First Came the TACO Trade. Now It’s the NACHO.

Summary

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WSJ What’s News – May 12, 2026

Episode: First Came the TACO Trade. Now It’s the NACHO.

Overview

This episode delivers a brisk yet comprehensive roundup of the day's most impactful financial, political, and economic headlines, focusing particularly on market unrest in the UK, a major Supreme Court redistricting decision in Alabama, the rise of the “NACHO” trade on Wall Street, AI industry intrigue, and the debate over secondary home taxes in the U.S. Memorable moments include spirited discussion about financial acronyms, implications of the Hormuz Strait closure, and an in-depth look at the effectiveness and controversies of taxing second homes.

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Key Discussion Points & Insights

Political and Market Turmoil in the UK

• [00:48] Luke Vargas
  • The UK faces market turbulence due to a political crisis:
    • The pound drops and borrowing costs hit a 26-year high after the Labour Party’s poor local election performance.
    • Prime Minister Keir Starmer is under immense pressure to step down as internal party rebellion mounts.
    • “A Cabinet member resigned, saying the country faces enormous challenges and that Starmer cannot deliver the changes needed.”
    • Nearly 1 in 5 Labour lawmakers call for Starmer’s resignation.

U.S. Supreme Court Ruling on Alabama Redistricting

• [01:18] Luke Vargas and Nicholas Miller
  • The Supreme Court backs Alabama's new congressional map, likely dissolving the state’s only majority-Black district and strengthening Republican control.
  • Steve Marshall, Alabama Attorney General [02:01]:

    “My job in this office was to put the Legislature in the best possible legal position to draw a congressional map that favors Republicans 7 to 0.”

  • Shalita Ladowdy, plaintiff (paraphrased by Luke Vargas):
    • The decision feels like a setback toward the Jim Crow era in representation.
  • The decision may lead to Republican gains of 2 to 12 House seats, spurring map changes in blue states for 2028.

AI Industry Developments and Concerns

• [02:53] Luke Vargas
  • Investigation into OpenAI CEO Sam Altman's personal investments as OpenAI gears up for an IPO.
    • Altman is accused of potential conflicts of interest, given his investments in companies OpenAI supports.
    • Elon Musk sues, alleging OpenAI’s transition from nonprofit was manipulative.
    • OpenAI’s board chair defends Altman’s transparency; Republicans remain skeptical.
  • Elon Musk’s Grok chatbot sees user decline: 20 million downloads in January fell to 8.3 million in April.
  • SpaceX–Anthropic deal for computing power puts Grok’s future in doubt.
  • Musk:
    • Publicly describes Xai (Grok’s parent) as “the smallest of the AI companies.”

The "NACHO" Trade and Wall Street Acronyms

• [04:16] Kaitlyn McCabe at JP Morgan Global Markets Conference
  • A new market acronym, “NACHO” — Not a Chance Hormuz Opens — is gaining traction, following last year’s “TACO” (Trump Always Chickens Out) trade.
  • Kaitlyn McCabe [04:16]:

    “So this term is nacho, and it stands for Not a chance Hormuz Opens... It’s really an iteration of the taco trade... 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."

    • The NACHO trade reflects market bets that the strategic Strait of Hormuz won’t reopen soon, keeping oil prices high until economic disruption forces a resolution.
  • Luke Vargas [04:59]:
    • Asks how to “play” the NACHO trade.
  • Kaitlyn McCabe [05:06]:

    “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.”

    • Warns listeners not to put all their eggs in one basket — financial acronyms are often tongue-in-cheek and market reactions can be unpredictable.
    • Stocks remain buoyant, mainly due to excitement over AI and chip stocks, seemingly oblivious to Middle East risks.
  • Luke Vargas [06:00]:
    • Investors are poised to react to April’s inflation data amid ongoing war and market volatility.
    • The Senate is voting on Kevin Warsh as the next Federal Reserve chair.

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Taxes on Secondary Homes Gain Momentum

• [06:40] Segment: State and Local Governments Target Owners of Second Homes
  • New taxes on secondary/vacant homes aim to combat budget shortfalls and housing shortages.
• [07:15] Nicholas Miller:
  • New York City’s proposed “pied-à-terre” tax, targeting properties worth $5 million+.
  • Rhode Island’s “Taylor Swift tax” (homes worth $1 million+, uninhabited at least 183 days/year).
  • Proposed San Diego tax: $8,000 (rising to $10,000 in 2028) on properties uninhabited half the year.

    “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 most of the year.” [07:50]

• [08:40] Has This Worked Elsewhere?
  • Nicholas Miller:
    • Vancouver: Empty homes tax reduced vacancies from 2,500+ (2017) to less than 1,000 (2024).
    • Noted impact in France as well: more vacant homes turned into rentals, easing rental prices.

    “One study...found that as a result of this, rental prices in the city did see a lasting decline.” [08:43]

• [09:29] Pushback & Criticism
  • Critics worry taxes may:
    • Deter wealthy spenders who support the local economy.
    • Discourage new upscale housing construction, shrinking property tax revenue.
    • In some cases, may disproportionately impact those who aren’t actually wealthy.

