It’s been a while since I did an election deep dive. And by coincidence, it was Portugal! Now I venture again into the Portuguese-speaking world to point out where the market is wrong. And this time, I’m doing it properly.

I used to do simple models to approximate where the market is wrong (as in the Polish presidential election). Now, I’m taking my election trading a step further with proper proprietary models. Brazil is the first real test of my skill, but hardly the last one—I am building a forecast for the midterms (the Senate and Governor races, to be precise), which should launch as a series here next week.

This should be fun and profitable, so let’s take a look at Brazil.

Context

I’m going to be brief here. Lula vs Bolsonaro is like Trump vs Democrats—a decade+ battle between the right and left. Both politicians led the country at some point, but unlike in America, in Brazil the right-wing leader was eventually found guilty of attempting a coup and jailed. Now, his son, currently a Senator, is the right’s candidate, aiming to take back power and free his father.

Fundamentals

Fundamentals are slightly favoring a challenger. The labor market is robust, but slow growth and above-target inflation are working against Lula.

It shows in his approval rating, which never fully recovered from its early-2025 low and slipped again in September:

Political Climate

Brazilians have lived under extreme political polarization for over a decade. They are increasingly tired of the overall political climate, which shows in social surveys:

Brazilians are increasingly polarized, but at the same time disengaged; those who stick with following politics become hardline, while others become less and less engaged over time. The fear of politically-motivated violence is still high, as is general distrust among voters.

But most importantly, about half of Brazilians say this election draws less interest than 2022 (Datafolha: 47% less, 44% more). Seeing that, both contenders are trying their best to activate fatigued voters. I’ve analyzed dozens of elections in my life, and Brazil is at the frontier of political campaigning. The center of each campaign is WhatsApp, where campaigns run anything from simple coordination to gamified challenges aiming to convert new voters.

Other Candidates

When analyzing two-round elections, it’s always important to look at candidates beyond the top two. While they are extremely unlikely to achieve anything, their voters overwhelmingly tend to vote in the second round. How they transfer is key. Today, we have three contenders for the third place—Augusto Cury, Renan Santos and Ronaldo Caiado.

Cury is a bestselling self-help author (and the richest candidate per the official numbers) running as the anti-polarization candidate. He attracts voters that are tired of the current political climate.

Santos is a right wing candidate, a mix between Milei and Bukele. He attracts mainly young voters; online polls show him well above other minor candidates, but on the ground polling didn’t replicate this discrepancy.

Caiado is another right-wing candidate with a hardline stance on security. He is polling the lowest out of the three and is strongest in Goiás, where he was governor, and in the Federal District.

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Forecast

My headline forecast is very bullish Bolsonaro:

What’s cool about having a full-fledged model is that I can trace back to what exact assumptions are pushing my model away from the market. This reverse-engineering exercise is not perfect (the market price is an average of multiple models and vibe-based forecasts), but it allows me to challenge my key assumptions.

While I directionally agree with the main market, the devil is in the details. I have some disagreements when it comes to margins and order in the first round.

In the below section for the paid subscribers, I explain what assumptions drive my model, what specific adjustments diverge my forecast from the market and what is my setup for the first round.

Vote Share

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I’m reviving this series as a forecast update on the global events I cover. While deep dives are great for introducing a new thesis, they are not optimal for updating. Each deep dive is standalone and needs full context, so I kept repeating large parts of a thesis in every update. Now, I will be able to update you on a rolling basis and build up my theses step by step.

Today I’ll start with the Fed post-mortem and its implications. Then I have a forecast update on Iran and Ukraine after the UNGA.

The Fed

The hike vs no hike thesis was a simple one. It was essentially the market vs the belief in Trump (or the belief that there is a plan). The Fed-Treasury Accord, the grand strategies, Project 2025, Miran’s paper… all imploded on September 16th. However you want to look at it, there’s nothing good for Trump coming out of the hike. But this is only half of the story.

The most important signal about the FOMC wasn’t the decision to hike. It was the fact that the decision was unanimous. The economic data on its own didn’t call for a hike. It was Warsh’s suggestive language that pushed the yields higher. The very person who wanted to abolish forward guidance fell victim to it. Or did he?

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What a ride! We went from a 76% chance of no change to an 88% chance of a 25bps hike in less than a month:

What pushed the market towards this view? We have three inflection points:

1. Warsh’s Jackson Hole speech, and more precisely, his hiking path parable, along with his hard stance on inflation.

2. PPI coming in hotter than expected.

3. CPI coming in slightly above expectations, days after the PPI print.

In essence, the market took in an extremely complex situation (current-state global economy) and applied a rather simplistic heuristic—if CPI=cool then hold, else hike.

