Weekly PROPHET NOTES 12/2/24
Global Outlook: The Ceasefire, The Escalation and The Economic Wars of The Incoming Administration
And just like that the year is ending. With December rolling in, many are in a preparation frenzy for the end of year festivities. Our leaders and politicians are no different - they are in their own preparation frenzy, but they are not readying themselves for the end of year celebrations.
At the end of January we will have a new POTUS with a new agenda that everyone is scrambling to predict. For me it is also a retrospective period, as I like to reflect on my year while it ends. There will come a time for that as many of us will wind down to spend the last week of the year in peace. In the meantime, the world is spinning around at the same back-breaking pace and I am here to unravel the global events.
First a small change - with US elections over, I am now expanding my coverage to include rest of the world in both the recap and outlook sections. It is high time to make this weekly outlook truly global. And as usual the global outlook section will be accompanied by analysis of the new and ending soon prediction markets for my paid subscribers. If you still have not, subscribe below and let’s see what the world is focusing on.
Weekly Recap
The headline of the week was definitely the ceasefire announcement between Hezbollah and Israel. While this war has finally deescalated, it cannot be said about the other major one we have in Europe where we are in the escalatory cycle.
Besides new war developments, last week has been quite eventful in more minor, but possibly consequential developments.
United States
The US is in transition mode. Joe Biden has already been forgotten and all eyes are on Trump. With less than two months left till inauguration Trump is gradually revealing both his administration picks as well as his approach to some aspects of domestic and foreign policy.
Trump’s choices for the top positions in the government are a mix of loyalists, party people and surprisingly some smart choices, especially for the economy and finance focused spots.
Additionally, the PR campaign for the Department of Governmental Efficiency (DOGE) is still strong creating more than a mere anticipation - at this point the expectations are high among Trump voters. If done right, it can be a major game changer for the administration and its successors.
The Americas
At the same time Brazil is reliving the American simulation. Former president Jair Bolsonaro was accused of a coup and more precisely of attempting an elaborate election interference. Bolsonaro is often called a Brazilian Trump. What is even more interesting is that in Brazil they even had their own January 6th - for them it was on January 8th 2023 and there as well protesters went into Congress, Presidential Palace and the Supreme Court. A bit more extensive operation, but the parallel is clear.
Under the rule of Luiz Inacio Lula da Silva, Jair Bolsonaro has already been deemed ineligible for office by the Brazilian Supreme Court. The current regime is also actively fighting “fake news” as was visible during a debacle with X.
In other parts of South America, Yamandú Orsi, a left wing opposition candidate has won the presidential election. Uruguay is know for being a generally progressive country so a left wing victory in the light of the global right-wing shift is not shocking. My small bet on the right-wing obviously did not hit, but it was worth a try at those odds.
Asia
Asia was also not spared of the last week’s turmoils. The spotlight was on India and Pakistan where different internal events shook the political establishment.
In India, Gautam Adani, supposedly the richest men in India, was accused of being part of a $265 million bribery scheme, saying that his ports-to-power conglomerate was committed to world class regulatory compliance, by the US government. Adani is of course maintaining his innocence, but the market capitalization of all of his companies dropped by a whooping $34 billion. On top of this, the charges can disrupt the current Indian government as Adani is a dear friend of the current Indian Prime Minister Modi.
At the same time Pakistan has its own political crisis. The entire capital city went into lockdown as protesters led by Imran Khan’s wife, Bushra Bibi, marched to oppose Imran’s being jailed. Imran Khan’s story of charges is long and complex as the new regime is after him and this is just another chapter in this country’s political disaster - a disaster, because it is a nuclear power and we are all better off when nuclear powers are stable.
Middle East
This being the story of the week, I do not think I need to present a lot of context, but I will stop at a few details. Last week the ceasefire agreement between Hezbollah and Israel was signed. The agreement is on 60 days of ceasefire, during which:
Israel will withdraw from Lebanon,
Hezbollah must move north of the Litani river (20 miles / 30 kilometers north of border),
Hezbollah will be disarmed (most probable breach),
Lebanese army will deploy to the buffer zone.
There are more points, mainly defining US and France involvement in rebuilding Israeli-Lebanese relations and general overview of the ceasefire implementation.
At the same time there are once again tensions in Syria. I need to went deeper into the topic for a thesis, but it is no coincidence that movements there started just as the ceasefire went into effect. Trade routes, pressure, take a guess for now, we should have more visibility soon.
Europe
Staying within the war department, Europeans also gave us quite a bit to digest. During the last couple of weeks, Russia and Ukraine entered into an escalation cycle, most probably boosted by Trump victory in the US election. Ukraine was allowed to strike deeper (emphasis on “er”) into Russia and Russia responded with showcasing a new type of hypersonic mid-range missile, supposedly capable of striking all European capitals within 30 minutes. It was a mighty show of force that was succeeded by a massive strike on already damaged Ukrainian energy infrastructure.
With less than two months left to Trump presidency, the world is holding its breath to see how far will each side go to secure a better position before possible negotiations. For now we will see a lot of destruction.