    “A lot of these luxury properties compose kind of a significant portion of, you know, localities property tax revenue. And so the fear is that if fewer of these properties are built as a result of the tax, then that could end up hurting city's tax receipts.” [09:53]

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Notable Quotes & Memorable Moments

• Steve Marshall, Alabama Attorney General [02:01]: — “My job in this office was to put the Legislature in the best possible legal position to draw a congressional map that favors Republicans 7 to 0.”
• Kaitlyn McCabe, on market acronyms [04:16]: — “This term is nacho, and it stands for Not a chance Hormuz Opens... it’s an iteration of the taco trade.”
• Kaitlyn McCabe, on market speculators [05:06]: — “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 markets swing so violently...”
• Nicholas Miller, on second home taxes [07:15, 07:50]: — “The intention [of these taxes] is generally either to raise tax revenue or open up more housing availability by trying to encourage owners of second homes... to rent out those properties or sell them.”
• Nicholas Miller, on policy effects [08:43]: — “One study of the Vancouver tax found that as a result of this, rental prices in the city did see a lasting decline.”

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Timestamps for Important Segments

• [00:18] – Top stories preview (UK, US redistricting, NACHO trade)
• [00:48] – UK political crisis, market fallout
• [01:18] – Alabama Supreme Court redistricting decision
• [02:53] – AI industry news: OpenAI probe, Musk’s Grok struggles
• [04:16] – "NACHO" trade explained: market implications and history
• [05:06] – Market reactions and investor behavior
• [06:00] – Fed chair news and upcoming Senate vote
• [06:40] – Taxes on second homes: proposals and impact
• [08:40] – Effectiveness of vacancy taxes globally
• [09:29] – Critiques and concerns around new taxes

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Language & Tone

The conversation maintains a brisk, informative, and slightly wry Wall Street Journal tone — clear-eyed, sophisticated, and occasionally tongue-in-cheek, especially around Wall Street’s love for catchy acronyms.

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This summary captures all key topics—UK political chaos, major Supreme Court decisions, Wall Street trading trends, AI industry intrigue, and the complexities of taxing vacant homes—providing a solid briefing for those who missed the episode.

Transcript

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[Luke Vargas]

British Prime Minister Keir 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.

[Kaitlyn McCabe]

The idea with not a chance for moves 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.

[Luke Vargas]

It's Tuesday, May 12th. I'm Luke Varkas 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 Keir 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 Starmer cannot deliver the changes needed. Nearly 1 in 5 labor lawmakers have made similar statements urging Starmer 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 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.

[Nicholas Miller]

My job in this office was to put the Legislature in the best possible legal position to draw a congressional map that favors Republicans 7 to 0.

[Luke Vargas]

A plaintiff in the case, Shalita Ladowdy, 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, leading 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 head for an IPO. The probe into potential conflicts of interest comes after a Wall Street Journal article detailed Altman'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 nonprofit 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 because Altman and OpenAI's involvement could boost their value well. Elsewhere in the AI race, Elon Musk's Grok is losing ground as downloads fell from 20 million in January to just 8.3 million in April. An agreement by parent company SpaceX to rent massive computing power to Anthropic is also leaving Grok's ability to catch up to other chatbots in doubt. The deal provides Anthropic with the essential computing power needed to scale While Musk and Grok's parent company didn't respond to requests for comment in public statements, Musk has characterized Xai, the owner of Grok, as 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 Kaitlyn McCabe stepped out of the JP Morgan Global Markets Conference in Paris to break it down for us.

[Kaitlyn McCabe]

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 Hormuz Opens is essentially the straight this 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.

[Luke Vargas]

So what then is the bet exactly, Caitlin. Besides that if the strait remains closed, oil prices, I presume, are going to stay higher for longer.

[Kaitlyn McCabe]

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 markets 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 can 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.

[Luke Vargas]

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 US More on that after the break.

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[Luke Vargas]

Across the US 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.

[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.

[Nicholas Miller]

Absolutely. So New York City got a lot of attention recently for proposing a tax on pied a terres. 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 is either 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.

[Daniel Bach]

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.

[Nicholas Miller]

So they're generally subject to different rates and there are exemptions in some cases. New York City is planning to tax pizza terre worth $5 million or more. Rhode Island's so called Taylor Swift tax will hit homes valued at over 1 million that are uninhabited for at least 183 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 of the year. It would place a levy of $8,000 on those properties next year. And that tax would rise to $10,000 in 2028. 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 VAC most of the year.

[Daniel Bach]

Has this worked as intended anywhere else? Nicholas?

[Nicholas Miller]

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.

[Daniel Bach]

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.

[Nicholas Miller]

So critics say that the taxes would do two things. One, drive away wealthy people whose spending kind of boosts 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, you know, localities property tax revenue. And so the fear is that if fewer of these properties are built as a result of the tax, then that could end up hurting city's 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 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.

[Daniel Bach]

That's Journal reporter Nicholas Miller. Nicholas, thanks for your time.

[Nicholas Miller]

Thanks so much.

[Luke Vargas]

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 Sandra Kilhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show and until then, thanks for listening.

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