Investors try to stay ahead of Trump’s Iran moves

Good morning from the Financial Times.

Today is Thursday, March 26th, and this is your FT News briefing.

Investors are having a hard time keeping up with Donald Trump, and two big tech companies

were found liable for harm to children's mental health as a result of social media.

Plus a look at the guardrails that might address worries over private credit.

A Mark Filipino, and here's the news you need to start your day.

There was more back and forth yesterday about what kind of negotiations are taking place

between the U.S. and Iran.

Washington presented Tehran with a 15-point plan to end the war, and U.S. President Donald

Trump said the Islamic Republic was ready to make a deal.

But then Iran's top military leadership forcefully dismissed the claim that they're talking.

Now Trump's been making a lot of bold statements like this since the start of the war.

They swung wildly from escalating the conflict to signaling the end of the war as near.

And oil investors have been trying to stay ahead of all this.

Here to tell us more is the FT's George Steer.

He covers the U.S. markets.

Hi, George.

Hello.

So George, do me a favor, walk us through what's going on with Trump, oil prices, and the war in Iran.

So since the war began on the 28th of February, we've noticed a pattern,

and traders have noticed this too.

Trump tends to intensify his threats against the Iranian regime over weekends when oil markets are

closed, and then hint at impending peace.

He does that basically when Brent and WTI are going crazy as they have done since the war began.

And actually, we saw that as recently as this week, right?

Well, yeah, on Monday, Trump posted on Truth Social that the U.S. had held

productive talks with Iran.

The Iranians denied that.

But 15 minutes before his post, we noticed an unusual spike in trading activity

around oil derivatives.

Investors had placed bets worth about $600 million at $649 in the morning.

They're usually quite a period in the market when nothing else is happening.

That is kind of fueled suspicions that people are making suspiciously well-time bets ahead of

big White House proclamations, especially post a lot of very successful polymarket bets on when

the U.S. might invade Iran and Venezuela.

So the White House said earlier this week that it, quote, does not tolerate any administration

official illegally profiteering off of insider knowledge,

and any implication that officials are engaged in such activity without evidence is baseless.

And quote, George, have you contacted the White House to see what they have to say about these

market movements more broadly?

They haven't responded to us just yet.

But in the past, when we've gone to the White House for comment on stories like this,

they tend to insist that Trump is out here doing his best for American citizens for main street

rather than Wall Street.

What kind of effect has all this had on the oil market?

Because it's gone through some pretty serious generations.

Yes, so we began with the day before the war began on the 27th of February.

Brent crude was hovering at around $70 a barrel.

It peaked on March 9th at around $119 a barrel, and it collapsed to $84 a barrel,

I think the same day, maybe the next day.

It's veered higher ever since then, but fell sharply on Tuesday afternoon after reports from

an Israeli broadcaster that Jared Kushner and Steve Wickoff, Trump's emitter,

is in the Middle East, had devised this 15-point peace plan, which they had apparently

put to the Iranians, but even Wednesday morning, all the prices have ticked higher again.

How do investors approach all this unpredictability? I mean,

there's got to be some sort of strategy to try and cope with all this.

I think it's quite hard to trade around such unpredictability. A lot of people have identified

that Trump does tend to back down when oil prices and mortgage rates tend to start

carining higher, but quantitative investors who use kind of very complex algorithms to guide

portfolio management, they're often backwards looking, so they're not really that well equipped

to handle the market that can swing one way or the other on a truth social post.

One hedge fund investor told me that he chosen simply to sit out the KLC's not.

Trading oil at all, because it's been so volatile ever since the war broke out, but generally,

I think the sense is that now is not a good time to be adding money to the market.

Yeah, it's probably producing some gray hairs out there. What does this tell you about the

power of the markets in Trump's second term? It seems like there's this push and pull where

the markets clearly have some sway over Trump's behavior, but he also has all the power to make

market swing wildly, like they are now. Yeah, I guess the bond market is a big and terrifying

entity that has punished presidents in the past and has punished Trump more recently than that.

Last year, he's obviously aware of the market reactions to what he says and what he posts on

truth social. And to a certain extent, they do curtail his most aggressive impulses.

The sense now is that every time Donald Trump says something like we have started peace talks

around, the market does react to that. Every time Trump says things like this, we now are waiting

for Iranian confirmation that did in fact happen. The market and investors generally believe

the Iranians more than the Americans right now, which is an unusual state of affairs.

Sure is. That's the FT's George steer. Thanks, George. Thank you.

Metta and Google were found liable in a landmark legal case yesterday.

A jury in Los Angeles ruled that social media platforms like Metta owned Instagram and

Google's YouTube are designed to be addictive to children. Metta and Google both say they disagree

with the verdict. The case will set a precedent for a whole bunch of similar lawsuits.

It's also been compared to the 1990s crackdown on Big Tobacco.

