Weekly PROPHET NOTES 12/16/24
Global Outlook: Drones, The New Balance of Power in Syria and the End of TikTok?
Despite the global turmoil, the world has once again managed to surprise us this week. After South Korean martial law and the Syrian imbroglio, the people are in a drone frenzy. What has begun as conspiracy theory is now a real concern. Unidentified drone activity has resulted in closure of the major airport and deployment of high-tech detection equipment while the authorities struggle to answer societal concerns.
All of this just shows that there is a major reshuffle behind closed doors. People in power are scrambling to consolidate it, while the less stable regimes are experiencing overthrowing attempts. An avid conspiracy theorist would already tout incoming WW3. I believe that the world is responding to changes in the US administration, trying to take advantage of the expected foreign policy change.
I analyzed these changes in my new Global Reshuffle series, focused on the most consequential regions in the coming months - Europe and Ukraine. If you missed the last one, take a look below:
Now though, let’s focus on the current events. If you still have not, subscribe below as we are moving towards the new year.
Weekly Recap
Last week has given us many new developments. The main theaters of events are still in the US, Europe and the Middle East, but this week we also had a renewed focus around the most important island in the world.
United States
Starting from the top, for the last few days the world is undergoing a drone frenzy, but not in a good way. First reported in New Jersey, followed by sightings in New York, Connecticut, Pennsylvania, Massachusetts and Virginia, the drones make the citizens uneasy. Additionally their activity resulted in a temporary closure of the New York’s Stewart International Airport. Federal agencies are trying to reassure citizens that there is nothing to worry about, but their lack of definitive answers unnerves local politicians that demand more answers. More on this in the outlook section.
From other developments, the current administration has provided a new funding round to Ukraine. $20 billion are funded by the frozen Russian assets and are to be used for non-military spending. Biden administration is doing what they can to provide a long runway to the fighting nation.
Meanwhile, Trump is busy selecting his administration. In the new announcement he nominated Andrew Ferguson as a new chairman of the FTC. While finance guys are eyeing a potential comeback of M&As, the chairman’s agenda will also be focused on guarding free speech and reigniting competition, stifled by big tech enormous balance sheets.
The Americas
In the Americas, Brazilian president Lula had a minor brain surgery after a hemorrhage, that was a result of his fall and hit in he head back in October. The president is in good condition.
Outside of Brazil, El Salvador is eyeing a new loan from the IMF totaling $1.3 billion. The nation has managed to limit the crime and is looking to grow and attract new investments under a continued rule of Nayib Bukele.
While one country has been victorious over crime, the other is engulfed by it. In a gang-ruled Haiti more people die as the mob rule is now doing executions due to witchcraft. The church must rejoice for the comeback of their favorite medieval activity.
Asia
In a surprising development South Korean parliament has passed the motion to impeach president Yoon. There was no doubt that his political career is over, but I expected him to resign on his own accord, rather than to live his last political days desperately hinging to the last remains of power. I must have overestimated the Asian honor.
Additionally, China is beginning another Taiwan drills with close to 90 vessels participating. Increasing Chinese military presence near the island serves as an appetizer to what may come in the next two or three years.
Middle East & Africa
The war hungry Israel is not wasting any second and continues to bomb military infrastructure in Syria. Diplomacy must be a forgotten art for them. At the same time Netanyahu had his first deposition on the corruption charges he is facing. As usual he is denying any wrongdoing, putting the blame on his opposition. Polymarket traders agree, that there is little chance he will step down or be removed:
More on the Middle East in the last week’s deep dive linked in the introduction.
Europe
Europe is grappling with the falling governments. In a yet another attempt to create a centrist government, Emmanuel Macron has appointed Francois Bayrou as the new prime minister. However, this changes nothing as he is facing a fierce opposition and a tight deadline to submit the budget.
