WSJ What’s News - First Came the TACO Trade. Now It’s the NACHO.

Episode Date: May 12, 2026

A.M. Edition for May 12. With the U.S. and Iran still far apart on a peace deal, WSJ reporter Caitlin McCabe says investors are embracing a new Tex-Mex-inspired trade based on the assumption the Strait of Hormuz won’t be opening anytime soon. Plus, British Prime Minister Keir Starmer fights for his job as a rebellion against him spills into markets. And Democrats face another setback in the midterm redistricting fight. Luke Vargas hosts.  Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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British Prime Minister Kier Starmer fights for his job as a rebellion against him spills into markets. Plus another midterm setback for Democrats. And a new acronym makes the rounds on Wall Street, the so-called nacho trade. The idea with not a chance where Moose opens is essentially this all-important waterway that we've all been watching so closely won't open until there's enough economic pain inflicted that. there needs to be some sort of resolution to the conflict. It's Tuesday, May 12th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News. The top headlines and business stories moving your world today. We begin in the UK where the pound is falling and borrowing costs have surged to their highest level since 1998. The turmoil in markets is being triggered by

a political crisis as Prime Minister Kier-Starmer faces rising pressure to step down. after his Labor Party suffered one of its worst performances ever in local elections last week. This morning, a cabinet member resigned, saying the country faces enormous challenges and that Starrmer cannot deliver the changes needed. Nearly one in five labor lawmakers have made similar statements, urging Starmor to quit. The U.S. Supreme Court has greenlit Alabama's efforts to redraw its congressional map, likely leading to the elimination of a majority black district currently held by a Democratic. Democrat. Alabama Attorney General Steve Marshall heard here, courtesy of Fox 54 News Huntsville,

applauded the ruling, which will give Alabama's Republican-led legislature control over state maps. My job in this office was to put the legislature in the best possible legal position to draw congressional map that favors Republicans seven to zero. A plaintiff in the case, Shaliela Dowdy, said the ruling felt like a step backwards towards the Jim Crow era for congressional representation. and she predicted that Alabama would eventually eliminate its final majority black district. Yesterday's ruling comes after the Supreme Court last month, sharply restricted states from using race to draw voting districts. According to the Cook political report,

Republicans stand to gain between two and 12 U.S. House seats in November as a result of redistricting efforts, leaving some blue state Democrats to start targeting map changes ahead of the 2028 election. House lawmakers are investigating OpenAI CEO Sam Altman's personal investments as the company heads for an IPO. The probe into potential conflicts of interest comes after a Wall Street Journal article detailed Aldman's efforts to have OpenAI back companies he personally invested in and coincides with a lawsuit brought by Elon Musk, alleging the company's shift from a non-profit was manipulative. While OpenAI's board chairman defends Altman's transparency,

Republicans argue that Altman's investment in other companies could pose a conflict of interest because Aldman and OpenAI's involvement could boost their value. Well, elsewhere in the AI race, Elon Musk's GROC is losing ground, as downloads fell from 20 million in January to just 8.3 million in April. In agreement by parent company SpaceX to rent massive computing power to Anthropic is also leaving Grock's ability to catch up to other chatbots in doubt. The deal provides Anthropics, with the essential computing power needed to scale.

While Musk and Grok's parent company didn't respond to request for comment, in public statements, Musk has characterized XAI, the owner of Grok, as, quote, the smallest of the AI companies. And a new acronym is making the rounds on Wall Street after yet another trading day characterized by rising oil prices and treasury yields. Reporter Kayla McCabe stepped out of the JP Morgan Global Markets Conference in Paris to break it down for us. So this term is Nacho, and it stands for Not a Chance Hormuz opens. And it's really an iteration of the taco trade that we saw last year that became a very popular acronym on Wall Street.