Is this a place in which a nuanced approach gives alpha? Or rather, should I conform to the crude reasoning of the market? Kevin Warsh is a new chair trying to implement a new regime, so I think we should all decide for ourselves. After all, that’s what Warsh wants us to do!

I am a fan of a nuanced approach.

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I’m reviving this series as a forecast update on the global events I cover. While deep dives are great for introducing a new thesis, they are not optimal for updating—often I needed to repeat large parts of a thesis in each update as deep dives are standalone content and always require context. Now, I will be able to update you on a rolling basis and build up my theses step by step.

Today I’ll focus on the Iran and Ukraine war developments and the latest on the Fed decision in September. The last Forecast Update is here for context:

Iran

The most recent deep dive on Iran:

And a small update:

The Iran peace markets are at their lowest level ever and so are the Strait of Hormuz traffic normalization markets:

Oil markets are near 2026 highs as well:

Sentiment is as bearish as it gets:

1. We’ve seen another round of kinetic strikes.

2. There’s no peace narrative circulating.

3. Trump is reportedly mulling exiting the war.

4. Diesel cracks are at record highs.

And the situation seems to be in a strange equilibrium—diplomats are still engaging (Qatari and Pakistani trips most notable in recent days) while any kinetic attacks are rather limited in scope and duration. We are still playing the game of chicken. For the next two months, however, Iran holds the upper hand.

Since neither side will invade anything, we are analyzing runways, supply chains and domestic politics, rather than military capability. Here, there’s a striking (pun intended) asymmetry:

• Iran already feels all the pain it can. Exports are effectively blocked, so it has limited access to foreign currency. Industrial capacity is decimated and shortages of basic goods are pushing inflation higher. Coups and revolts have historically needed much less to spark. That being said, Iran’s runway is still measured in months, even years—IRGC seems to be in full control of the political apparatus, the economy and Artesh itself. And Iranians are like the Soviets: they are used to shortages.

  

• The US, and the rest of the world, on the other hand, has yet to feel the real pain. Diesel, jet fuel, LNG, sulfur, helium and many other commodities are near or at ATHs. Fertilizer is scarce and will impact food supply next year and beyond. The SPR is at its lowest level since 1982, when it was being filled. Everything is strained, but nothing has broken yet.

Trump faces difficult midterms with the global economy strained to the limit. While Americans will hardly starve, they will feel the pain in prices. And in potential wars all around the world if we really hit the wall at full speed.

What I see happening next:

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Fed markets have never really been exciting. For eight years we had Powell at the helm and he was like a rock—stable, unmoved and… boring. His approach was one of stability and communication. Dot plots, forward guidance, Nick Timiraos as Fed whisperer; generally, the post-GFC regime focused on stability above all.

That changed in 2022. Before the Ukraine war the global economy was rather stable, bar COVID—and the pandemic was a demand shock, something the Fed is well equipped to manage through rates. Supply shocks are a different beast. The Fed cannot print oil. Worse, the stable, data-driven approach forced Powell to offer continuous guidance on inflation over which he had little to no influence. Cornered, the previous chairman did the only thing he could—he kicked the can down the road and called inflation transitory.

Warsh’s Fed saw that. He dropped guidance, declined to submit his own dot, and is intentionally vague in his speeches.

Jackson Hole

If you think that Jackson Hole will be any different, think again. The theme of the symposium is “Financial Innovation: Implications for Payments and Policy”. The theme itself gives Warsh the ultimate cover—chances are he won’t mention the monetary policy path at all.

Instead, he can freely talk about AI, stablecoins and his task forces (the bolded three are what I expect him to spend the speech on):

• Communications: Mervyn King, Arminio Fraga, Peter Fisher—legitimizing the end of the dot plot and forward guidance.

• Balance sheet: Rajan, Stein, Dynan—Warsh’s own smaller-balance-sheet view outsourced to people with academic cover.

• Data: Doug McMillon, Raj Chetty, Kevin Murphy—providing cover for bad economic data by suggesting that there’s a need for better, private-market sources.

• Productivity and jobs: Marc Andreessen, Chad Jones, Asha Sharma—AI’s impact on productive capacity and monetary policy. This is the doctrinal home of “the economy can run hot without inflation.”

• Inflation frameworks: Greg Mankiw, Thomas Sargent, William White—working out a new approach to modeling inflation.

I will be surprised if the speech moves the September hold odds by more than 10 points in either direction. Especially after the two FOMC press conferences we’ve seen, both refusing to provide any guidance and forcing the market to decide itself. The task forces provide an additional cover—Warsh can claim that inflation is a non-issue and that data is not reliable.

