
Stocks are flattish this morning after Trump called off strikes on Iran. Bonds and MBS are flat.
Trump has called off strikes on Iran after requests from Middle Eastern leaders. In a Truth Social post, Trump said: “I have been asked by the Emir of Qatar, Tamim bin Hamad Al Thani, the Crown Prince of Saudi Arabia, Mohammed bin Salman Al Saud, and the President of the United Arab Emirates, Mohamed bin Zayed Al Nahyan, to hold off on our planned Military attack of the Islamic Republic of Iran, which was scheduled for tomorrow, in that serious negotiations are now taking place, and that, in their opinion, as Great Leaders and Allies, a Deal will be made, which will be very acceptable to the United States of America, as well as all Countries in the Middle East, and beyond. This Deal will include, importantly, NO NUCLEAR WEAPONS FOR IRAN! Based on my respect for the above mentioned Leaders, I have instructed Secretary of War, Pete Hegseth, The Chairman of The Joint Chiefs of Staff, General Daniel Caine, and The United States Military, that we will NOT be doing the scheduled attack of Iran tomorrow, but have further instructed them to be prepared to go forward with a full, large scale assault of Iran, on a moment’s notice, in the event that an acceptable Deal is not reached. Thank you for your attention to this matter! President DONALD J. TRUMP”
Builder sentiment improved in May, according to the NAHB. That said, the index is still struggling. “Recent increases for long-term interest rates will continue to hold back home buyer demand,” said NAHB Chief Economist Robert Dietz. “Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges.”
Nearly 1/3 of builders cut prices in May, with a typical reduction of 6%. We saw big decreases in gross margins for the big publicly-traded builders, so the price cuts seem to be universal. Builders are still sitting on inventory. The supply of homes for sale is quite elevated.

There is an article in the Wall Street Journal about builders getting sued for shoddy construction. The biggest homebuilders, from Lennar to Pulte are seeing increased legal liabilities. For example, D.R. Horton’s legal liabilities have increased from roughly $400 million in 2018 to $1.14 billion today. Lennar has also increased provisions.
Chicago Fed President Austan Goolsbee said “We’ve got an inflation problem … services inflation is high and rising and that’s probably not coming from oil, it’s probably not coming from tariffs.” On the subject of Kevin Warsh, Goolsbee said that the two were “foxhole buddies” from the 2007-2009 financial crisis: “I feel like I got a window into his character at a time of a lot of stress, and I think he’s coming in with some new ideas,” Goolsbee said. “I’m excited for him to get there.” Kevin Warsh is scheduled to be sworn in this Friday.
On the subject of tariff inflation, the clock runs out on them sometime in mid-June. At that point, it will take Congressional legislation to impose tariffs, which won’t be forthcoming. All of the tariffs will revert to pre-Liberation Day levels. This will certainly help push inflation lower, although it may take a while to flow through. Lower oil prices will go a long way there as well.














