Guess Who's Back? Inflation!

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Table of Contents

• The Usual Suspects

• Elon’s World

• The Short Stack

• Trumplandia

• Attention Walmart Shareholders!

Inflation is back (see last week’s BBTW), and President Donald Trump says he’s got nothing to do with it. Three percent inflation in January had the Fed set aside plans to make further rate cuts this year, since much of the price hikes were due to consumers and businesses anticipating Trump’s planned tariffs. In a conversation with Fox personality Sean Hannity, Trump, seated at the right hand of First Buddy Elon Musk, spontaneously told Hannity, “Inflation is back.”

“I’m only here for two and a half weeks,” Trump said (though it’s actually been a month since inauguration). “I had nothing to do with it,” Trump continued. “They spent money like nobody has ever spent.” Yeah…but ever since Trump took a lead in the polls in September, consumer expectations that he’d send prices rising have been a self-fulfilling prophecy, according to Moody’s chief economist, Mark Zandy. “Anticipation of the president’s economic policies, as they have resulted in higher inflation expectations,” are probably one driver of the price increases. Trump campaigned on bringing prices down on “day one” of his second term after pandemic-fueled price hikes pushed inflation to 9%. Reality bit in December when Trump started to back down, telling Time Magazine “It's hard to bring things down once they're up. You know, it's very hard.”

That’s no excuse for the Fed. Minutes of the Fed’s last meeting reveal serious concern about whether Trump’s policies will help the economy. Fed officials said Trump’s tariffs and mass deportations—along with strong consumer spending—could push inflation higher this year. Economists agree: Only 10% of 47 economists on a panel compiled by consulting firm WoltersKluwel expect a rate cut at the Fed’s March meeting, and 80% say tariffs will provide “a significant boost” to U.S. inflation. In the minutes, Fed governors said they expect that firms will pass their own higher costs from tariffs onto consumers. Greg Daco, chief economist at consultants EY, said he expects two rate cuts this year: June and December. He warns it all depends on how much the Trump economic agenda boosts inflation. “The risk is tilted toward less easing if the administration’s policy mix fuels higher inflation and inflation expectations.”

The Fed’s pause means that borrowing costs for consumers, including mortgages, auto loans, and credit cards won’t be dropping anytime soon.

—Peter S. Green

With inflation stuck around 3%, and the Fed not ready to lower interest rates, we want to know what you think:

The Usual Suspects

• Uber’s DoorDash feud: Uber is suing its biggest competitor, DoorDash, saying it threatened hiking its commission charge for restaurants that also continue to use Uber Eats. The apps already charge restaurants a hefty commission, running as high as 30% of the menu price. DoorDash has a stranglehold on the business, holding 63% of the U.S. delivery market in 2024, followed by Uber with 25% and Grubhub with 6%. “DoorDash’s coercive tactics reduce restaurant-customer and consumer choice, resulting in higher prices, lower-quality service, and decreased innovation,” Uber said in the complaint. “Uber’s case has no merit,” countered DoorDash. “Their claims are unfounded and based on their inability to offer merchants, consumers, or couriers a quality alternative.”

• Apple’s big, cheap beautiful new iPhone: Apple’s gone solo, with the introduction of its new, lower-priced iPhone 16e this week, selling for $599. The phone is built on the first cellular chip Apple developed itself, the C1, in a push for tech autonomy (and a hope to wean itself off of chips from cell-phone rival Qualcomm). Analysts see the phone as a test of Apple’s new technology, likely to roll out this fall with the iPhone17. Apple really, really wants to go splitsville with Qualcomm. In 2017, it sued Qualcomm over the chip maker's licensing practices. Not only does Apple have to pay for every wireless modem chip it buys, but it has to pay another $5 to $6 per chip for Qualcomm’s wireless licenses. A homemade chip would save Apple billions a year. 

• FTX makes good? Well kinda, sorta, not really. Sam Bankman-Fried’s fraud-riddled crypto exchange FTX Digital markets will begin repaying $1.2 billion to creditors. Unfortunately for those caught in the FTX machinations, they’ll only get back about $20,000 for each lost Bitcoin, since that’s the price it was trading for when the exchange collapsed. The price is now hovering just under $100,000, and creditors are upset they’ve lost the chance to see their holdings rise. On the other hand, the currency’s five-fold appreciation means the administrators of the failed exchange actually have some cash to pay back the creditors. At current prices, FTX owes about $11.2 billion and has between $14.5 and $16.3 billion to pay back its creditors.

