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Authored by Armstrong Williams via The Epoch Times,

There are moments when the world seems to be moving toward peace and war simultaneously.

This is one of them.

President Donald Trump continues to express hope that the conflict with Iran can be brought to an end. Iran and Oman say negotiations over shipping arrangements in the Strait of Hormuz are progressing.

That is encouraging, but the moment remains fragile.

Iran has attached significant conditions to reopening the strait, including compensation for wartime damage and changes in American policy. So diplomats are discussing stabilizing one of the world’s most important waterways while Tehran continues making demands Washington may find impossible to accept.

That is the fog of war: hope in one headline, escalation in the next.

The contradiction extends to Yemen. Even as diplomacy continues, Iran-aligned Houthi forces remain capable of destabilizing the region, including threatening Saudi interests and shipping routes.

One spark can touch several alliances.

That is why progress must be measured by actions, not announcements. Diplomats negotiate while generals prepare contingencies. Political leaders speak of peace while military planners prepare for negotiations to fail.

America must do the same.

But Washington can no longer ignore another reality: Modern warfare consumes sophisticated weapons at astonishing speed.

Recent reporting has raised serious questions about American inventories of Patriot and THAAD missile-defense interceptors, Tomahawk cruise missiles, and other precision weapons after months of conflict.

The United States remains the most powerful military nation on Earth. But even the strongest military cannot consume advanced weapons indefinitely without confronting production times, supply chains, industrial capacity, and cost.

That is not an argument for weakness. It is an argument for strategic discipline.

Strength means possessing the ability to wage war while understanding which wars are necessary, what objectives justify them, and when diplomacy better serves the national interest.

Europe faces a different danger.

Lithuania and other countries along NATO’s eastern flank increasingly worry that Russia could test the alliance through something deliberately ambiguous such as a drone incident, cyberattack, infrastructure sabotage, false-flag operation, or limited provocation.

The objective might not be territorial conquest.

It might simply be to ask one dangerous question: Will NATO really defend every inch of NATO?

The greatest danger is miscalculation. History reminds us that wars are not always deliberately chosen. Sometimes nations stumble into them because each side assumes the other will retreat.

Then there is migration.

Recent events in Ceuta, Spain’s small territory in North Africa, demonstrate how quickly economic desperation, political instability, and misinformation can overwhelm borders.

Not every national security crisis begins with missiles.

Europe has every right and responsibility to control its borders. But border security and human dignity cannot become opposing principles. A civilized society must be capable of defending both.

Another transformation receives too little attention: the democratization of warfare.

Ukraine demonstrated how inexpensive drones can destroy equipment worth millions of dollars, conduct surveillance, and fundamentally alter battlefield tactics.

Now those technologies are spreading.

Colombian authorities have confronted armed groups using or experimenting with weaponized civilian drones. The lesson should concern every government: Technology perfected on one battlefield does not remain there. It migrates.

Today’s battlefield innovation can become tomorrow’s terrorist, cartel, or homeland security threat.

Yet amid this instability, Venezuela reminds us that political change does not always require warfare.

Opposition leaders continue demanding restored democratic institutions, political freedoms, and credible elections. Dialogue matters, but dialogue without genuine political competition is insufficient.

Eventually democracy comes down to something remarkably simple: Let the people choose.

What connects Iran, Yemen, Russia, Europe, Colombia, and Venezuela is neither geography nor ideology. It is uncertainty.

We are living through a period in which the international order is being tested from multiple directions. Alliances are under pressure. Military inventories are being strained. Drones are transforming warfare. Migration challenges borders. Governments struggle with legitimacy while regional conflicts threaten to widen.

And yet diplomacy continues. That matters.

Oman is still mediating. Washington is still searching for an exit from conflict. Governments capable of exchanging missiles remain capable of exchanging messages.

We should never confuse optimism with naivete. A ceasefire is not peace. Negotiations are not reconciliation. Progress announced today does not guarantee tranquility tomorrow.

But cynicism cannot become foreign policy either. Peace almost always begins while distrust still exists.

The question is whether leaders are negotiating because they genuinely seek an end to conflict or because they need time to prepare for its next phase.

That is why I remain hopeful but clear-eyed.

Political leaders make the announcements. Ordinary people live with the consequences.

Families bury the dead. Soldiers carry the wounds. Refugees leave their homes. Businesses absorb the costs. Parents wonder whether their children will inherit another war.

Through this fog, our objectives must remain clear: Strength without recklessness. Diplomacy without naivete. Deterrence without endless warfare. Hope without illusion.

