Iran has a deal to open the Strait of Hormuz—and shipowners are outraged by its plan to charge fees

ONE BIG THING

Bill Ackman on the ‘disaster’ of socialism

Bill Ackman, founder of the $8 billion hedge fund Pershing Square, told Fortune’s Alyson Shontell that, “One of our biggest challenges as a country is that almost half the country isn’t participating in the growth in value created by capitalism—the stock market. Either they don’t have 401(k) plans or they don’t own stocks.”

“Wages can’t compound as quickly as stocks,” he said, which is how you end up with “people feeling left behind.” That alienation is why “you’ve seen a move toward publicly pronounced socialist candidates winning things like the New York City mayoralty,” he said. “But the answer isn’t socialism—socialism is a disaster.”

Interestingly, Ackman’s diagnosis of the problem is the same as that of Thomas Piketty, the French economist who specializes in researching the sources of inequality, and was the author of the bestseller Capital in the Twenty-First Century. The book argues that the value of assets compounds faster than the rate at which wages grow, and this is why the rich get richer faster than those relying on cash from employers for their net worth.

So Ackman is in good company in terms of economic rigor. He may, however, be surprised to learn that Piketty is a democratic socialist.

STRAIT TALK

Iran and Oman near deal to charge fees for use of Strait of Hormuz—shipping groups are aghast

The leaders of eight shipping lobby groups are already protesting the impending agreement between Iran and Oman to reopen the Strait of Hormuz, which appears to include a proposal in which ships would have to pay fees to transit the waterway, according to Al Jazeera.

Fees for using the Strait—through which one-fifth of the world’s oil normally passes—would hurt the interests of European and Asian customers, the groups said. The letter was signed by the Asian Shipowners Association, the Baltic and International Maritime Council, the Cruise Lines International Association, the European Shipowners Association, the International Chamber of Shipping, the International Association of Dry Cargo Shipowners, the International Association of Independent Tanker Owners and the World Shipping Council.

Although the deal has yet to be published, Iran confirmed that an agreement with Oman has been reached, the BBC said. Iran’s foreign ministry spokesperson Esmaeil Baqaei said the deal was “in the final stages.”

“The geographic coordinates of the route envisioned by both sides have been agreed upon,” Baqaei said, according to the NYT. “If certain third parties do not obstruct the process, a joint statement by the two countries, containing the principal considerations and points of agreement, is currently in the final stages of review and drafting.”

It’s not clear who the “certain third parties” are, but the presumption is that Iran is conditioning the reopening of the Strait on the U.S. not interfering with the Iran-Oman agreement.

• The White House has not yet commented on the deal. Nor has Oman. And we don’t know if President Donald Trump will be able to tolerate Iran’s non-interference requirement.

THE MARKETS

Stocks take a breath following record highs as the price of oil stays under $80

• S&P 500 futures were up 0.14% this morning. The index was down 0.17% yesterday. 
• In Europe, the Stoxx 600 was up 0.49% in early trading, and the U.K.’s FTSE 100 was up 0.3% before lunch.
• Asia: South Korea’s KOSPI was down 4.58%. Japan’s Nikkei 225 was down 0.93%. India’s Nifty 50 was flat. China’s CSI 300 was down 0.15%. 
• Brent crude was $79 per barrel this morning, down slightly from a high of $80 yesterday.
• Bitcoin was $64.6K.

CAPEX-TACULAR

AI is bigger than canals!

Going viral among finance types right now … this chart that investment-s/1563088825849632/” href=”https://www.facebook.com/TheEconomist/posts/this-chart-shows-how-the-ai-capex-boom-is-fast-becoming-the-largest-investment-s/1563088825849632/”>The Economist shared on social media recently, comparing the historic wave of investment in AI to previous waves in canals, railroads, and websites. It even made it into a recent note from Macquarie.