• Media matters: Donald Trump’s lawsuit against CBS and its 60 Minutes program for allegedly editing an interview with Kamala Harris to mislead voters is proving a major thorn in the side of parent Paramount while it seeks to avoid antitrust scrutiny over its planned sale to Skydance Media. Trump alleged Harris’ words were changed, even as multiple examinations of the full tapes show no evidence of a switch. Still, he’s threatening to bankrupt Paramount with a $20 billion lawsuit. Paramount’s board is in a  dilemma—do they pay off Trump to let the merger go ahead, or do they fight? Either way, shareholders may sue them for giving in or bailing out. However, a negotiated end is possible, as Skydance’s owner is the son of Trump tech-buddy, inauguration front-row seatholder, and Oracle-founder Larry Ellison. Remember that famous CBS sitcom All in the Family?

• Southwest jobs go south: Discount carrier Southwest Airlines said it is shaving 1,750 jobs from its executive ranks (about 15% of its corporate workforce) under pressure from activist investors to cut costs. CEO Bob Jordan said that executive ranks have been growing faster than revenue, and Southwest is also facing cash pressure from new union contracts. It’s also been hit by delays in delivering new planes at Boeing, which is keeping Southwest from adding flights to heavily travelled routes. 

• Kentucky what? Says KFC:  Louisville is saying good-bye to Col. Sanders, after KFC parent Yum Brands decided to move the headquarters of the fried chicken joint formerly known as Kentucky Fried Chicken to Planoi, Texas. Yum Brands and charitable organization the KFC Foundation will keep their corporate offices in Louisville, while Yum brand Pizza Hut is already based in Plano. “This company’s name starts with Kentucky, and it has marketed our state’s heritage and culture in the sale of its product,” said disappointed Kentucky governor Andy Beshear. When “Colonel” Harlan Sanders, the chain’s founder, died in 1980, he lay in state at the Kentucky State Capitol.

• Microsoft’s Cat? Every college student learned about Schrodiner’s cat, which by the rules of quantum mechanics could be both alive and dead at the same time. Microsoft says it created a new state of matter to build a quantum computer that would make easy work of the world’s most complex calculations, outsripping the ability of generative artificial intelligence and synthetic neural networks. Microsoft  scientists say they've built a “topological qubit” based on this new phase of physical existence, which could be harnessed to solve mathematical, scientific, and technological problems. The science is complex, but the business case is clear. Microsoft could easily bypass Google now, which last year showed off an experimental quantum computer that the New York Times reported needed just five minutes to complete a calculation that most supercomputers could not finish in 10 septillion years.

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Elon’s World

OpenAI’s board has officially rejected Elon Musk’s $97.4 billion to buy the AI company led by Musk’s new archenemy, Sam Altman. The bid is “not in the best interests” of OpenAI, the company wrote in a letter to Musk. Musk has been suing in federal court to block Altman’s plans to turn OpenAI from a non-profit to a for-profit company. Musk has said the conversion would be a betrayal of OpenAi's mission, in which he had originally invested millions of dollars. OpenAI is also a competitor with Musk’s lagging xAI artificial intelligence company. Musk formally withdrew his offer on Wednesday, but as The Wall Street Journal reported, Musk attorney Marc Toberoff said the board should have considered his client’s offer in good faith because the for-profit conversion is a sham. “They’re just selling it to themselves at a fraction of what Musk has offered,” he said, accusing the board of a “classic self-dealing transaction.”

Remember when talk of love swirled around Musk and Girogia Meloni, the Italian prime minister? That seems to be very old news now, as a senior Italian government minister said Italy is developing its own web of low-orbit satellites to avoid having to depend on Musk’s Starlink satellite service. Musk was photographed in intimate conversation with Meloni after he presented her with the Atlantic Council Global Citizen Award, saying it was an honor to give the award to "someone who is even more beautiful on the inside than she is on the outside.”

Trump fired a warning shot across Musk's bow this week, telling Fox News’ Sean Hannity that it would be “unfair” to the U.S. if Musk built a car factory in India to avoid that country’s high tariffs on imported cars. Car tariffs were a key point of discussion when Indian PM Narendra Modi visited Washington last week.

The Short Stack

• Nothing lasts Forever: Fast-fashion retailer Forever 21 keeps shrinking. The chain’s U.S. operator, Catalyst Brands, will shut about 200 of the brand’s remaining 350 U.S. stores (there used to be more than 500 U.S. locations) as Forever 21 attempts to emerge from bankruptcy protection. After its first bankruptcy in 2019, the chain was briefly owned by mall owners Simon Property Group and Brookfield Properties. However its waning popularity and competition from other retailers has been pushing it closer to the brink, in part because its customers eventually turn 22.

