TheChek News Flow

Selecting which Trump trades turn into Trump investments is just as difficult this time around as it was in his first term. The right bets might seem obvious now, but they did back then, too.

The Trump trade is over. Now markets are thinking about the Trump investments.

The challenge is to split out what he really plans to do, and in what order, from what was merely campaign rhetoric. Before the 2016 result, the Atlantic wrote that Donald Trump supporters take him seriously, but not literally, while his critics take him literally, but not seriously.

Markets are currently putting everything they like into the seriously camp, and dismissing all the bad stuff as literal, mere campaign rhetoric. This smacks of too much optimism, the same mistake they made last time.

After taking office in January 2017, Trump prioritized things that markets didn’t like. He moved fast on immigration, especially from Muslim countries, pulled out of the Trans-Pacific Partnership trade deal and renegotiated trade with Mexico and Canada, then wasted energy trying to ditch Obamacare.

He didn’t literally make Mexico pay to build a border wall, but he was serious about reducing illegal immigration. Investors had to wait until the end of the year to get the tax cuts they anticipated, while regulatory easing took a long time too.

This time the same four big policies are in play. Again two are broadly bad for investors, and two broadly good. Clampdowns on immigration and high tariffs would hurt the economy, while lower corporate taxes and less regulation would help economic growth and stock prices.

The order they come will be critical, and remains entirely unknown. Yet investors have been piling on the happy thoughts as they buy U.S. stocks, especially smaller companies, and dump Treasurys. The bet is on higher growth and less red tape.

This might be merely a trade. Already the most obvious—and deeply flawed, in my view—Trump trade has imploded. Trump Media and Technology Group, or DJT, the money-losing social-media operation which he part-owns, had plummeted on Friday morning to half the value it hit during bets on him winning in late October, before a partial rebound. It is down 30% from its high the day after the election. The initial surge in banks and the dollar and the plunge in the Mexican peso all had big reversals.

Trump trades lasted longer after the 2016 election, but then faded before he entered the Oval Office. Could this week’s jump in stocks be a similar short-term bounce?

One argument is that the gains are what normally happen after an election, but on steroids. There was a lot of uncertainty ahead of the vote, because the polls—which proved deeply flawed—were 50-50, and many investors were concerned that Trump would not concede defeat if he lost. The VIX index of implied volatility hit 23 at the end of October, before plunging to 15. The trope that investors hate uncertainty has some truth to it, and that fall in the VIX almost mechanically pushes up stocks.

Chris Brightman, chief executive of Research Affiliates, says stocks have tended to trend upward after past elections for about 20 trading days as uncertainty is resolved, before the effect fades.

Another argument is that it is much easier for Trump to implement the stuff markets don’t like than to cut taxes and regulation. He can quickly impose tariffs and limit immigration with executive orders, even if he is highly unlikely to follow through literally on using the army to round up illegal immigrants for deportation. Cutting taxes needs Congress—where the House election outcome remains uncertain, although looks likely to go Republican—while regulatory moves are sure to be challenged in court.

Even if we were willing to ignore the timing and invest for his full term, it isn’t obvious how his major policies would interact. Supply shocks from ejecting immigrants and from higher tariffs are in principle inflationary in the short run. But in the long run they slow growth, which should lower stocks and Treasury yields.

Tax cuts are inflationary and pile on even more government debt, which should lift stocks and Treasury yields. Removing bad regulation should raise productivity, which increases growth without inflation and pushes up Treasury yields, while lowering the cost of compliance is great for stocks.

Worse still, we don’t know how far he will go with his policies. Whether Trump should be taken literally about the scale of tariffs, or whether this is just a negotiating tactic as some tariffs proved in his last term, is unclear. Likewise, the current administration has already clamped down on immigration. Trump can do more to secure borders but if he doesn’t literally force millions to leave, the impact on the economy wouldn’t be serious.

