| FOR PEOPLE WHO WANT TO SEE WHAT BREAKS BEFORE IT BREAKS |
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| | The Supreme Court struck down IEEPA tariffs, but refund timelines, working capital strain, and a new 15% global levy mean the real trade is timing, not ideology, and private markets are pricing the lag across importers, building products, and AI capex. | | | | | | THE SETUP | The Supreme Court struck down IEEPA tariffs Friday, 6-3. Markets rallied. Then Trump signed a new 15% global tariff over the weekend under Section 122. Futures slid. The legal frame changed. The cash reality did not. | Policy shifts do not become cash flows until systems, contracts, and buyers absorb them. Customs requires tariff codes for cargo release. Importers pay within the 10-day window regardless. This week tests three arenas: trade plumbing, governance catalysts, and AI capex. | | PMD Lens | The gap between a ruling and real cash flow is the actual trade this week. Risk did not vanish. It shifted from headline to execution. Refunds are not instant. The interim period is the position. | Private markets win when they price the lag with precision. This letter maps where it creates winners, hides losses, and rotates capital. |
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| | | | | WHAT MOST PEOPLE WILL MISS | CBP systems lag the ruling. Importers must file tariff codes and pay duties while guidance catches up. Refund paths default to courts or slow admin channels. TD Securities sees 12 to 18 months. That is a funding event, not a policy event. Trump's new 15% tariff under Section 122 has a 150-day shelf life. After that, Congress must act. Markets are discounting the 15% tariff as if it persists beyond the 150-day statutory limit. Working capital strain hits smaller importers hardest. They cannot fund the lag, fight in court, or absorb pricing fights with their buyers and suppliers. Refund claims are beginning to trade like litigation finance paper, priced at discounts to reflect timing and legal risk.
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| | | | | SIGNALS IN MOTION | The signals below are not forecasts. They are mechanisms already in motion. Each one reveals the same pattern: duration is being financed before economics are fully proven. | Signal 1: Governance as the Clearing Tool | Activist Ed Garden has built a stake in Fortune Brands and is pushing to replace the incoming CEO. The stock already fell 19% on weak fourth-quarter results. Housing is soft. Growth stories are not clearing capital. | This is not a breakup play. It is governance as a lever. When end demand is flat, leadership and cost control become the fastest path to changed results. The activist push implies a CEO search, margin reset, and fresh M&A options. For private markets, this is a template. Governance catalysts can unlock deals even when the macro refuses to help. | Investor Signal | When housing is weak, governance becomes the clearing tool. Underwrite leadership quality and deal options over growth hopes. Execution is the lever. |
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| | | | | Signal 2: Durability Clears Capital | Investors are paying up for firms that AI cannot disrupt with a prompt. The HALO trade, heavy assets and low obsolescence, keeps growing. McDonald's, Deere, and Exxon rise while software names bleed on every new AI tool. | This is not risk-on or risk-off. It is selectivity. Capital is repricing disruption risk and moving toward hard assets. The link to private markets is direct. Durability clears capital. Long-run story deals get shorter leashes. Lenders are more willing to underwrite stable cash generators with hard assets. Software deals require tighter covenants and clearer near-term cash visibility. Software deals face a higher bar. Boring cash flow gets a smoother lane. | Investor Signal | When AI fear reprices what things are worth, hard assets and pricing power set the floor. Underwrite durability. Shorten leashes on story deals. |
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| | | | | | Signal 3: Capex Gravity Reshapes the Map | OpenAI told investors it is targeting roughly $600 billion in compute spend by 2030. Down from $1.4 trillion, but the scale reshapes how capital moves. Nvidia is in talks for a $30 billion stake. The funding round tops $100 billion. | This is not an AI hype point. It is capital math. When one theme demands hundreds of billions, it changes what else gets funded and at what price. Power, land, gear, and loan terms become bottlenecks. Suppliers tied to the buildout benefit. Everyone else competes for what remains. The second-order effect is crowding out. Hurdle rates rise. Balance sheet room shrinks. That reallocation tightens capital conditions for sectors not directly tied to the buildout. | Investor Signal | Compute buildout absorbs balance sheet room and supplier bandwidth. Price the crowding-out. Map who gains and who gets squeezed. |