So what is the answer to September, if it’s not Jackson Hole?

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The Rate

If Warsh is not the one to give us guidance, we need to guide ourselves. Luckily, we have plenty of tells in what the Fed and the Treasury do.

The naive read of the current regime is that they want the market to tell them what to do. Both previous meetings resulted in higher long-term yields and a pure read would indicate that it’s high time for a hike. But we are nowhere near pure.

We are in an energy supply shock and there’s only one way to fix it—partially destroy demand and either wait for the crisis to resolve or build more capacity in the meantime. In our specific case building more capacity is easier said than done. Especially if the Strait of Hormuz opens—then, we would enter oversupply, pushing new projects towards bankruptcy. Additionally, America is directly involved in causing the supply shock.

What is rather happening is a deliberate policy choice—keeping the government borrowing cost relatively low and letting the long end bear the cost of the shock.

The tells are already there: the Fed cut its bill purchases to zero on August 14, Treasury froze coupon sizes and pushes every marginal dollar through bills, and the 2-year hasn’t moved while the 30-year made a twenty-year high. But can the board support it?

The Votes

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I’m reviving this series as a forecast update on the global events I cover. While deep dives are great for introducing a new thesis, they are not optimal for updating—often I needed to repeat large parts of a thesis in each update as deep dives are standalone content and always require context. Now, I will be able to update you on a rolling basis and build up my theses step by step.

Today I’ll focus on the Iran war and its chances of ending. The Clarity Act and Ukraine forecasts remain stable. Look at my latest update to get up to speed:

Iran

The most recent deep dive on Iran:

And a small update:

Read more

I’m reviving this series as a forecast update on the global events I cover. While deep dives are great for introducing a new thesis, they are not optimal for updating—often I needed to repeat large parts of a thesis in each update as deep dives are standalone content and always require context. Now, I will be able to update you on a rolling basis and build up my theses step by step.

Today I’ll focus on the Iran war and its chances of ending. The Clarity Act and Ukraine forecasts remain stable. Look at my latest update to get up to speed:

Iran

The most recent deep dive on Iran:

And a small update:

Read more

I’m reviving this series as a forecast update on the global events I cover. While deep dives are great for introducing a new thesis, they are not optimal for updating—often I needed to repeat large parts of a thesis in each update as deep dives are standalone content and always require context. Now, I will be able to update you on a rolling basis and build up my theses step by step.

Today I’ll focus on the Iran war and its chances of ending, the Clarity Act and the Ukraine war.

Iran

The most recent deep dive on Iran:

And a small update:

Read more

The Clarity Act market is another Trump-fueled soap opera. Every deal announcement makes the market rip up, while every leak about Trump's crypto dealings sends it off a cliff. The market went from as high as 81.5% to a low of 31.5%, to settle at 41.5% as of now.

Traders treat this market as any other legislation market. They are missing the bigger picture. There are bigger things at play here and preparations are already well underway. I’ve been building this thesis for a while and now I’m ready to share it.

What Is the Clarity Act?

The Clarity Act is a major part of a comprehensive crypto regulation push. It all started with the Genius Act. Signed last year, it provides the basis to regulate stablecoins. The two most important provisions specify:

1. Who can issue stablecoins.

2. What kind of collateral must be used when minting stablecoins.

In effect, it creates ground rules for stablecoin creation and issuance. Most importantly, it specifies that all stablecoins must be backed 1:1 with US Treasuries or cash. However, it stops at that and does not address the wider crypto market—while stablecoins are now a regulated product, the very infrastructure they rely on is still mostly unregulated.

This is where the Clarity Act comes in.

The Clarity Act goes a step further. It’s a comprehensive act that establishes a regulatory framework for the entire blockchain industry. It’s a pretty long piece of legislation that sets up rules for pretty much everything on crypto: tokens, NFTs, smart contracts, DeFi, you name it.

It divides jurisdiction over digital assets between the CFTC and the SEC, allowing for broad integration of digital assets into the overall financial system. If passed, this bill, in combination with the Genius Act, will permanently regulate the crypto industry. No more operating on guidance. No more overnight rule changes.

But you probably know that already.

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What Did You Miss (Probably)?

There are several facts and developments that are connected to the Clarity Act. In their totality they show a wider plan behind the legislation. When interests align, there’s a bigger dedication to push things through.

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Escalation trap! Some analysts are ecstatic that they predicted a return to hostilities. Now, they go a step further predicting further escalation in the Strait of Hormuz, including a US invasion of Iran (sic!). I wonder what they’ll say once it’s clear there’s no US invasion coming.