On taxes, again it was right to take him seriously but not literally. One example was the estate tax: In 2016 Trump said he would abolish it, then kept it, but with much larger exemptions. The broad direction would clearly be lower taxes and an extension of the 2017 tax cuts, but don’t assume he will follow through on the (very problematic) promise to scrap taxes on tips.

He has said he will make billionaire Elon Musk his “efficiency czar,” which suggests a return to the pre-Nixon days of light-touch regulation. But voters like clean air, clean water, safe vehicles and reliable banks. Picking which rules to ditch and which to keep will require time-consuming assessments, while a slash-and-burn approach to red tape could alienate many supporters.

Selecting which Trump trades turn into Trump investments is just as difficult this time around as it was in 2016. They might seem obvious now, but they did back then, too.

The resulting company would easily be the world’s second-biggest crude producer, after Saudi Arabia’s Aramco, pumping almost three times the output of Exxon Mobil

Moscow is working on a plan to merge its biggest oil companies into a single national champion, a deal that would tighten President Vladimir Putin’s grip on global energy markets and Russia’s wartime economy.

Under one scenario being discussed, state-backed giant Rosneft Oil would absorb fellow state producer Gazprom Neft—a subsidiary of natural-gas exporter Gazprom—and independently-owned Lukoil, people familiar with the discussions said. All three are under U.S. sanctions.

The resulting company would easily be the world’s second-biggest crude producer, after Saudi Arabia’s Aramco. Pumping almost three times the output of Exxon Mobil, the biggest American producer, a combined entity could enable Russia to wring higher prices from customers in places such as India and China.

Talks among executives and government officials have taken place over the past few months. They may or may not result in a deal, and details of any plan could change, the people said.

Speculation about mergers and takeovers periodically sweeps Moscow and St. Petersburg but no big energy deals have transpired in the past decade. Obstacles include opposition from some Rosneft and Lukoil executives as well as the challenge of amassing the funds to pay Lukoil shareholders, some of the people said.

A Kremlin spokesperson said the administration had no knowledge of a deal.

A Rosneft spokesman said that The Wall Street Journal’s reporting was false, based on information available to him. He said in an email that the Journal’s article “may be aimed at creating competitive market advantages in the interests of other market participants.” Asked by phone what information Rosneft considered to be inaccurate, the spokesman said he wasn’t allowed to answer questions.

A Lukoil spokesman said neither the company nor its shareholders were in the process of merger negotiations “with any parties as this would not be in the interest of the company.”

Spokesmen for Gazprom Neft and Gazprom didn’t respond to requests for comment.

The talks underline Putin’s desire to muster the energy sector to support his war effort, the people familiar with the talks said. The Russian president, some of them said, envisions a juggernaut able to compete with Saudi Arabia at a time when oil demand, while still enormous, is slowing in the face of greener alternatives.

Oil and gas are the lifeblood of Russia’s economy, supplying almost a third of federal revenue and handing Putin influence around the world. Russia’s success at stabilizing its economy in the face of Western sanctions is in large part thanks to its oil industry.

A champion exporter may be better able to withstand Western sanctions, which have complicated exports, hamstrung big new oil-and-gas projects and snarled payments, the people said. The talks, while influenced by the war in Ukraine, are also meant to prepare Russia for an eventual postwar thawing in economic relations.

Bringing Lukoil under direct state control would mark a big step toward fully unwinding the privatization of Russia’s mineral riches after the collapse of the Soviet Union.

When he came to power a quarter-century ago, Putin ruthlessly reorganized the fragmented post-Soviet oil industry, arresting oligarchs and redistributing power to his allies. Today’s handful of players maintain different levels of independence from the government, but all are seen as ultimately compliant to the Kremlin’s wishes. The leaders of the three oil giants are considered among the most powerful players in Putin’s orbit.

For Putin, a combination carries risks. The presence of oil company fiefs prevents any one boss from gaining too much clout. Russia’s oil companies cooperate as part of the OPEC+ cartel, but compete for market share and vie for favor with the government.