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| | | | | DEEP DIVE | The Refund Bottleneck | The Ruling vs. The Pipes | The Supreme Court ruled 6-3 that IEEPA does not allow tariffs. The ruling struck down trade duties and drug-related levies. It voided the framework that pulled in roughly $133 billion in revenue. Small firms cheered. Trade lawyers warned of chaos. | The celebration is premature. CBP systems have not caught up. Importers file tariff codes for cargo release. The 10-day payment window governs how goods enter the country. The ruling changed the legal basis. It did not change the daily process. | Then Trump pushed back. Hours after the ruling, he signed a 10% global tariff under Section 122. By Saturday, he raised it to 15%. That law allows levies for up to 150 days. Congress must approve any extension. The old tariffs died Friday. New ones arrived before Monday. | The Cash Lag | The refund path is where private markets should focus. The court did not say how or when the cash comes back. Justice Kavanaugh warned the ruling would create a "mess" with billions in refunds owed. He was right about the mess. Timing is the problem. | Trade lawyers see refunds routing through the Court of Trade or slow admin paths. TD Securities projects 12 to 18 months. | Extended refund timelines also alter Treasury issuance patterns. Delayed revenue recognition and refund outflows increase near-term borrowing needs, particularly at the long end. Higher supply raises term premiums, which lifts hurdle rates for private equity and infrastructure projects. The refund lag therefore feeds directly into cost of capital. | Small importers cannot wait or fight in court. Large firms with legal teams and credit lines will work the process. Smaller ones face cash strain, pricing fights, and contract terms that were not built for policy shock. | The interim cost comes down to contract language. Invoice terms, tariff line items, and refund duties between buyers and sellers are now live disputes. Clean records set apart the firms that recover from those that write off the loss. | The Tradeable Claim | The most missed second-order play is claims trading. Legal groups are building networks to link importers with lawyers. Funds are moving to buy refund claims at a discount or share in the take. The refund itself is becoming a structured asset. | Reorder plans slow as importers wait for clarity. Pricing fights hit demand in areas like home goods and apparel. A "policy risk premium" is showing up in covenants and spreads for import-heavy borrowers. | Firms with liquidity and clean documentation can treat the lag as optionality. Firms without it face covenant pressure and pricing disputes. | Investor Signal | Tariff risk is now a balance sheet problem, not a trade debate. Underwrite cash flow, clean records, and refund claim upside. Price the lag before it prices you. |
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| | | | | THE PLAYBOOK | Screen for short-term cash stress in import-heavy borrowers. Ask for proof of customs readiness and a refund plan before extending terms. | Tie capital calls and earnouts to documented refund milestones rather than assumed timing. | Build 30, 60, and 90-day cash plans around payment windows. Get paperwork ready for refund pursuit now, not after the window closes. | Structure deals to split core business value from claim recovery value. Refund claims are upside, not sure things. | Watch activist-driven building products platforms as buyers. Governance catalysts in soft housing open M&A windows the macro alone will not. |
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| | | | | THE PMD REPOSITION | The next few weeks are about process updates, not court drama. | Trade plumbing creates cash strain. Governance catalysts create deal flow. AI capex gravity reshapes what gets funded. These three forces compete for the same dollar this week. | Markets are moving from story to receipts. Private markets are moving from headlines to process. If the pipes lag, finance becomes the play. If governance is weak, activists force the cycle. If capex gravity grows, only the most durable cash flows clear. | Private capital is not debating tariffs. It is pricing liquidity, governance leverage, and capital intensity. That is where this cycle will clear. The edge belongs to those who price the lag before the rest catch up. |
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