The jury awarded $3 million in damages to the 20 year old plaintiff. She claimed that a social

media addiction during childhood harmed her mental health. Snap and TikTok settled for

undisclosed amounts before the trial. We've talked in depth on the show about how investors are

growing increasingly concerned about AI's impact on well, pretty much every industry right now.

Though that uncertainty is intensifying specifically when it comes to software,

private credit firms have been growing more entrenched in that area, and that's starting to

cause some big problems for those companies. Brook Masters is the FT's US Managing Editor.

She joins me now to delve into this. Hi, Brook. Hey, Mark. So this week we saw two big investment

managers, Aries and Apollo, limit the amount of money investors can withdraw from flagship funds.

How concerning is this? It's part of a trend. We've now seen from five or six of these big funds

aimed at wealthy individuals. They've been requests to pull out a total of $13 billion.

And these funds are in the $200 billion range. In most cases, the funds are getting almost twice

as many requests for redemption as they are granting. So it's not totally scary, but it's a big chunk.

People are starting to get worried. What do these companies have to say about investor worries?

What they say is that investors are responding to Doomsday headlines that talk about a few

high-profile bankruptcies or they're exaggerating the effect AI will have on the software companies.

And the reason the software companies matter is private credit does a lot of lending to

software companies because software companies don't have tangible assets that a bank is willing

to lend against. And what private credit funds all say is, look, we've lent to good software

companies, plus we're not very overlevered. We haven't borrowed a lot on top of it. And these funds

have the ability to cap withdrawals. There isn't going to be some mass chaos that leads to

fire sales. And if you just stick with it and stick it out, people will largely get their money

back and probably make some money. But Broke it's starting to look like more wealthy investors

are getting nervous. How will these redemption caps affect their appetite to continue investing

in these kinds of funds? What we've seen from wealthy individuals is they are being encouraged or

persuaded by their advisors to put more money in what are called alternative assets, things that

are not the stock market or the bond market. And they have put some money in private equity,

they're putting some money in private credit, some in infrastructure. And I think what this

makes some of them more conscious of is the whole point of private is you give up liquidity.

You can't as easily get your money back. And that's one of the reasons why the returns are higher.

And so what this hopefully will do is make these investors understand that they are making a trade

off. These are not funds meant for you to take your daily spending out of.

Broke the reason we have you on is because you recently wrote a column about all this. And

in it you argued that stronger guardrails are needed to prevent all of this from becoming a

systemic risk to the financial sector. What would those guardrails look like? And how far away

would we be from a football crisis without them? Well, I think the thing you need to remember is

right now these funds aimed at wealthy individuals where the money is running out the doors

are still a relatively small part of the private credit and alternative asset landscape.

If they continue to expand and if the Trump administration goes forward with putting them in

the $9 trillion retirement market and you would have this in your 401k plan,

then they become much more systemic and people running for the exits are a problem.

If we're going to do that, the guardrails you'd want to do are real rules that say you can't run

for the exit. You need to understand that if you put your money in these funds, you are staying

in for some period of time. Because in general in this kind of situation, it's not necessarily

that the underlying assets are worth nothing. It's that if everybody's running for the exits,

everyone is trying to sell the underlying assets at the same time and the price goes down.

The other thing that we could do in terms of guardrails is one of the reasons people run for

the exits is they are afraid that as people leave, the funds will sell their good assets because

that's what they can sell. If there were penalties, if you ran and if you knew if you stayed,

you wouldn't get stuck. I think that would reduce the risk that these sorts of funds could cause

a bigger problem. Brooke Masters is the FTZ US managing editor and encouraging everyone to take a

deep breath. Thank you, Brooke. Thanks for having me. The World Trade Organization might not be

relevant much longer without action. That's what EU Trade Commissioner Maro Sefkovich told the FT.

He's joining calls to modernize the WTO. Global Trade Ministers and diplomats are meeting in

Cameroon today for a WTO ministerial conference. They're going to negotiate changes to the trade

body's consensus-based decision making. That process has been under pressure because a small group

of countries routinely block agreements. The EU and other nations would like WTO members to be

able to form coalitions that can agree to deals even if not everyone is on board. The WTO's Director

General told the FT. She expects, quote, tough conversations at the conference.

You can read more on all these stories for free when you click the links on our show notes.

This has been your daily FT news briefing. Check back tomorrow for the latest business news.

Are you really buying a car online on Auto Trader right now? Really? At a playground? Yeah,

really. Look at these listings from dealers. Wow, your search can really get that specific.

Really? And you just put in your info and boom. Cars in your budget. Mom needs a second, honey.

You can really have it delivered? Really? Or I can pick it up with the dealership.

One sec, sweetie. Mommy's buying a car. I think kid is walking up the slide.

Kyle, again, really? Auto Trader. Buy your car online. Really?

Decisions made in Washington can affect your portfolio every day. But what policy changes

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