Group 1 - Nobel Prize-winning economist Paul Krugman criticized President Trump's nomination of Kevin Warsh as Fed Chair, calling it "a big humiliation for the Fed" [1] - Krugman warned that the biggest risk to the dollar is not a rival currency but the potential for it to be replaced by "nothing," leading to a chaotic international monetary system [2] - He expressed skepticism about Warsh's record, stating he is a "hawk" only when a Democrat is in the White House and described the selection process for Fed Chair as degraded [3] Group 2 - Krugman noted that tariffs have raised prices by about 1% compared to what they would have been without them, ahead of a Supreme Court hearing on Trump's tariff authority [4] - He highlighted a $500-600 billion AI capital expenditure boom that is increasingly risky, with a shift from retained earnings to debt funding [5] - Goldman Sachs forecasts gold could reach $5,400 by year-end, driven by sustained central bank buying, while JP Morgan targets $6,300 with expectations of 800 tons of official-sector purchases in 2026 [5]

Core Insights - Flexsteel Industries reported a strong second-quarter fiscal 2026 performance, with net sales reaching $118.2 million, a 9% increase from $108.5 million in the prior-year period, marking the ninth consecutive quarter of year-over-year sales growth [2][6][3] - The company achieved a GAAP operating income of $9.0 million, or 7.6% of sales, with adjusted operating income increasing by 35% compared to the previous year [1][6] - Management highlighted the impact of tariffs on revenue, estimating tariff-related revenue at approximately $9.5 million, and indicated potential margin dilution in the second half of the fiscal year due to higher-cost inventory [5][9] Financial Performance - Net sales for the quarter were $118.2 million, up 9% from $108.5 million in the prior-year period, driven by higher unit volume in sourced soft seating products and pricing from tariff surcharges [2][6] - GAAP operating income was reported at $9.0 million, with an adjusted operating income increase of 35% from $6.7 million in the prior-year quarter [1][6] - The company ended the quarter with $36.8 million in cash, $126 million in working capital, and no bank debt, with a sales backlog of $82.4 million [4][15][16] Market Dynamics - Management noted that the furniture market is influenced by uneven demand, shifting consumer behavior, and evolving tariff policies, which are key variables affecting performance [3][14] - The company experienced gains in soft seating products, but these were offset by a nearly 50% decline in Homestyles ready-to-assemble sales [4][12] - Flexsteel's strategic focus on large independent retailers is expected to drive growth through share gains and expanded penetration in the market [13] Operational Insights - The company emphasized structural margin gains from cost discipline and productivity improvements, with management stating that margin performance benefited from sales leverage and thoughtful product portfolio management [7][6] - New products accounted for approximately 30-40% of overall sales, with a strong pipeline expected to contribute to future growth [11][12] - Management is pursuing additional cost initiatives to offset tariff impacts and has paused forward guidance due to uncertainty around demand and tariffs [10][9]

Core Insights - Stocks and Treasurys experienced a partial recovery following President Trump's comments regarding Greenland, indicating a potential shift in market sentiment [1] - The U.S. dollar faced challenges, recording its worst weekly performance in eight months, suggesting a weakening in its relative strength against other currencies [1] Market Reactions - The recovery in stocks and Treasurys may reflect investor optimism or a response to geopolitical developments, particularly those involving the U.S. administration [1] - The significant decline in the dollar's value could impact international trade and investment flows, as a weaker dollar generally makes U.S. exports cheaper and imports more expensive [1]

Core Viewpoint - The article discusses the challenges facing the Chinese economy, particularly focusing on deflation as an indicator of economic contraction, and highlights concerns regarding tariffs, trade wars, and near-shoring impacting the economy [1]. Group 1: Economic Indicators - Deflation is identified as a significant sign that the domestic economy in China is contracting [1]. - The article suggests that external factors such as tariffs and trade wars are exacerbating the economic situation [1]. Group 2: Analyst Background - The author has over 35 years of experience in the investment field, having worked as both a sell-side and buy-side analyst, as well as a portfolio manager for debt and equity funds [1]. - The focus is on providing fundamental views and analyses of companies and funds, emphasizing the importance of operating and financial forecasts in driving valuations [1].

Group 1 - The article discusses the implementation of a 25% tariff on chips, which may impact the semiconductor industry significantly [1] - Oil prices have experienced a decline, indicating potential shifts in the energy market and consumer behavior [1] - Despite concerns over affordability, consumers continue to borrow and spend, suggesting resilience in consumer confidence and spending patterns [1]

Core Insights - The article highlights a trend of reduced comfort in consumer products, specifically mentioning softer couch cushions and a limited selection of jacket sizes [1] Group 1 - The industry is experiencing a shift towards softer materials in furniture, indicating a potential change in consumer preferences [1] - There is a noted decrease in the variety of sizes available for jackets, which may reflect supply chain constraints or changing fashion trends [1]

Supply Chain Shift - US tariffs on Chinese goods led to a dramatic supply chain shift in the video game console industry [1] - China's share of US console imports decreased from nearly 90% to less than 5% due to tariffs as high as 88% [2] - Vietnam's share of US console imports increased to 75% or more with tariffs of about 10% or less [2] - Vietnamese manufacturers' monthly exports of video game consoles to the US increased from less than 30 million USD to over 400 million USD [3] Production and Investment - Key suppliers for Sony, Microsoft, and Nintendo have been building or acquiring new factories and warehouse space in Vietnam since early 2024 [3] - Analysts predict that production lines will not revert back to China, even if the tariffs disappear [3] Market Impact - US holiday shoppers may not have noticed the supply chain realignment because store shelves have remained stocked [4] - Consumers may have noticed price increases on some older video game console models due to the tariffs [4]

Market Trends & Drivers - Speculative froth in futures or options markets is contributing to exponential price increases in certain commodities [7] - Electrification efforts are creating industrial demand for copper and silver [4][5] - As gold becomes less affordable, consumers are shifting to platinum and silver, creating retail demand, particularly from India and China [6] Supply & Demand Issues - Under-investment in mining is preventing supply from matching physical and speculative demand for certain metals [3] - Mining and production quality issues are contributing to the outperformance of silver [2] Geopolitical & Economic Factors - Concerns about tariffs are impacting Chinese industrial production demand for copper [8][9] - Chinese industrial production bid for copper has cooled due to slowing growth [9] - Uncertainty surrounding the final tariff rate on processed copper exists [10] Regional Market Dynamics - Copper inventories in America are at their highest levels, anticipating the finalization of tariffs [9] - The spread between COMEX and LME copper prices is wide, reflecting tariff concerns [8]

JUST IN: 🇺🇸 President Trump says "tariffs are responsible for the GREAT economic numbers just announced and they will only get better." ...

To avoid Donald Trump’s wrath (and punitive tariffs), Asian allies must declare America their trade and technology partner of choice. Some demands involve blood as well as treasure https://t.co/dyRyTWE1IP ...