Weekly PROPHET NOTES 2/10/25
Global Outlook: The world is ending (maybe), but show must go on
Happy Monday Tuesday! The recent gloomy weather where I live couldn’t have come in a better time. It amplifies the seemingly omnipresent doomerism we can witness this year. Even nature agrees between the Santorini earthquakes and a non-zero chance of asteroid hit at the end of 2032.
But some February blues can’t stop me from taking advantage of the plethora of global events currently unfolding. While most are doomers, I can’t help but enjoy living in these defining times. All is a matter of perspective. Subscribe below and enjoy this edition of weekly global outlook!
Weekly Outlook
Massive updates this week as the new US administration is settling in and the world is reacting in real time to the new policy of the hegemon.
United States
Starting with Trump, he moved to once again fully enforce sanctions against Iran. He wastes no time to project power in the Middle East, from the comments on taking over Gaza, through supplying Israel with more missiles to showing Iran who’s the boss. I can see why Team East preferred the Democrats - way more soft and predictable conduct. That being said I don’t see one orange man changing their long-term plans too much.
Staying with foreign affairs, Greenland will hold an election on the 11th of March. The citizens will vote with US in mind as they now seem to have a choice between staying in the Kingdom of Denmark and joining the US. Deep dive is coming, however everything points to the former.
Moving to internal affairs, Trump has banned transgender women and girls from participating in women’s sports in colleges and schools. Nothing unexpected, non-compliance will result in cutting of federal funding.
Immigration is also taking a hit with the first group of high-threat immigrants sent on the plane to Guantanamo Bay. There are also talks that Nayib Bukele offered to take some of the high-threat immigrants and domestic criminals (sic!) to his prisons for a fee. I didn’t expect El Salvador to want to become a prison colony. I guess they figured that last such arrangement in the history books yielded good results for the prison colony. Yes, I’m talking about Britain and Australia.
Lastly, Marco Rubio refuses to go to G20 summit as he feels that the organization is not acting in the US best interest, pushing DEI and climate change. Some say that the US is backing off and resigning from being an empire - for me it’s quite the contrary. I finally see the US acting its strength, for the better or worse. Maybe Trump & Rubio read my piece on American Imperialism?
The Americas
Aside from El Salvador mulling over becoming a prison colony, Marco Rubio got some early W in Panama, where the president José Raúl Mulino announced that the country will not renew an investment agreement with China around the Panama Canal.
At the same time “geopolitical strategists” in my country are saying that America is backing off in the face of multipolar world order. I am starting to suspect that we are living in parallel universes.
In the meantime, Javier Milei is aligning closely with the Trump administration as Argentina has officially withdrawn from the WHO. In my opinion Javier has positioned his country to reap benefits in case of Trump victory and now he is looking to show solidarity in hopes of a closer cooperation.
Asia
China is not exactly a country that will be intimidated by Trump’s tariffs and we didn’t have to wait long for their answer - we now have 15% on coal and liquefied natural gas products and 10% on crude oil, agricultural machinery and large-engine cars imported from the U.S., starting February 10. Trade war 2.0 is on and while both countries will hurt, it is the consumer that will take majority of the burden.
I must say that in the face of Team West vs Team East competition that should culminate with the war for the most important island in the world (Taiwan), the strategy of reducing the size of the global economy pie (as this is what tariffs essentially do) is interesting. A quick thought from me, that I may expand later: the US grows more slowly than China. It means that in a free market global trade scenario, China has a bigger net benefit than the US. Similarly, putting pressure on international trade hurst China more than the US as China is the world’s biggest exporter. With the world preparing for war, each small edge matters.
Middle East & Africa
Aligned with my Team West vs Team East thesis, Iran’s Ayatollah Ali Khamenei said that any negotiations with the US would be neither wise nor prudent. This is after the Hamas leadership met with him and just as the Phase 2 Gaza ceasefire negotiations are starting. I’m more bearish on Phase 2 by the day.
At the same time Hamas is delaying the release of more hostages until further notice on the grounds of Israel breaching ceasefire clauses. Can you see the connection? I can. And I can see my game theory analysis from the ceasefire deep dive playing out as expected.
