hotels in the 16th arrondissement, including The Peninsula, Plaza Athénée and Shangri-La, and Allen is determined to add another luxury address to the neighborhood with his 4,700-square-foot space.
Allen’s path to this moment is anything but linear. Raised in Virginia, he was a wide receiver at the University of Kentucky with early ambitions of going pro. But an injury cut those career dreams short, setting off a series of personal reinventions — first as a prison worker and parole officer, then as a graduate student in Paris studying international relations, and eventually, almost accidentally, as a fashion photographer.
“I literally just bought a camera with my stimulus check for $400 at a liquidation sale,” he says. “It sat in the box in my closet for about four months, because there were so many buttons on it I didn’t know how to use it.”
That was just before moving to Paris, where he began walking around after class taking photos of the city. He later met another American in Paris in photographer Ernest Collins, who became his mentor.
Yoga, mat and reformer pilates are offered at Dream Seven
Courtesy of Dream Seven
What began as a way to document the city soon evolved into a career. Over the past decade, Allen has shot for Elle, L’Officiel and Harper’s Bazaar, as well as commercial projects for major department stores and brands such as Sonia Rykiel. His work is defined by an emphasis on movement, often set against dramatic landscapes or architectural backdrops.
“Coming to Paris, it kind of transformed into a love for creating an otherworldly view on luxury and fashion,” he says.
His passions for sport and image, alongside movement and aesthetics, led to the creation of Dream Seven.
The idea for the studio emerged during a difficult time following a personal loss. In 2019, Allen’s mother died suddenly, prompting both an emotional and physical shift. He gained more than 30 pounds before a trip to Los Angeles led to another plot twist. Encouraged by a friend, the skeptical former football player tried a Pilates class.
“Immediately after that class, I told the instructor, ‘I’m going to open a studio in Paris,’” he says.
What followed was a slow build. During the pandemic, Allen began researching the business of wellness while continuing to develop his photography.
In 2021, he self-published a 260-page photography book, released in a limited edition of 402 copies — a symbolic number referencing 402 years since the arrival of the first slave ships in Virginia — featuring Black models in high-fashion imagery shot across nine countries.
A subsequent role leading PR and communications for the VIP experience at the Paris 2024 Olympic and Paralympic Games added another layer of understanding about luxury’s shift toward experiential, high-end hospitality.
Sculpture by Lionel Auvergne
Courtesy of Dream Seven
The result is a studio that blends the best of both worlds. “Parisian style, American smile,” Allen says, describing the combination of the city’s aesthetic precision with a warmer approach to customer service.
From the outset, Dream Seven was conceived as a fully immersive environment. Scent plays a central role. The hallway leading into the studio carries notes of a version of “Santal Calling,” developed in partnership with Ex Nihilo, with a second fragrance, “Lust in Paradise,” diffused in other spaces. Sound is equally considered through a collaboration with Bang & Olufsen, ensuring each room — whether for Pilates, yoga or meditation — has its own curated acoustic environment.
Allen had originally envisioned a smaller space, but when he found the former multibrand showroom, he knew it was the right fit.
Visually, the space leans toward maximalism-meets-minimalism, preserving original French details such as crown molding, ceiling roses and marble fireplaces, while drenching them in crisp cloud white.
The rooms are punctuated by sculptural works from Lionel Auvergne. The six pieces, depicting the human body in motion, were a gift following a previous collaboration between the two, reinforcing the studio’s central theme of movement.
That philosophy extends to the programming. Alongside mat and reformer Pilates, the studio offers a range of yoga disciplines, including vinyasa, ashtanga and yin, as well as hybrid classes.
One forthcoming concept, “L’Absense: The Class About Nothing,” departs from traditional formats altogether. Participants sit in a room with 4K projections of landscapes from African plains to Australian beaches accompanied by soundscapes, with no instruction beyond disengaging from digital life.
“The goal is not to meditate or practice, but to let the brain run wild after being tied to our phones for so many hours,” he says.
The teaching roster further strengthens its fashion industry ties. Many instructors are models signed with agencies including Marilyn and Mademoiselle, alongside professional ballet dancers.
Courtesy of Dream Seven
If the aesthetic and experiential elements draw heavily from art and luxury, the studio’s foundation remains rooted in sport. Allen’s former teammate Champ Kelly, now assistant general manager of the Miami Dolphins, provided some seed investment, though the bulk is self-funded.
Even the reformer machines carry personal significance: each one has the moniker of Allen’s mother and her nine sisters, who helped raise him, etched on gold plates and can be booked on a first-name basis.