On a more positive note Romania is in a voting frenzy. After the controversial first round of the presidential election last week, yesterday Romanians went to ballot boxes to choose its parliament. In another relative surprise, the currently ruling PSD has managed to win. AUR was in the second place with two other right wing parties also above the 5% threshold.
This time I have overestimated the votes for AUR, as I was not expecting the other two parties to both cross the threshold. An interesting outcome, it is not yet known if the current coalition will be able (or willing) to form the government. What is known is that the right wing is now a formidable force in Romania and will have many seats in the parliament.
Australia & Oceania
Lastly from the politics world, Australian parliament has voted overwhelmingly in favor of a bill banning access to social media to those below 16 years old. A controversial bill as there are plenty of good arguments against the youth on social media, but at the same time many say that access to this digital world should be granted on parental discretion, not governmental mandate.
Personally I am for the latter option. I will watch Australia from time to time to see how the bill will evolve. Australia is known for its draconian COVID regulations and one can expect them to be as draconian in other aspects.
Business, Finance & Economics
Tariff must be Donald Trump’s favorite word. What a mercantilist, I wonder what libertarians that voted for him are thinking now. Personally, from an economics standpoint, I also hate the concept of tariffs as they result in lost value. My laissez-faire approach to economics does not though take into account foreign policy and leverage.
Last week Trump has threatened a series of massive tariffs on Canada, Mexico and China. It is of course just a weapon in Americas vast arsenal of economic and military tools of exerting power and Trump is using it to force Canada and Mexico to fight unwanted (by the US) immigration. With China the move is more strategic as it targets both fentanyl and overall rising ambitions of China. Trump has already engaged in the economic war with China during his last term and the tariffs imposed by him are still in effect.
Besides the world of foreign policy, last week was also abundant in new AI investments. Amazon has doubled its investment in Anthropic, creator of Claude, to $8 billion and it aims to incorporate Claude into Alexa.
Additionally, SoftBank is reportedly planning to invest another $1.5 billion into OpenAI after its last massive round that has valued it at $150 billion.
Lastly on a more fun note, Macy has delayed the release of the most recent earnings report because some employee has hidden close to 154 million in delivery expenses. Who said that accounting is not a high paying career?
Global Outlook
While the last week was filled with many different events unfolding, what will happen now? As bad as the situation may sound, this is more or less a typical week in the world of politics. The overall forecast for next week is stable with no major escalations in sight.
United States
The US remain in the transition period and there is nothing really substantial to happen until Trump’s inauguration. We are bound to hear more stories from the transition with more administration picks announced and Trump being more and more active in the current affairs as he gets up to speed on all developments.
Besides the news from the incoming administration, in December we will see the last meetings of the current Congress, where they are bound to try and pass as many bills as possible to finish the legacy of the Biden administration.
The Americas
In other nations in The Americas, only Brazil is poised for some turmoil next week. Bolsonaro’s topic is as controversial as Trump’s topic in the US, or even more. I expect some protests to take place, especially considering that the current Brazilian regime will not have the same amount of backing from the US as it had before.
Asia
Indian situation is not especially dangerous, it may influence the next elections, but nothing more. At the same time Pakistan has ben embroiled with political protests for quite some time now and another wave of them will not drastically change the political picture in the country.
Asia should remain relatively stable in the next week with no major announcements.
Middle East & Africa
Starting with the more peaceful predictions, this week there will be bot parliamentary and presidential elections in Ghana. Ghana is not really an important country on the international scene, besides being the world’s second largest exporter of cocoa, but I have some work acquaintances there and they are all saying that the current opposition party will win. My business dealings there as part of my W-2 also show me that the current administration is getting ready to leave. That is as good alpha as you can get being a non-African.
Moving to the Middle East, with the ceasefire agreement in, all the focus in now on Gaza and Syria. Considering the Syrian quasi-surprise, I do not expect many news on Gaza, but the Syrian conflict is developing quickly and we should see more news from there in the coming weeks. I expect heavy fighting that may lead to possible, but not very probable ceasefire breach at some point.
Europe
In Romania where they are in an election frenzy, we are yet to hear about the decision on the last week’s presidential election. I do not expect the election to be annulled as it would have undermined Romanian institutions, but after a recount either of the two candidates will win against the right wing surprise.
In the meantime in France the political crisis looms again as the parliament is looking to vote on the budget. Macron’s favorability rating is not helping the cause as with 78% rejection rate he and his party are once again in risk of government collapse as Marine Le Pen is eyeing voting against the budget to force a collapse.
After a previous try earlier this year, Marine Le Pen might want to once again test her strength against weaker Macron and his party. The summer elections went against her wish with Macron devising a clever trick to win the second round of voting. I expect that she will not go down so easily this time.
Business, Finance & Economics
In the economics world, we are awaiting US jobs and unemployment data. Many were criticizing the previous data as they believed that the data was massaged to show us a better view of the economy than reality. Reckoning day is coming and we shall see if they were right.
More on this in the markets section.
Markets ending this week
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