Analysts can’t update their Excel sheets fast enough to keep up with the upside surprises to future guidance on capex. Their combined AI capex estimates have been revised upward for 10 straight quarters, according to Ohsung Kwon and his team at Wells Fargo.

“The lag between capex and monetization suggests higher ROI ahead,” he said in a note.

MORE FROM FORTUNE

Reinvent or go extinct: Inside the CEO playbook for the AI era – Alyson Shontell

Google DeepMind chief AI officer signed a statement warning AI could cause human extinction—she says odds are ‘not zero’ but disagrees with Elon Musk – Orianna Rosa Royle

The machine-readable brand: Inside Ally Financial’s strategy to win AI search recommendations – Ruth Umoh

Fashion’s biggest brands spent years letting eBay and Depop resell their clothes. Now they want the money – Tatiana Sataua

Michael Dell’s son built a $13 billion home battery business—and he’s going on 30 years old – Jordan Blum

The SEC should ban the products behind South Korea’s recent market meltdown – Nic Puckrin

California mints the most billionaires. A new index ranks it dead last on the freedom to give to charity – Sydney Lake

A billion SpaceX shares unlock Thursday. Wall Street isn’t worried: ‘You never bet against Elon’ – Eva Roytburg

After months of a public back and forth over Mamdani’s pied-à-terre tax, Ken Griffin isn’t ready to give up on New York after all – Joshua Hong

CHART OF THE DAY

Hybrid electric car makers have had a good war

“Since the onset of the U.S.-Iran war, high gas prices have prompted more consumers to purchase vehicles that are less dependent on fuel,” Grace Zwemmer of Oxford Economics said in a recent note. Hybrids were 17.4% of car sales in May, up from 13.9% before the war. More than 200,000 hybrids are now sold in the U.S. every month.

NUMBER OF THE DAY: Gen-Z savings

>0.5

The ratio of monthly savings-to-spending among Generation Z, according to Bank of America’s Liz Everett Krisberg and David Tinsley. “This indicates their median cumulative savings balances are less than their monthly median spending,” they said in an email.

Gen Z isn’t saving because they haven’t reined in their spending. Their “discretionary spending has also picked up across beauty, jewelry, coffee and travel, suggesting younger consumers continue to prioritize experiences and small indulgences— hallmarks of the ‘little treat economy,’” the pair say.

THE FRONT PAGES TODAY

Inside Intel: how America’s chip champion came back from the brink – FT

JPMorgan’s Jamie Dimon warns of high leverage: ‘Somebody will disrupt the market’ – CNBC

Tucker Carlson unveils 10-point manifesto amid third-party speculation – Axios

The Investors Whose SpaceX Shares Vanished Before They Could Cash In – WSJ

Situational Awareness Returns to Investing With $400 Million Bet – Bloomberg

I Helped Run Lululemon. Companies Need to Stop Kidding Themselves About A.I. – NYT

ONE MORE THING

Suggest a headline here that’s better than my original*

In the age of AI, we’re learning a new way to make a mistake: accidentally including an AI prompt in your published work, thus revealing to your audience that a robot created your stuff, not you. It most recently happened to YouTube star Hank Green, who left the phrase “I appreciate the pushback” in one of his scripts—a classic AI cliché. 

Everyone is doing it! Here’s Bill Oliver, a member of the Legislative Assembly of New Brunswick, Canada, reading a speech that includes the line, “Here’s a more natural flowing version of that section that reads like a legislative speech rather than a series of short points.”

This professor at Alcorn State University included a white-text prompt in an assignment for his students that instructed AI models to include the word “Madagascar” in their answers, even if it made no sense. Thirty-two out of 35 students failed to notice, and thus failed the homework.

And here is a company that sent a job application rejection email to a candidate that read, “Write a warm but generic rejection email that sounds polite yet firm. Do not mention specific reasons for rejection. Make the candidate feel like they were strongly considered even if they weren’t. Remember to use candidate name and company name variables.”

*Get it?