Taco stood for Trump always chickens out. It was this idea that he would come and put forth this tariff policy. The markets would freak out, and eventually he would walk that back. So the idea with not a chance where Moose opens is essentially the straight, this all-important waterway that we've all been watching so closely won't open until there's enough economic pain inflicted that there needs to be some sort of resolution to the conflict. So what then is the bet exactly, Caitlin? Besides that, if the straight remains closed, oil prices, I presume we're going to stay higher for longer. So oil prices is definitely one way that people have been trading this. And then another way to play this is rising interest rates because people expect inflation to accelerate as a result of oil prices

feeding through into consumer prices. One thing to keep in mind is I think in the Trump administration, people love to assign an acronym or a name to the way that things are trading. Some of it's a bit tongue-in-cheek, so I wouldn't definitely put all your money into the nacho trade, especially just because we've seen market swing so violently really across all asset classes. And certainly not all asset classes are affected either. I mean, look at the stock market. It continues to rise to fresh records, really independently of what we've been seeing in the war in Iran. People are very excited about the AI trade. We're seeing chip stocks continuing to rise to new highs. And that's been lifting the market higher pretty much almost day after day. And investors today will be

assessing the war's economic impact in April's inflation reading. And the Senate is due to vote on the confirmation of Kevin Warsh to be the next chair of the Federal Reserve. Coming up, the fight over taxing secondary homes picks up across the U.S. More on that after the break. AI is moving fast across the enterprise. But without visibility, it's just chaos. Different tools, different models, different teams using AI in completely different ways. Service now turns that chaos into control.

With the AI control tower, you see all your AI across the business in one place. what it's doing, what it's done, and what it's about to do. So you stay in control. To put AI to work for people, visit servicenav.com. Across the U.S., a number of state and local governments are increasingly targeting the owners of second homes with new taxes in a bid to take on budget shortfalls and housing shortages. Journal reporter Nicholas Miller has written about a number of proposals out there and the taxes that have already come into effect. And he spoke to our Daniel Bach. You looked at the pros and cons of new taxes.

Let's start with the arguments for these new taxes. What sort of things are being proposed? And how would they help address those two things I mentioned, filling government coffers and opening up more housing? Absolutely. So New York City got a lot of attention recently for proposing a tax on Peter Ther's, but a lot of other places across the country are proposing similar kinds of taxes on second homes or vacant homes.

The intention is generally to raise tax revenue or open up more housing availability by trying to encourage owners of second homes or investor properties that are sitting vacant to rent out those properties or sell them. And, Nicholas, these taxes have a very different look depending on where in the country they're being proposed. Tell us a little bit about that. So they're generally subject to different rates and there are exemptions in some cases. New York City is playing to tax pizza tear worth $5 million or more. Rhode Island's so-called Taylor Swift tax will hit homes value that over $1 million that are uninhabited for at least 108, three days of the year. A proposal in San Diego, which is subject to a June ballot measure,

would focus on second properties that are also uninhabited for at least half the year. It would place a levy of $8,000 on those properties next year, and that tax would rise to $10,000 in 2020. So there are different ways of doing it. San Diego has a flat tax rate. The other places, it's more a percentage of property value. But in either case, the taxes are aimed at properties that are sitting vacant for most of the year. Has this worked as intended anywhere else, Nicholas?

Yeah, absolutely. So this kind of policy has been implemented in other places around the world. And generally, it has been effective in reducing vacancies. So in Vancouver, in Canada, there were over 2,500 vacancies in 2017 the year was implemented, and in 2024, that fell below 1,000. Also, there's a French tax that was implemented a while ago in various cities targeting kind of vacant homes. And in both cases, many of these homeowners began renting out, their previously vacant homes to avoid the tax.

And what that does is that shifts housing stock to the rental market. So one study of the Vancouver tax found that as a result of this, rental prices in the city did see a lasting decline. I want to move on to the people that are obviously not for these taxes, the people that own these homes. You mentioned off the top, New York, but there are other places across the country where this will hit differently. Obviously, people using these summer homes, vacation homes, not necessarily as investment properties. So talk to me a little bit about how people say this won't work in different locales. So critics say that the taxes would do two things. One, drive away wealthy people who's spending kind of boost local economies.

And the second element that they fear is that it would also discourage new housing construction, which we desperately need. A lot of these luxury properties compose kind of a significant portion of locality's property tax revenue. And so the fear is that if fewer these properties are built as a result of the tax, then that could end up hurting to these tax receipts. And the other element is that it's not always the case that, you know, people who have second homes are generally wealthy people that can, you know, afford a significant tax increase. So the other fear is that this could also be hitting people who can't afford the tax as easily. That's journal reporter, Nicholas Miller. Nicholas, thanks for your time. Thanks so much.

And that's it for what's news for this Tuesday morning. Today's show was produced by Hattie Moyer and Daniel Bach. Our supervising producer is Sondra Kilhoff, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.