Because peace is not what governments announce today. Peace is what survives tomorrow.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Apple has trained a custom large language model specifically for the Chinese market, utilizing technical support from Alibaba Group, according to Reuters. 

This arrangement would make Apple the first foreign company cleared by Beijing to offer a proprietary AI model in China.

The custom model is expected to power portions of Apple Intelligence when the AI suite rolls out to mainland China via an upcoming iOS update.

This marks a strategic shift from Apple's earlier plan to rely solely on third-party Chinese models for its regional generative AI features. According to the report, OpenAI's ChatGPT and Anthropic's Claude - which Apple pairs with its own technology in Western markets - are unavailable in China.

In July, China's Cyberspace Administration officially registered Apple's generative AI service, clearing the primary regulatory hurdle that had kept Apple Intelligence off local devices.

Under this approved framework, Alibaba's Qwen model will integrate into Apple Intelligence across compatible iPhones, iPads, Macs, and Vision Pro headsets sold in China, while Baidu's technology will separately support search-related features.

It remains unclear exactly how Apple's proprietary model will divide tasks with Qwen and Baidu, as the technical breakdown between the systems has not yet been disclosed.

China remains one of Apple's most crucial markets. Until now, the lack of native AI capabilities on Chinese iPhones has put Apple at a distinct competitive disadvantage against domestic rivals like Huawei, which have aggressively marketed AI-equipped handsets.

Apple Intelligence began rolling out globally in October 2024, but Apple said at the iPhone 16 launch that September that mainland China availability was "subject to regulatory approval." The CAC's July 15 registration came roughly 22 months later, clearing Apple alongside six other on-device generative AI services from Huawei, Samsung, OPPO, vivo, Xiaomi and ZTE.

The wait proved costly in a market Apple has been winning back. IDC put Apple's China smartphone share at 18.1 percent in the second quarter, up from 13.9 percent a year earlier on 24.4 percent shipment growth - the strongest gain of any major brand, and enough to move Apple from fifth place to second. Huawei held the lead at 22.6 percent. They were the only two vendors to grow at all as overall shipments fell 4.3 percent to roughly 66 million units, a fifth straight quarterly decline driven by rising memory costs and fading government subsidies.

Apple's gains came from holding iPhone 17 pricing steady while Android rivals raised theirs, and from signaling second-half price increases that pulled demand forward - mechanics that flatter one quarter rather than establishing a trend. Domestic rivals shipped on-device generative AI features throughout the wait.

Reporting has indicated Apple evaluated Baidu, ByteDance's Doubao and DeepSeek before settling on Alibaba as its primary model provider. Apple has said nothing publicly about the arrangement - every confirmation to date has come from Alibaba and Baidu, or from the regulator's own filing. No mainland launch date has been announced.

Submitted by Peter Tchir, Academy Securities — Macro Strategy

Warsh's Mark Antony Moment

I really wanted to go with Warsh is “puttin’ on the foil” as the title for our Jackson Hole preview, but I’m told the Hanson Brothers might not be as iconic as I thought. In any case, of all my failings as a parent, getting my kids to finally watch Slapshot is one of the easier ones to correct. I felt the “vibe” of Warsh “puttin’ on the foil” in the green room as he gets ready to speak to the Jackson Hole crowd was good, but today we’ll go a little more “highbrow.”

Friends, economists, central bankers, lend me your ears;
I come to bury inflation, not to praise it.

As you know we have been on the side of No Cuts:

• We discussed this along with the danger of Cheap Chinese Compute on Thursday on CNBC.
• On Friday, we discussed Iran, ProSec, and the Fed on Bloomberg TV (starts at the 2:19:40 mark, with Lisa giving her best Seinfeld impersonation of No Hikes For You (last weekend’s T-Report)). The segment before discusses why the Fed is still going to hike 75 bps, so the combination of the two segments makes for some interesting viewing.
• The Path to a September Rate Cut (Despite AI Inflation). Restarting the conflict in Iran has not been good for this timeline, and the data task force is likely to take longer to come back with recommendations than I’d like, but the points, I believe, are still valid.

Arguing about what data the Fed uses and how they interpret the data is not new for the T-Report:

• A few “oldies but goodies”:
  • You're So Vain — July 2022.
  • Not that Anyone Cares, but OER seems Crazy — October 2022.
  • Inflation Dumpster Dive — October 2022.
  • More Inflation Dumpster Diving — November 2022.
  • Threading the Needle — December 2021. “Pointing out the risk that CPI is understated due to the shelter component.”
  • Inflation – Yes. Hikes – No. Taper – Maybe. August 2021.
    The Fed has a script and will follow that script:
    • Act 1: Say it is Transitory.
    • Act 2: Question how it is measured.
    • Act 3: Say it is Transitory.
    • Act 4: Say it is Transitory but talk about multi-year averages…

The role of a strategist is to determine what is likely to happen, not what one wants to happen. This report may skew a little to the “want” rather than “expect” side of the equation, but sometimes it is healthy to vent (and possibly influence policy).