The mainstream view on the situation misses the bigger picture. They still think that the purpose of this war is to beat Iran! If they dared to challenge this assumption, they’d discover that there’s much more at play. But they are too entrenched in their own ways—don’t be like them. Subscribe and see what’s really going on.

The Iran War

Background

I have repeatedly said that Iran might strike shipping in response to the Lebanon framework agreement. It was signed just a few days after the MoU and showed the cunning side of American diplomacy. At its core, the Lebanon framework agreement was signed to cooperate in restoring Lebanon’s total sovereignty and enforcing the government’s monopoly on arms.

The MoU asked the US and its allies just that. But the Lebanon framework expanded these principles in a way that they target Hezbollah now. It is a twisted interpretation of the relevant MoU clause from Iran’s point of view. Thus, escalation was inevitable.

The MoU resulted in one big win for the US. In coordination with regional governments and international organization, it was able to restore a significant part of the traffic through the strait. We went from less than 10 vessels a day (or low 20s if we approximate dark transits) to over 60 vessels a day on the best post-MoU day.

Attempting to limit the traffic through the strait was Iran’s best bet to protect its interests.

The Aim of the War

The framework from my recent article is still the best explanation of the conflict:

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Welcome to the 19th State of the PROPHET NOTES. As there are a lot of new subscribers, I use this series to give you a monthly update on my performance on prediction markets as well as a high-level outlook for the next month.

For me accountability matters. My bets are fully visible on the blockchain and my profile is public (under PROPHET.NOTES). The value of PROPHET NOTES is truth and transparency. And my P&L is the only and ultimate confirmation of my forecasts.

By seeing my results that are fully based on my articles and posts, you can be the judge of my value to you! I am honest of my wins and I’m honest about my losses. My aim here is to provide you with insight into the future of the world that is as accurate as possible. And there is no better way to judge it, but by pure prediction markets return on my predictions.

Summary

June was a wild month, but this time I was ready:

1. I started June with $19,221 in my portfolio.

2. Today my portfolio stands at $22,060.

3. There were no additional capital injections.

4. Total ROIC is 14.8% for the month and for 3% for the year. Percentages are calculated on the normalized bankroll.

5. All bankroll allocations are on the basis of starting bankroll.

The Good

The best news (at least for my psyche) is that PROPHET NOTES is now in the green for the year. The plan this year was to double the bankroll and with all the lessons 2026 brought, I can say I’m on track to achieve that. Especially since I’m back to fully trusting my research and my gut.

The majority of my gains came from the Strait of Hormuz markets. Despite having a complete thesis and model for the Iran war, I’m sticking to the markets that have resolutions grounded in the reality. I’ve been burnt enough trying to play Trump’s yapping and I’m better off leaving this to swing traders. My deal-related holdings in June were minimal.

Additionally I have a great pipeline of new research that should keep me (and you) busy through the next couple of months.

The Bad

I should have put more on the US not winning the World Cup! But jokes aside, it was a great month. Even though I was extremely busy, the overall result is great. I have nothing to add here besides that I’m looking to keep up the good mental state and great execution that I had in June

Bankroll Comments

I have 45% of my bankroll available for trading. I’t a good improvement vs end of May, but I’m still below my sweet spot when it comes to the utilization. However, with a good research pipeline I’m aiming to allocate at least 15% towards new markets and keep the 30% for unexpected occasions.

Wrap Up

That’s all for today. As I’ve said before, new research is coming, but I need to keep you in the dark for just a bit longer before I can tease what it is.

Stay strong and see you soon!

This is not official investment or life advice. Do your own research. This are only my opinions and I encourage anyone to do their own research before putting any money anywhere.

This year has been different. Ever since the kidnapping of Maduro, we have been living at the mercy of American foreign policy. It seems like a perfect environment for geopolitics traders - plenty of complex global events combined with the global rise of prediction markets.

At the same time, Polymarket enjoys record-high volumes this year. Outside of sports, geopolitics represents one of the biggest categories on the platform. And yet, plenty of whales and sharp traders focusing on geopolitics have suffered heavy losses this year.

The reason is simple. Along with the rising popularity of prediction markets and record high significance of geopolitics in our lives, came misinformation. Trump announced an imminent Iran MoU over 39 times before it finally happened. The Strait of Hormuz has been opened several times, and yet there’s little traffic to show for it. Axios turned from a respectable publication to a meme. Not only traders, but also mainstream analysts are consistently wrong on the most important matters around the Iran war.

Somehow, a seemingly perfect environment for trading turned into a cursed one. But it doesn’t need to stay that way. At least for you.

What Has Changed?