Supporters of the plan believe a combined company could make significantly more money, some of the people said. One reason: Oil from all three companies could be sold with the help of Lukoil’s big Dubai-based trading arm, Litasco.

Rosneft in particular has faced difficulties maximizing profits on its exports. Western sanctions allow Russia to sell oil, but seek to limit how much it earns and where the crude can go.

Since early in the war, Rosneft has relied on a secretive network of trading and shipping firms run by a little-known trader from Azerbaijan to send crude to buyers, the Journal reported this year. At times, this operation has struggled to extract payments from India and elsewhere, according to people familiar with its business and documents seen by the Journal.

As well as the trading unit, Lukoil has reserves in the Middle East, Africa, the Americas, and in Russia. One of Russia’s two remaining major independent producers, Lukoil also has a gas-station network, owns refineries in Eastern Europe and has a Moscow stock listing.

A week after the Ukraine invasion in 2022, Lukoil’s board called for an end to the fighting in an open letter to shareholders, customers and employees, making it a rare Russian company to have publicly opposed the war. Ravil Maganov, then chairman, died when he fell from a hospital window in Moscow six months later, state media reported at the time.

Longtime boss Vagit Alekperov—a former deputy Soviet energy minister, and Russia’s richest person last year, according to Forbes—officially resigned as Lukoil president in April 2022, days after being sanctioned by the U.K. He remains the biggest shareholder.

A deal would spark a shake-up in the Russian corridors of power. A main player in the talks is Rosneft boss Igor Sechin, a Putin confidant since the 1990s and former deputy prime minister.

Under Sechin, Rosneft expanded into a massive producer, partnered up with the likes of Exxon and received investments from BP and Qatar’s sovereign-wealth fund. All the while, the U.S. said when it sanctioned him in 2014, Sechin displayed “utter loyalty to Vladimir Putin.”

He has played a major role in foreign relations because of Rosneft’s strategic ties with foreign governments. His 35-year-old son died earlier this year.

It isn’t clear if Sechin would head any eventual combined company, some of the people familiar with the talks said. Another possible leader of the group could be Aleksandr Dyukov, who is credited by analysts with having introduced Russia’s most advanced oil-extraction technology as CEO of the smallest of the three producers, Gazprom Neft.

The Week’s Biggest Funding Rounds: Slow Week Produces Small Venture Rounds

Regular readers know this is usually a top 10 list of the biggest rounds of the week. However, this week is a little different — mainly because of the election.

Very few companies announced funding rounds this week, and the ones that did were on the smaller side — obviously aside from Physical Intelligence’s massive one. Many startups clearly didn’t want their funding news overshadowed by a presidential election. So instead of running a list of 10, we’re going with a top five.

1. Physical Intelligence, $400M, robotics: Physical Intelligence, a startup developing brains for a wide array of robots, raised a $400 million round at a $2 billion valuation led by Jeff Bezos, Lux Capital and Thrive Capital, per The New York Times. The San Francisco-based company had raised a $70 million seed round at a valuation of about $400 million back in March. Physical Intelligence is just the latest startup looking to use AI to improve how robots operate and create foundational software that could be used on a variety of robot models instead of having to create separate operating software for each individual model. Investors already have placed big bets in the intersection of robotics and its AI-enhanced foundational software — especially Bezos. In February, Sunnyvale, California-based Figure, which is developing AI-enhanced robots that it hopes will be able to perform dangerous jobs and alleviate labor shortages, raised a huge $675 million round at a pre-money valuation of roughly $2 billion. That round included investments from Nvidia, Bezos’ Explore Investments and others. In July, Pittsburgh-based Skild AI — also developing brain models that can be used in a variety of robots and for different tasks — raised a $300 million Series A led by Coatue, Lightspeed Venture Partners, SoftBank Group and Bezos, through his Bezos Expeditions. The funding valued the company at $1.5 billion. Overall, this has been a good year for robotics startups receiving funding.