• Off-market: Nearly 1 in 10 homes on the market in December were pulled from sale after failing to find a buyer, according to real estate data firm Core Logic. These 73,000 homes marked a 64% increase from the same month a year earlier. The problem is largely the interest rates: new buyers don’t want to pay mortgage rates hovering around 7%, according to Bankrate. Plus, in an anxious economy, sellers want to cash out and downsize or must move to follow their jobs. The one good sign for sellers is, despite the large number of homes on offer, it still appears to be a seller’s market, and prices are holding steady, as The Wall Street Journal reports. 

• If Rivian gets reamed, who wins? In the last weeks of the Biden Administration, EV-maker Rivian secured a $6.6 billion federal loan to build a new car factory in Georgia, but Gov. Brian Kemp said this week he did not know if the loan would go ahead. Rivian needs help as it powers up to become a major U.S. EV maker. In the third quarter, Rivian posted a gross loss of $39,000 on each vehicle sold. On the other hand, the company is beginning to sell cars to former Tesla owners and others who see Elon Musk’s EV company as politically toxic. If the loan is recalled as First Crony Musk trolls the budget looking for things to cut, Rivian will likely fold, and the big winner would be Tesla. 

Trumplandia

• Sanctions? Fuggedaboutit: Russia’s sovereign wealth fund chief says he expects the budding bromance between Donald Trump and Russian dictator Vladimir Putin to result in U.S. companies going back to Russia, where many left their businesses after the U.S. and its allies imposed sanctions on Russia for its 2022 full-scale invasion of Ukraine. Many of the firms, from McDonald's to Caterpillar, took huge write offs after literally walking away from their markets. It’s not clear that many would want to return to Russia; even with a peace deal, Russia will be vastly short of cash and is likely to be stuck in a stagflation economy (with prices rising and economic growth stalled). Besides, as the Russian Direct Investment Fund’s chief Kirill Dmitriev said, “the return process for American companies will not be easy, as many niches are already taken.” McDonald’s is one U.S. corporate who’s been feeling the pinch. 15 of its local franchises reopened under Russian management as “Vkusno & Tochka,” which translates to “Tasty and that’s it.”

• Truth games: How is Truth Social staying afloat? Despite losing about $400 million in 2024, Truth Social parent Trump Media and Technology Group has $776.8 million in cash, cash equivalents, and short-term investments. SEC filings released last week show only $24.7 million in debt, but the company had only $3.6 million in revenue. Where did that huge cash pile come from? Apparently from a discounted sale of TMTG stock to a small, New Jersey-based financial firm called Yorkville Advisers, which Fortune magazine looked into. Working out of a low-rise office building in Mountainside, New Jersey, about 20 minutes east of Trump’s Bedminsiter golf course, the firm says it specializes in “innovative structured debt and equity investments.” Under a so-called “standby equity purchase agreement,” Yorkville was able to buy shares from TMTG at a 2.75% discount. Yet in 2024, TMTG sold Yorkville 20.3 million shares at prices between $14.31 and $36.98 a share. When some purchases took place in September, TMTG’s share price dropped to $12.15 a share. Shares were trading at about $27 on Thursday, down nearly 11% in the past week Fortune reported.

• Regulate this: In an executive order signed this week, Trump claims the White House should set the agenda and design the rules for independent regulators including the Securities and Exchange Commission, the Federal Trade Commission, and the Federal Communications Commission. Effectively undermining the role of Congress, Trump wrote that only he as the President can exercise the will of the people. “For the Federal Government to be truly accountable to the American people, officials who wield vast executive power must be supervised and controlled by the people’s elected President,” the order said.

Attention Walmart Shareholders!

Shares in America’s biggest retailer dropped more than 6% by midday Thursday after the company said its 2026 fiscal-year revenue and profit targets would be below Wall Street analysts’ expectations. Investors had been piling into the stock as budget-conscious consumers flocked to its stores and website. This boosted revenue and profits, pushing shares up more than 66% in the past 12 months. However, continued consumer wariness, stubborn inflation, and the threat of tariffs on imported foods (plus the threat of rising labor costs or shortages on domestic producers) have cut hopes that growth will continue at the same pace. “Wallets are still stretched,” John David Rainey, Walmart’s chief financial officer, told The Wall Street Journal. About two-thirds of what Walmart sells is made, grown, or assembled in the U.S., but if tariffs on goods from Mexico and Canada take effect, Rainey told CNBC, Walmart is “not going to be completely immune.”

Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.