The Warsh Reaction Function is Clear

Okay, that is probably an overstatement, but I think worrying about the reaction function is missing the main point. The main point is to figure out what data Warsh is going to react to. The “reaction function” consists of two parts:

• The data that feeds into the equation.
• The equation that processes the data to get an answer.

Why do so many people still think PCE or some other data point (that has likely led to bad policy decisions in the past) is what Warsh will use? I suspect his “reaction function” will be more or less “normal,” but what will be unusual is what data he uses to input into that function.

That is a key premise to my view on how he should attack his Jackson Hole Speech.

The Speech I Would Give

This is definitely a mix of what I’d say, what he may say, with a bit too much Shakespeare to keep the report aligned with the title. Mark Antony’s speech starts with one thing and ends with pretty much the exact opposite, which hopefully I’m able to replicate here (and I was tempted to put on the foil to help write this).

Friends, economists, central bankers, lend me your ears;
I come to bury inflation, not to praise it.

Inflation is Bad, But…

Step 1 — Argue inflation is bad, but it is at least a little unclear that this is always true, or if there is some scientific method to determine what level of inflation is bad.

Is inflation bad? Yes, some level of inflation, historically, has hurt a segment of the population. Do we know that exact level? No. Well, some say 2%, but why not 0%? Why not 4%? 2% seems like an awfully convenient round number. If we had rigorous scientific backing it would be one thing, but unlike “hard sciences” much of what we do in economics is conjecture. [Step 1a — inflation is bad, but how do we know 2% is the “right” target?]

Is inflation bad? Yes, but don’t we need to look at income growth as well? Inflation erodes purchasing power, but if wages are rising at or near the pace of inflation, should we be that concerned? If we had 4% wage growth, 1% real yields, and inflation running at 3%, should we try to stop it? Nominal is important but real numbers are important too. [Step 1b — inflation may be bad, but it needs to be thought of in an overall context.]

Is inflation bad? Yes, and Powell was an honorable man, but…

We’ve all agreed that inflation is bad, but yet, my honorable predecessor left rates unchanged even as inflation soared. Did this inflation in 2021 not seem bad? Surely the Fed must have been afraid of inflation above 4% using the auspices of the BLS data. While relying on the high priests to examine the entrails, could they have not looked for other signs that inflation was there? [Step 1c — hint at better ways to measure].

Then in 2024, just before an election, my predecessors were able to cut rates. Inflation must have been below 2%, no? No, inflation was above 3%, but we cut rates. Yes, I understand why everybody says inflation is bad, but did they act on it? [Step 1d — point out recent examples that don’t match the current angst on inflation].

Rate Hikes Quell Inflation, Except…

Step 2 — Argue that rate hikes are not always an effective tool against inflation.

Rate hikes will quell inflation. Yes, we have a conflict in the Middle East where the U.S., under the guidance of President Trump, is trying to make the world safe (I’m writing what he as an appointee might say). One offshoot of that conflict has been higher energy prices across the globe. The U.S. as a net exporter has weathered this better than other regions. Energy prices (including gasoline, jet fuel, and diesel) have risen, along with products reliant on oil and LNG as their feedstock. Will hiking rates cause oil prices to come down? Will people drive less because of a hike? How does raising the cost of funding help our great energy companies explore and produce more energy? Shouldn’t we be making it easier for companies to invest in energy production rather than the other way around? If we had a “natural” supply and demand imbalance, hiking rates might be effective. However, hiking rates due to a conflict, which could ultimately lead to lower energy prices, seems like the bigger mistake. [Step 2a — argue that hiking to offset inflation due to Iran is counterproductive].

Rate hikes will quell inflation. Yes, we have one of the largest capital investments this nation has ever seen! We are building data centers and AI processing power across the country! It is a “revolution” that is “transforming” the country. There are strong arguments that over time, this build out will increase productivity, thereby dampening inflation. Assuming that we think it is good policy to dampen future productivity gains (over today’s concerns), would it even work? Will a single “compute” project be put on hold because we raise rates by 50 bps? Given the profit potential being priced into the market, a 50 bp hike would be a mere blip for these companies regarding their willingness to proceed with projects. Yet every other part of the economy would be hurt. [Step 2b — argue that hiking to slow the “compute” spend is bad public policy and would not work anyways].