2. Precision Neuroscience, $93M, neuroscience: New York-based Precision Neuroscience, a developer specializing in brain-computer interfaces, raised a $93 million Series C, per reports from medical news outlets citing financial filings. Investors were not named. Founded in 2021, the company has raised $146 million, per Crunchbase.

3. AmplifyBio, $50M, biotech: Ohio-based drug development company AmplifyBio received a $50 million investment — with ability to scale to $65 million — from Vitrian for its new manufacturing enablement center in New Albany, Ohio. Founded in 2021, the company has raised nearly $330 million, per Crunchbase.

4. Inquis Medical, $40M, medical: Menlo Park, California-based Inquis Medical, a medical technology company specializing in thrombectomy systems, locked up a $40 million Series B led by Marshall Wace. Founded in 2020, this is the first round with a disclosed amount, per Crunchbase.

5. PrognomiQ, $34M, healthcare: San Mateo, California-based PrognomiQ, a healthcare company developing detection tests for cancer and other complex diseases, announced a $34 million Series D led by Seer. Founded in 2020, PrognomiQ says it has raised more than $135 million.

There were two big $100 million rounds outside the U.S. this week.

Summary

Nov 8 (Reuters) - Spirit AeroSystems (SPR.N), opens new tab and Boeing (BA.N), opens new tab are close to reaching a funding agreement that would give a cash lifeline to the struggling Boeing supplier, an industry source familiar with the matter said.

A deal could be announced in the next few days, said the source, who spoke on condition of anonymity about the private talks, although he cautioned that it has not yet closed.

Spirit Aero is juggling financial and production challenges, having issued a liquidity warning on Tuesday after four years of losses. It expects to burn around $450 million to $500 million in cash over the last three months of 2024 and first half of 2025, according to filings.

Boeing, which plans to buy its one-time subsidiary, is trying to revive its battered supply chain and jet production after a weeks-long strike halted most of its output.

Spirit could not be immediately reached. Boeing declined to comment.

Spirit said this week it is seeking ways to raise liquidity including possible customer advances. The supplier has previously disclosed it has drawn down a $350-million bridge loan set up when Boeing agreed to acquire the supplier, and previous advances from both the U.S. planemaker and rival Airbus (AIR.PA), opens new tab that Spirit has not repaid.

The Wichita, Kansas-based aerostructures company is a key supplier to the world's two major commercial planemakers.

Spirit had been weighing furloughs of workers on its 737 MAX fuselage program after it ran short on storage space and cash, a second source close to the matter said.

In late October, Reuters first revealed a decision by the supplier to temporarily furlough 700 employees, who produce parts for Boeing's 767 and 777 jets, due to space constraints.

Separate industry sources said cash support from Airbus is also an option, as the European company has warned its A350 deliveries could be disrupted next year due to concerns over the timely delivery of fuselage parts from Spirit.

“Spirit is a cash story now,” a third source said.

Airbus declined to comment.

All the sources spoke about private conversations on condition of anonymity.

Boeing CEO Kelly Ortberg reiterated the planemaker's commitment to an all-stock deal to acquire the supplier in 2025 during a recent call with analysts.

Ties with Tehran, which sought to assassinate president-elect and other former U.S. officials, are likely to be even worse this time around

President-elect Donald Trump plans to drastically increase sanctions on Iran and throttle its oil sales as part of an aggressive strategy to undercut Tehran’s support of violent Mideast proxies and its nuclear program, according to people briefed on his early plans.

Trump took a dim view of Iran during his first term, aborting a six-nation agreement with Tehran—known as the Joint Comprehensive Plan of Action—that sought to curb Iran’s nuclear-weapons work. He also imposed what was described as a “maximum pressure” strategy in hopes Iran would abandon ambitions for a nuclear weapon, stop funding and training what the U.S. considers terrorist groups and improve its human-rights record.

But when he takes office on Jan. 20, Trump’s approach to Iran is likely to be colored by the knowledge that its agents tried to assassinate him and former top national-security aides, former Trump officials said. The FBI thwarted an Iranian plot to assassinate Trump before he was re-elected president, the Justice Department said in a case unsealed Friday.