The personal stories are central to Dream Seven’s positioning. Unlike many recent entrants into the Parisian fitness space, often driven by private equity or franchise models featuring nightclub lighting and boom-boom beats, Allen frames his project as an extension of the emotional importance of healing rather than a purely commercial venture.
That distinction may prove significant as luxury’s relationship with wellness evolves. While major groups have built extensive portfolios across fashion, beauty and hospitality, wellness is increasingly seen as the next opportunity, particularly among younger consumers who view health as integral to lifestyle.
For Allen, however, the ambition is as much about impact as scale. An accident in late 2023, which required reconstructive surgery,
reinforced the role that movement — particularly yoga and meditation — would play in the studio’s offering.
“These are the things that saved my life,” he says.
The studio will also introduce massage therapy, including athletic performance, lymphatic drainage, deep tissue and cupping. Treatments will start at 120 euros, an accessible price point that is integral to Allen’s personal philosophy.
“I don’t want to neglect people from care and from feeling good. It’s not because you earn a certain amount that you’re allowed to feel good,” he says.
Inside Dream Seven.
Courtesy of Dream Seven
Looking ahead, Allen sees Dream Seven as the foundation for a global wellness concept that extends beyond Paris. Rather than a single-location studio, his ambition is to scale the model into other key fashion capitals, building what he describes as a movement rooted in community, experience and a more inclusive vision of luxury.
“This isn’t just about opening studios,” he explained. “It’s about creating something people can be a part of.”
Why Cohere is merging with Aleph Alpha
Canadian AI startup Cohere is taking over Germany-based Aleph Alpha with support from Schwarz Group (parent company of grocery chain Lidl). With the blessing of their governments, the companies intend to offer a sovereign alternative to enterprises in an AI landscape dominated by American players.
As companies that develop large language models, Aleph Alpha and Cohere have been hometown stars, while still lagging far behind OpenAI and the likes globally. But similarities aside, this isn’t an alliance between equals. Last valued at $6.8 billion, Cohere will lead the new entity that will incorporate Aleph Alpha, subject to approval by authorities and shareholders.
Schwarz Group, one of Aleph Alpha’s main shareholders, is already fully onboard with the deal. The retail giant will now become a strategic backer of the new entity with €500 million in structured financing (approximately $600 million) — and with expectations that it will make use of STACKIT, the sovereign cloud service of its IT division Schwarz Digits.
As part of its investment, Schwarz Group is also acting as Cohere’s lead investor in the Series E round of funding — and it already set the price tag. According to German business media outlet Handelsblatt, the term sheet anchors the valuation at around $20 billion.
This would be a significant leap that combined revenue alone can’t justify. While Cohere reported $240 million in annual recurring revenue in 2025, Aleph Alpha had previously generated little revenue and significant losses. But investors are betting that teaming up will improve their odds.
They may not be alone in their thinking. Elon Musk’s AI startup xAI has reportedly discussed a three-way partnership with France’s Mistral AI and Cursor, which SpaceX recently secured the option to buy. But it remains unclear whether the French company would be interested in risking undermining the very positioning as an alternative to U.S. tech that boosted its revenues.
Cohere, too, is hoping to get tailwinds from enterprises looking for alternatives to AI providers that may not meet their requirements when it comes to privacy and independence. The new entity plans to target highly-regulated industries — including defense, energy, finance, healthcare, manufacturing and telecommunications— as well as the public sector.
Aleph Alpha also developed specialized language models targeting enterprises and public institutions in Europe, such as the PhariaAI suite. A subsequent pivot and the departure of its cofounder and CEO Jonas Andrulis made its strategy and leadership less clear, but its team of 250 people and their expertise could still complement Cohere.
“Their focus on small language models, European languages and tokenizers is a really complementary one to our own, which is more of a general focus on large language models,” Cohere CEO Aidan Gomez said in a press conference announcing the plans on Friday.
The press conference’s lineup was also telling. Rather than Aleph Alpha’s co-CEOs, it was co-founder Samuel Weinbach who joined Gomez on stage alongside Schwarz Group’s chief digital officer Rolf Schumann. The event also featured German digital minister Karsten Wildberger and his Canadian counterpart Evan Solomon.
Amid growing tensions with the United States Canada has been increasingly keen to sign bilateral initiatives with a variety of partners, including Germany. With a shared concern for privacy and security, the two countries recently launched a Sovereign Technology Alliance to “strengthen sovereign AI capacity and reduce strategic technology dependencies.”
The question remains whether European organizations will view an initiative involving Canada as sufficiently sovereign, or whether they will trust that the alliance will remain transatlantic in the long run. According to Gomez, “Cohere will become a Canadian-German company.” But ownership could soon become less clear if an IPO is still in the cards.