As a result of the end of the Bashar al-Assad regime, many European countries have stopped processing Syrian refugees. After years of holding the burden of millions of immigrants, European governments are keen to send the Syrians back. The actions of the new interim government will determine if this will be possible.
Business, Finance & Economics
In a quite shocking ruling, the appeals court has sustained the TikTok ban. While Trump was saying that he will try to overturn the ban, the reality is that it goes into effect just before his inauguration. Interesting times for both big tech and influencers.
While one big tech is struggling, the other is breaking new frontiers. Google has announced a new quantum computer, bigger and more capable than the previous ones, giving researchers hope that larger models can also remain stable for long and achieve good results.
On a more chilling note, just before my publication last week, the police has apprehended the suspect in the UnitedHealthcare CEO assassination case. Luigi Mangione was found with multiple fake IDs, a 3D printed gun and a manifesto of sorts. He is denying any wrongdoing and we are yet to see if he has a convincing alibi (everything though points to no on this one).
Lastly some news from the American economy. Last week’s CPI print came in hot at 2.7% with core inflation remaining stubbornly at 3.3%. CPI’s unwillingness to go down may stop the Fed from further cuts, outside of the December one one, which is more or less a given at this point.
Global Outlook
I feel like I have been saying that for the last two weeks, but to adjust my saying a bit - we are entering a festive season connected to Christmas and end of year celebrations. Bar this coming week, we are bound to see some slowdown on global affairs. The pace will pick up again in the first and second week of January, but we should get the much needed rest soon.
United States
Donald Trump loves to be candid on social media, but this time his hands are tied. As president-elect he is for sure in the know. There is probably no us in trying to decode this message. The conspiracy theorist in me wants to assign no question mark at the end off the second sentence with a cryptic message that this is in fact happening without the government’s knowledge.
However I do not like basing my whole theory on a single data point that is dubious at best. Based on my research of the topic, the drones should be American (due to eg. FAA compliant signal lights) and the government should know about them, but for some reason they are not disclosing why they are flying. Under normal circumstances there should have been a NOTAM notice.
All of this leads me to believe that the drones are looking for something and the government does not want the public to know what it is. One person supposedly working in drone manufacturing has recorded a video claiming:
that the drones are looking for something (plausible) or someone (less plausible as they fly at night so they could only follow a heat signature),
that they are most probably looking for a lost nuclear warhead.
The second point, as concerning as it sounds, is based on an unverified report that during the Reagan administration several Ukrainian nuclear warheads were lost and that one of them is now headed to the US. I am short of endorsing such reports.
All in all, there is definitely something going on, but it is only a matter of time before we start hearing some explanations.
The Americas
The Americas (besides Haiti) are looking stable for the coming weeks.
Asia
In Asia, we are bound to hear more in both the topic of South Korea and Taiwan.
In Taiwan, for now these are only drills. As in the Ukraine case, there will be signs if we are close.
Having impeached their president, South Koreans have little to celebrate. The actual process will take months, but the country will be slowly taken over by the opposition. The will of the people, but not very beneficial to the US, as the opposition is less keen on working with the west and more looking towards better relations with North Korea.
Middle East & Africa
All I have to say on the topic is below:
Europe
The former investment banker’s administration is riddled with issues since the very beginning of his reign. However I believe that the pedigreed president is more than capable of solving his problems.
I expect the new parliament to pass the budget with some compromises. In the worst case scenario, the 2025 budget will be capped at 2024 levels, so the big guy has little to worry about now. Macron is busy securing his position as the main European leader, using the fact that Germany is in political turmoil.
For him the internal problems can wait as the next snap elections can only be done in July. By that time he is bound to find another clever gambit, to be determined if successful.
Business, Finance & Economics
With the end of year in sight, I expect little developments in the business sphere. The only event left in the year is the Fed decision, but here there are no surprises expected.
Markets ending this week
Now let’s see some of the interesting markets ending soon. Similarly to last week, there are few markets ending now with the end of year in sight, but the new markets section holds some interesting mix.
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