An Iranian operative told law enforcement that an official in Iran’s paramilitary Revolutionary Guard directed him in September to put together a plan to surveil and ultimately kill Trump, federal prosecutors in Manhattan said in the criminal complaint.

“People tend to take that stuff personally,” said Mick Mulroy, a top Pentagon official for the Mideast in Trump’s first term. “If he’s going to be hawkish on any particular country, designated major adversaries, it’s Iran.”

The people briefed on Trump’s plans and in touch with his top advisers said the new team would move rapidly to try to choke off Iran’s oil income, including going after foreign ports and traders who handle Iranian oil. That would re-create the strategy that the former president adopted in his first term, with mixed results.

“I think you are going to see the sanctions go back on, you are going to see much more, both diplomatically and financially, they are trying to isolate Iran,” a former White House official said. “I think the perception is that Iran is definitely in a position of weakness right now, and now is an opportunity to exploit that weakness.”

The officials familiar with Trump’s plan didn’t provide details of how precisely he would increase the pressure on Iran.

Israel in recent months has killed the leaders of Iranian proxies Hamas in Gaza and Hezbollah in Lebanon, and damaged much of the groups’ command structure. It launched strikes inside Iran, in retaliation for an Iranian missile attack on Israel, that severely damaged Tehran’s missile-production capabilities and air defenses.

Iran has vowed to respond to the Oct. 26 Israeli attack, but it is unclear whether Trump’s election victory this week will change Tehran’s calculus or timing.

Brian Hook, who oversaw Iran policy at the State Department in Trump’s first term and is now in charge of the Trump transition for the department, said Thursday that the president-elect had “no interest” in seeking to overthrow Iran’s rulers.

But Hook, in an interview with CNN, noted that Trump has pledged to “isolate Iran diplomatically and weaken them economically so they can’t fund all of the violence” perpetrated by Hamas, Hezbollah, the Houthis in Yemen and other proxies in Iraq and Syria.

Hook is widely expected to receive a top national security job in Trump’s second term. During the first term, he championed the maximum-pressure campaign to squeeze Iran. Advocates say it reduced the funds available to Tehran’s security services. But it failed to halt Iran’s operations via its proxies or its nuclear work.

ran’s oil exports surged last year amid quiet negotiations to free Americans detained by the regime, leading Republicans to accuse the administration of not fully enforcing the current oil sanctions, which the White House has denied.

Trump had reimposed a full embargo on Iran’s crude exports in 2019, and its shipments collapsed to 250,000 barrels a day by early 2020—substantially less than their level two years earlier. But after Biden took office, they reached a six-year high in September this year.

Once back in the White House, Trump could face the same dilemma that Biden did in curbing oil sales by Iran and other adversaries such as Venezuela—the risk that oil prices could rise and spark inflation.

Robert McNally, a former U.S. energy official, said the Trump administration could impose U.S. bans on Chinese ports that receive Iranian oil and also sanctions targeting Iraqi officials that fund Iran-backed militias. Even expectations of an aggressive enforcement of the oil embargo would be enough to cut at least 500,000 barrels a day in mostly Chinese oil purchases, he said.

“It’s going to be maximum pressure 2.0,” said McNally, who now heads Washington, D.C.-based consulting firm Rapidan Energy Group.

Helima Croft, the chief commodities strategist at Canadian broker RBC Capital Markets, said Trump’s senior advisers have expressed strong support for an Israeli strike on Iran’s nuclear and energy facilities. Another person in touch with Trump’s team said the new president might be less inclined to oppose such a move by Israel.

Biden sought and received Israeli assurances before its Oct. 26 Iran strike that it wouldn’t hit nuclear sites or energy infrastructure, which the U.S. feared would raise oil prices and lead to a wider regional escalation.

