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Here’s what you need to know today

• A quick update on where we are with US and China tariffs. The US currently has a 145% tariff on Chinese imports while China has a 125% tariff on US imports. The rest of Trump’s ‘reciprocal tariffs’ are paused for 90-days as dozens of countries call to make deals. (CNBC)
  
  

• The big tariff announcement over the weekend was that consumer electronics like phones and computers would be exempt from Trump’s tariffs. Tim Cook, the quiet diplomat, and Apple do it again! (NPR)
  
  

• After a wild week-and-a-half in markets, here how they have moved since Trump announced his tariff policies: America’s S&P 500 down 5.5%, Australia’s ASX 200 down 3.6%, Hong Kong’s Hang Seng down 8.5%, and Europe’s Stoxx 600 down 9.3%.
  
  

• After a week-and-a-half focused on US tariffs, the Australian election was back in focus over the weekend. Topping the headlines were housing policies from the major parties:
  - The Labor Party unveiled their new housing policy headlined by $10 billion to build 100,000 new homes only available to first home buyers and also plans to allow first home buyers to buy with any home with a 5% deposit (ABC News)
  - The Coalition announced plans to make mortgage repayments for first home buyers tax deductible. This policy would only apply to the first $650,000 of mortgages and only for newly built homes. (ABC News)
  
  

• The AFR’s economics editor, John Kehoe, summed up our feelings about both of these policies: “The extraordinarily dumb demand-side housing policies by Labor and the Coalition will fuel even higher prices and cause first home buyers to take on more risky debt levels.” (AFR)
  
  

• They weren’t the only policies announced over the weekend. Here’s what else you need to know from the Australian election:
  - Labor announced a new $1,000 standard tax deduction for work-related expenses. (AFR)
  - In a similar vein, the Coalition pledged that anyone earning under $144,000 would earn a one-off $1,200 tax refund for the 2025-26 financial year. (ABC News)
  - The Greens announced $30 million to lure retailers, including Aldi, to Tasmania to challenge the Coles-Woolworths duopoly in the state. (AFR)

  
  

• In the US, analysis of Trump’s 90-day pause on reciprocal tariffs has focused on the bond market. As yields spiked (meaning bond prices fell) panic set in across markets, prompting many to ask the White House to ease off (or as Trump tells it “People were getting a bit yippy”). (The Guardian)
  
  

• This isn’t the first time the bond market has prompted action. In 2022, it was the bond market selloff that ended Liz Truss’ Prime Ministership in Britain and in 1993, US President Bill Clinton was forced to abandon his spending plan after bond yields jumped from 5% to 8%. (AFR)
  
  

• Unfortunately for Trump and the White House, bond yields have continued rising in the days since his 90-day pause. US Government Bonds (called Treasuries) had their worst year since 2019 and the 10-year yield reached 4.6%, up almost half a percentage point since the end of last week. (AFR)
  
  

• The UN passed a carbon-pricing plan for international shipping, which accounts for 3% of global emissions. This would put a carbon price of $380 a tonne above a target level, starting in 2028. The USA was a notable ‘no’ vote and then threatened to retaliate against countries that enforced it. (Al Jazeera)
  
  

• America’s Q1 earnings season was kicked off with reports from the big financial institutions. JP Morgan, Wells Fargo and Morgan Stanley all reported strong results, but JP Morgan CEO Jamie Dimon warned that America’s economy is facing “considerable turbulence” despite his bank’s 9% rise in quarterly profits. (Financial Times)
  
  

• Over the weekend, the US and Iran met to discuss a deal on Iran’s nuclear program. Both sides said the talks were “positive and production” although nothing concrete has been agreed. The parties are scheduled for further talks next week. (ABC News)

What the…?

If you’ve ever complained about airline food, the large American airlines want you to know - they hear you. And in the most American news story ever, they’re competing to be the first airline to bring fast food to the skies.

Delta has got out of the blocks strongly, offering the fast food chain Shake Shack to its first-class flyers. However, the airlines are running into issues with fries. It is tough to keep them crisp in a plane environment. But for the problems it struggles to solve, one thing we’re confident American capitalism will eventually overcome: the problem of soggy french fries in the skies. (Quartz)

Investing is a lifelong journey

Here’s what you can learn today.

Criteria for great software investments

This is an excerpt from our conversation with Sumit Gautam, founder of Scalar Gauge Fund, titled ‘Why AI won’t deliver in 2025’ (Apple | Spotify | YouTube)

Question: What criteria do you look for in software companies?

Sumit: The most important thing in our investing criteria is a high-quality software company, and we measure quality by the ability to make sure customers find the software very sticky.

A perfect example is email - you open Outlook every day and cannot live without your email. That is an example of a very sticky product. We want to invest in companies with very sticky products, which is measured by their gross retention rates. We're looking at companies that have gross retention rates in the mid-nineties. Some companies we own go all the way up to 98-99%, which is very high gross retention.

We're dealing with companies selling their products into the enterprise side. They're very well integrated and absorbed in the ecosystem, integrated with SAP and ERP systems, and from a value-add standpoint, they're delivering great ROI to their customers.

We want to also invest in companies from the quality standpoint that have very high gross margin, which is one of the best things that software companies have is if you have 75 to 80% gross margins, then the incremental dollar of revenue that you generate flows to the bottom line.

Then we want to look at net retention rate of these companies, which is can you sell new modules? Can you improve pricing to the same set of customers?

And then finally, we want to make sure that it flows to the bottom line, which is are you able to get net incremental EBITDA per net new revenue? Are you increasing that over time?

Prefer to watch? Head over to the Equity Mates YouTube where you can watch our full conversation with Sumit.

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