We will hike rates when inflation is too high (if we believe that hiking rates will not only act to lower inflation, but also serve the longer-term interests of the nation). The key sources of inflation that we are experiencing will not be impacted by hikes and it would be bad public policy, at the national level, to slow the “compute build.”

Task Forces Are Ambitious, Or Just Common Sense?

Step 3 — Changing the Fed is “ambitious” but necessary.

Is a Balance Sheet Policy Task Force ambitious? Yes, but how did something that was once considered “extraordinary” become a basic part of the tool kit? The most recent Quantitative Easing ended in March 2022. We continued to buy bonds up until the day we first hiked? It is unclear why we waited so long to hike with inflation spiking, but to still be buying bonds right up until that moment in time seems wrong. If QE is “extraordinary,” that makes no sense. The 10-year Treasury was 1.5% in December 2021, with inflation soaring, and the Fed kept buying bonds?

Going back to COVID, we saw “near panic” in corporate bond markets. The need to raise money was overwhelming the ability to support prices. The “carnage” in ETFs attracted the Fed’s attention. A short-dated corporate bond ETF was trading at an extremely large discount relative to NAV, which was causing the ETF Spiral™ to play out (according to the T-Report at Academy Securities (wishful thinking plug on my part)). On a Sunday night, in conjunction with Treasury, the Federal Reserve announced programs to not only purchase corporate debt in the secondary market and to buy corporate debt new issues, but also to buy corporate bond ETFs. The result was instantaneous and markets recovered before the announced programs ever bought a single corporate bond or ETF. It in fact took weeks, or longer, to develop the protocols and piping to execute the plan, but we went ahead with the purchases, even though the announcement had done the heavy lifting. [Step 3a — is it ambitious to question how we use the balance sheet? Yes, but it seems like an extremely useful exercise].

Is having an Inflation Frameworks Task Force ambitious? Yes. Why weren’t we hiking earlier? Why were we cutting when inflation was well above target? Why would we hike (or cut) when many entities (including every person and corporation locking in long-term low yields during ZIRP) would not respond to that simple decision?

Is having a Data Sources Task Force ambitious? Actually, no, it is not ambitious, it is common sense! It has been a long time since anyone at the Fed used a slide rule, so why would we not reassess what data we look at? Businesses have been built around processing, analyzing, and procuring data in a timely fashion. These businesses only survive if they are useful. The Fed itself publishes a swathe of data that seems to be largely ignored by the Fed (at least at FOMC meetings — Cleveland Fed Tenant Repeat Rent). Let’s examine what we already have at the Fed and BLS that can be used. Let’s examine other outside sources. Let’s create a “best of breed” dashboard. I cannot even fathom why some view this as “ambitious” instead of standard operating procedure!

Bottom Line

If I were Warsh, I’d take the gloves off and come out swinging!

Hammer home the point that while “inflation is bad,” the exact level that is “bad” is difficult to determine. There have been inconsistencies in the application of interest rate policy with inflation readings. Get people to question the status quo on what data is useful or not.

Argue that not all sources of inflation would be impacted by raising rates. That understanding the drivers of inflation is key to effective policy — not a “knee jerk” reaction to a number.

Highlight how we have an opportunity to rethink much of the Fed policy making process from the ground up with these task forces, and that these task forces should be the “norm” and should have been in existence already.

I wouldn’t weigh in on jobs (recent data supports the cuts, but this is already getting too long).

I wouldn’t weigh in on the neutral rate — far too wonky and will let Miran or someone else champion that part of the argument on why policy is too restrictive.

Probably far too aggressive on my take (and use of Mark Antony), but I expect that by the end of Jackson Hole, we will see rate hike expectations continue to drop.

I’m not as bullish on rates out the curve, as global sovereign bond issuance (to support defense spending and infrastructure spending) and ongoing corporate debt issuance are likely to keep pressure on the longer end of the yield curve. It doesn’t help, at least for now, that traditional buyers like Japan and the Middle East are likely not buying as much of our debt as they once did (for different reasons).

Rising bond yields and a “hawkish” Fed are something that should not be a concern for equity markets!

Cowards die many times before their deaths; the valiant never taste of death but once.

That seems like a good quote from Shakespeare’s Julius Caesar as it is the approach I’d like to see Warsh take (he will emerge victorious, if this is done well).

Have a great weekend, and at least now I won’t have to write about Jackson Hole next weekend.