Weekly PROPHET NOTES 3/3/25
Global Outlook: Keeping the vassals in check
Happy Monday! What a week it was. Everyone and their mother had something to say after an eventful Friday at the White House. Trump definitely has a talent in keeping the attention on him, be it for the good or the bad.
I’m looking outside my window and I see the sun shyly peeking from behind the clouds for the first time in close to a week. Lacking anything more concrete, I will take it as a good omen for the things to come. Jokes aside though, despite the emotions running high, the situation is pretty stable.
Maybe that’s the difference when you are prepared vs when you just react, but I feel oddly calm about the world today. Let me share this calm with you while I take apart last week’s events.
Weekly Outlook
I’m getting a bit bored with the Ukraine topic. Not that I don’t appreciate the effort, it’s just that the whole drama is inconsequential to the grand scheme of things that is moving forward regardless of the hiccups along the way.
Anyway, that’s still the hot topic so let’s get this over with and see what else has been happening.
United States
Zelenskyy made a terrible blunder. Here. I said it. Now let’s go to why having in mind that:
I’m no fan of Trump as I repeatedly said,
I am a realist and I see things as they are,
I can appreciate the complexity of the situation.
With the obvious out of the way I can focus now. For me the crucial point is that Ukraine cannot fight long-term without the US support. I’m not talking only about aid. The burden can be mostly shared between European countries. I’m talking mostly about the operational support, logistics, etc.
Anyone telling that US has no leverage over Ukraine or that Ukraine can sustain itself in the war with Russia should be laughed out of the discussion. I have a certain Polish geopolitical “expert” in mind, but such voices are common on X.
Sure, Ukraine ramped up military equipment production, especially drones and does a decent job at keeping the Russians busy. But a few drone factories and some experience under the belt won’t change the fundamental reality. Without the US, Ukraine will slowly, but steadily, lose ground, soldiers and a will to fight up to the point of total surrender. Even if it takes years.
Great, with that behind us I can set the context for the Friday meeting. Zelenskyy came to the White House to secure the US support for the coming years by signing the lucrative reconstruction and resources term sheet.
And all looked great in the beginning. Trump made a few sympathetic comments about Ukraine, while Zelensky was balancing in the verge of assertiveness and rudeness. Struggling he was while Trump polished his ego in front of the American media and positioned himself as the neutral mediator but he managed. Up to the point.
His blunder was simple - he undermined Trump’s effort to end the war by saying that Putin won’t abide by any terms. It doesn’t matter if it’s true or not. He closed the door on peace in front of the whole world. Of course, he was looking for strong security guarantees. But he should have discussed it behind closed doors.
The term sheet as it was presented has room for multiple security guarantees, both direct and implied. I understand that he is under enormous pressure. I understand that we would like to get in NATO and to get NATO troops on the ground to fight the invasion. But that’s not going to happen. Even Europe is not willing to push for it.
All he can get is a chance at peace with strong US backing. Worst case there is no peace and US ups the support to push Putin and start earning from the deal as soon as possible.
Trump is committed to his plan and he needs two things: skin in the game and Ukraine publicly supporting peace efforts. After what happened, he had no choice but to kick Zelenskyy out. But fear not. The deal will be signed. Zelenskyy will apologize eventually and all will be well. Because there is no Ukraine without the US support.
Otherwise, domestically the US lives through its own dramas. Starting with the most curious one, Trump has announced that he will sell “gold cards” that will grant permanent residency to people who pay $5 million for it. At the same time, Lutnick (commerce secretary) said that the US would impose tariffs on Canada and Mexico starting Tuesday. Creating new revenue streams to better manage the deficit? Maybe.
Lastly, a the UN the US has voted against a resolution at the General Assembly condemning Russia’s aggression in Ukraine. Then it proceeded to submit a resolution at the Security Council calling for an end to the war, but containing no criticism of Russia (it passed). Trump is trying to look neutral, makes sense if he really wants peace.
The Americas
In Canada, the Liberal Party of Justin Trudeau is choosing its next leader. Since Mark Carney has been a frontrunner in the race, the once defeated Liberal Party started to gain momentum in the upcoming election:
Some polls even suggest that if he wins, Liberals will catch up with the Conservatives. Canadian upcoming election is shaping up to be way more interesting than anticipated.
Asia
Meanwhile in Asia, China is allowing itself to expand its naval reach. Spotted recently near New Zealand and Australia, they signed a comprehensive “support deal” with Cook Islands, traditionally an ally of the former.
Besides forming new alliances, China was also caught trying to once again cut undersea cables between the mainland and Taiwan. China is dismissive, feeling sure in its region. Interesting strategy, they will be teasing US allies until the US responds and then Trump has a problem - he won’t be the peace president.
Middle East & Africa
While all eyes are on Ukraine, the second (and the third) theater of war is slowly boiling. As expected the talks on Phase 2 of the Gaza ceasefire have not even started:
Phase 1 is now officially over and we wait for either side to make a mistake that will resume the war. There is simply no willingness from Israel to continue with such a flawed deal structure. It doesn’t solve its ultimate problem of getting rid of Hamas taking effective control over its closest neighbors.
Meanwhile Syrians are trying to organize themselves. With the backing of Turkey they enjoy a relatively quiet period considering last several years, but we are yet to see how Turkey will use its new advantage. For now Erdogan is just posturing with Ukraine, showing he now has more influence than before.
In Africa, the war between Rwanda and DRC continues with the proxy rebel group pushing forward in the Eastern Congo. Besides them, something new is happening in Sudan, where a breakaway government was formed by Rapid Support Forces. The paramilitary group has its HQs in Nairobi. Kenya, a strong US ally in the region is making moves. Is the US getting finally involved in Africa to counter China and Russia in the face of European retreat? Seems probable as I was waiting for any sign of US involvement there since Trump took office.
Europe
After the Friday situation, the European leaders decided to do something and met on Sunday to discuss their options. In the end they recognized their vassal status - Keir Starmer announced that European allies would form a coalition of the willing to guarantee peace in Ukraine and even deploy troops there. However, the countries will develop a peace plan that they will present to the US.
He also announced a deal worth $2 billion for Ukraine to buy missiles. Along with him, Ursula von der Leyen said that Europe needs to re-arm and further discussions on increasing defense spending will be held on Thursday. Also Mark Rutte confirmed the increased spending.
Europe is mulling over peace, but it seems it’s keen on getting ready for war. Good strategy, but it also shows that the confidence around the peace deal is low. What can I say… as expected.
Business, Finance & Economics
Starting with bad news, American consumer confidence fell in February along with high inflation expectations… A tragic mix of circumstances, don’t expect the rate cut any time soon. Along with Atlanta’s Fed GDP projections for Q1 updated to -1.5% (yes a contraction), the picture starts to look really bleak. We ought to wait and see how these projections hold up against reality, but don’t expect any major rallies on equities (and most crypto, bar the strategic reserve) in the short-term.
Staying on the bad news side, Tesla and traditional auto makers are getting squeezed more and more by the Chinese competition. This time the bad news are for Tesla, which backtracked all of its gains since Trump won the election as it looks at half the sales vs January last year. If you ask me, the decline of the traditional players in the auto industry was long time coming (bar maybe Toyota…) and Chinese are looking ripe to take the lead soon.
Lastly, BP has announced that it’s steering away from green energy towards its core business. Investments will be cut by 70%. Cheap energy is more important than clean energy. Especially in the turbulent times we are currently in. Expect more such announcements.
Markets
And that’s all for this weeks Global Outlook. Conclusion is not to waste time on cheap dramas and see further into the horizon. Now moving to markets, we have a few interesting ones from last week.
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