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To understand an action, you need to understand the purpose. A week and a half ago we learned of an MoU between the US and Iran. It was my outlier scenario.

It is pretty clear that Trump needed a deal more so than I estimated. My portfolio was well-positioned for the move. I recognized the risk and held most of my capital in the Strait-of-Hormuz-related markets.

Now, since we have a deal that introduces a somewhat new concept around the SOH, in addition to affirming the status quo, I need to update the model I created to analyze the conflict. On the one hand, we have a theoretically open SOH. On the other hand, the flow is being actively limited by IRGC strikes and the traffic is predominantly outbound.

How does it fit into my mental model? Does it render it moot? Or does it fit well into my long-term assumptions?

The Strait of Hormuz

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Welcome to the 18th State of the PROPHET NOTES. As there are a lot of new subscribers, I use this series to give you a monthly update on my performance on prediction markets as well as a high-level outlook for the next month.

For me accountability matters. My bets are fully visible on the blockchain and my profile is public (under PROPHET.NOTES). The value of PROPHET NOTES is truth and transparency. And my P&L is the only and ultimate confirmation of my forecasts.

By seeing my results that are fully based on my articles and posts, you can be the judge of my value to you! I am honest of my wins and I’m honest about my losses. My aim here is to provide you with insight into the future of the world that is as accurate as possible. And there is no better way to judge it, but by pure prediction markets return on my predictions.

Summary

May proved to be a volatile month due to the Iran war, but my P&L grew regardless:

1. I started May with $17,700 in my portfolio.

2. Today my portfolio stands at $19,221.

3. There were no additional capital injections.

4. Total ROIC is 8.6% for the month and for -10.1% for the year. Percentages are calculated on the normalized bankroll.

5. All bankroll allocations are on the basis of starting bankroll.

The Good

I finally figured out my mistakes with the Iran war trading. I’m back to fully listening to my research, rather than trying to fit my trading to what I wanted to happen.

The first good thing was abandoning permanent peace Yes positions at slight profit, rather than riding them to the end, hoping for a big win. Trying to catch these falling knives hurt my performance in the previous month, as without trading this market, I would have been in profit.

The second good thing was sticking to my research when it comes to the Strait of Hormuz traffic and Iran airspace closure. While the latter resolved in June, I had most of my positions for May strikes. The former, for now, is an evergreen trade.

The third good thing was holding the Ukraine war ceasefire Yes on the end of June market. I had a very different idea in mind when I bought these shares, and while I don’t agree with the resolution process, I’m happy I pocketed some money there. Especially since I’ve been hurt several times by a wrong resolution.

Ultimately, I think I had a trust issue with my research after a string of negative variance. Since the beginning of May, I’m back to a stable growth path when it comes to my P&L and I’m planning to sustain it in the future.

The Bad

I don’t think I had any huge mistakes last month. The only thing I could have done better was selling my permanent peace Yes shares earlier, in profit.

Bankroll Comments

I have 64% of my bankroll to allocate at the moment. Most of May, though, I was running on around 30% of bankroll available. I’m now looking for more niche Iran markets, as well as other global events to increase my bankroll allocation.

Overall, I’m satisfied with the utilization of the bankroll in May. It was approaching 80%, which I consider most optimal; it’s a good balance between having liquidity to enter new markets and utilizing the size I have. However, since most of the markets I trade now are short-term, spikes in bankroll utilization will happen.

Wrap Up

That’s it for today. I’ll publish a separate portfolio update over the weekend to dive deeper into the positions I’m holding and explore some new ideas.

Stay strong and see you soon!

This is not official investment or life advice. Do your own research. This are only my opinions and I encourage anyone to do their own research before putting any money anywhere.

Not a single analysis of the Iran war I read bothered to offer a forecast of the future. All of them tried to explain Trump’s actions. All of them judged these actions. All of them provided a set of supposedly better solutions. But none offered a view of the post-war Middle East.

How can you judge current actions if you don’t know the goal? How can you explain them?

These experts think that a simple note that the war will end with a deal of sorts is enough. It isn’t. Iran is a country of almost 90 million people. Like it or not, it has a future. It has a role to play in the Middle East.

Any analysis trying to explain the current war needs to answer one simple question. What does the post-war order in the Middle East look like?

War

War is often misunderstood. We know it mostly from history books and news. Almost exclusively it was a war of conquest. One country trying to beat the other, extract labor and resources and expand its sphere of influence.

However, wars of today are different.

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There comes a time in every trader’s life when a profound realization of stupidity hits you. It’s not a singular event. Rather, it comes from time to time, especially after a not so good performance.

I’m at this point now. Contrary to what you might think, it’s a good feeling. But… Why am I here?

Iran

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