Moving a bit north, Ahmed al-Sharaa, the new Syrian president, has criticized America’s illegal military presence in Syria and suggested that Syria can accommodate Russian military bases if it is beneficial to the country. All I can say for now is that Turkey is a really cunning player and it seems from my perspective that for now they are playing their cards right. However, as common with cunning players, Turkey might just use the Russian bases to negotiate something out of the US. I will probably write more on the Middle East again somewhere in March when we will be approaching Phase 1 ceasefire deadline.
Moving to Africa, the fight for resources continues between Rwanda and Democratic Republic of Congo. I’m speculating now, but it seems to me that the conflict is fueled by the EU. It went a bit under the radar, but the EU has signed a Memorandum of Understanding with Rwanda on essentially delivery of raw materials for green transition. Some of them are more present in DRC than Rwanda. I need to dig a bit more into the topic, but on the surface it seems that the conflict will continue as Rwanda wants to expand its mining operations to supply EU.
Europe
The loudest news of the week was the Baltics disconnecting from the Russian electricity grid. Long time coming, their grids will be finally connected to Europe. I was tempted to say that Baltics are rather inconsequential, but Russia has Kaliningrad that is surrounded by the Baltics and Poland. This forgotten piece of land has little in terms of populations, but holds quite a large amount of military equipment, mostly missiles. They still have gas pipeline going there and I suspect that energy production of the Baltics was not exactly great as their total population is 6.1 million which is less than half of the population of Moscow. In my opinion this is not a big news overall.
Staying in the Eastern Europe, Zelensky is looking to make Trump interested in Ukraine’s future, offering contracts for mineral extraction. Ukraine has quite big rare earth resources that are currently untapped. With Chinese tariffs I see Trump considering it.
Now moving westward, Belgium finally has a working government and its led by what MSM describes as far right. They are planning to crack down on migration and spend more on defense. Nothing, but a continuation of the global move to the right.
Same might just happen to Norway, as their governing coalition has collapsed over a row on implementing energy directives from the EU. Norway is not part of the EU, but works with it closely. It is also rich in oil & gas and there is high probability that Europe will look to utilize its resources in the future as it is already happening with the Baltic Pipeline. For now the labour party is governing alone with minority, but the election is coming in September. More on that in the summer.
Lastly, France just managed to push its budget, using a constitutional rule that does not require parliamentary vote (it is essentially a continuation of the last year’s budget). While Macron is trying to take the leading position in Europe, using Germany’s political turmoil to his advantage, his ruling coalition is crumbling and we can expect yet another election in July.
Business, Finance & Economics (+World)
Starting with business, developments in AI seem to have no stopping. OpenAI has released a new Deep Research model that is supposedly even better than o3-mini. It is using chain of thought technique and often prompts take minutes to complete, but the results are research that usually took hours to complete. AI enthusiasts are pumped, despite the looming competition from China.
In the meantime Elon Musk has submitted a $97 billion unsolicited bid to buy the non-profit controlling OpenAI in the next chapter of his rivalry with Sam Altman. His aim is to stop the transition to for-profit structure. Big question is if he has the board’s support. My guess is that he approached at least a few of them before securing the funds and making the bid. Ultimately I don’t see it happening, but an interesting development nonetheless.
Moving to finance, Bank of England has reduced its rate from 4.75% to 4.5% despite inflation being above target. Two members voted for an even bigger cut, highlighting that the British economy is struggling. Yet another sign of things to come if you ask me.
Lastly, more of a world news - an asteroid named 2024 YR4 has now a 2.2% chance of hitting Earth on 22nd of December 2032 according to the European Space Agency. During the last two weeks the estimates have been increasing as in January the chance was estimated at 1.7%, that moved to 2.3% on the 2nd of February and down to the current 2.2% on the 7th of February. One of these is bound to hit Earth sooner or later - will it be this one? Odds are still very low, but we shall now in the coming couple of years as better estimates will be calculated. For now I wouldn’t worry too much.
Markets ending this week
Moving to market, as usual recently the ending this week section is shorter, I’m thinking of sticking only with the new markets section as many markets resolve before the final date and what happens is that this section mostly encompasses short-term markets or bonds. Let me know what you think.
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