Iranian President Masoud Pezeshkian said late Wednesday the result of the U.S. election didn’t matter to his country. “To us, it does not matter at all who has won the American election, because our country and system relies on its inner strength,” Pezeshkian was quoted as saying by state news agency IRNA.

Yet Iranian officials are divided over whether the Islamic Republic can resist added economic pressure. “The situation may become catastrophic for Iran’s oil industry,” said an Iranian oil official. He said China is already buying the country’s crude at a discount while Iran is suffering from natural-gas shortages—used for heating and industry—due to years of underinvestment.

But an Iranian diplomat said Tehran would offset the U.S. restrictions by deepening its trade partnerships through the Asia-focused Shanghai Cooperation Organisation and other alliances. It could also respond to the pressure by stepping up its nuclear program or threatening oil facilities in the Middle East, he said.

Despite the mutual hostility, some who worked for Trump don’t rule out an eventual U.S.-Iran diplomatic deal in his second term. Trump likes to make deals, Mulroy said, but only “if it’s his deal.”

Nicolas Chambon demolished an older home on the Venetian Islands property and built a roughly 6,000-square-foot modern residence in its place

When French shopping-center heir Nicolas Chambon set out to build a waterfront house in Miami Beach, Fla., six years ago, he paid particular attention to the rooftop terrace. When such spaces have “turf and no shade,” he said, “you don’t want to go.”

Instead, Chambon planted a dozen mature trees and other plants on his 3,000-square-foot rooftop, adding a pergola and dining and seating areas for enjoying sunset views. “For me, it’s the best place in the home to go have a drink,” he said.

Now, planning to spend more time in Europe than he expected, Chambon is listing the Venetian Islands home for $33 million.

Chambon is president of the France-based commercial real-estate firm Socri. He is also a partner in two franchise locations of Galeries Lafayette, the famed Parisian department store.

He fell in love with Miami during a visit for New Year’s Eve in 2018, he said, and paid $5.85 million that year for a ¼-acre property with 60 feet of frontage on Biscayne Bay. After razing an older home, he spent six years designing and building a roughly 6,000-square-foot modern residence, planning to live there permanently.

To bring a European sensibility to the home, Chambon enlisted French architects and designers to work with a local team. “We made the most of the square footage,” he said. “That’s what we do in Europe because we don’t have the space.”

The residence has five bedroom suites, each with its own terrace, en suite bath and walk-in closet. The 1,400-square-foot primary suite has two walk-in closets and two bathrooms. The house also has a wood-and-glass elevator, a home theater and an office.

Chambon said his design team spent a lot of time working on the floor plan to make it as efficient as possible, and used a lot of light wood and glass to keep things airy. He said 70% of the home’s facade is glass. “What I noticed here in Miami is everything goes fast,” he said. “I really wanted to make it beautiful and not rush.”

A focal point of the property is the landscaping. Chambon worked with a European landscape architect and planted dozens of full-height trees for privacy. Outside, there is an 80-foot infinity-edge pool and a hot tub facing the bay. A water feature contains a sculpture by the artist Jean Martin.

Chambon said putting full-height trees on the roof was challenging. “We have very big planters because they need soil,” he said. The trees are secured by cables affixed to the structure of the house.

Chambon declined to say how much he spent on design and construction, but said he didn’t cut corners because he intended to live there. When the house was completed recently, however, Chambon never moved in. “For now, I have too much on my plate in Europe,” he said. “There will be more houses. Maybe I can keep the next one for me. That’s the plan.”

Listing agent Dina Goldentayer of Douglas Elliman said the Venetian Islands aren’t known for large homes, but Chambon’s residence, with multiple terraces and a rooftop lounge, has estate-like qualities.

Prices in the Venetian Islands have been strong, with several home sales over $30 million. Overall, Miami’s luxury market didn’t have the pre-election jitters experienced in other places, Goldentayer said, citing a recent $72 million sale on North Bay Road in Miami Beach. “The sentiment has been that Florida is going to continue to rock ’n’ roll,” she said.