Weekly PROPHET NOTES 7/29/24
Global outlook: US Elections and the aftermath of the hot swap, Fed meeting, never ending wars
I reached my minor goal of 500 followers on X - that was the threshold I set to (re)start the Substack. From now on I am doing at least 2 articles per week - Monday morning free weekly summary + main things to watch in the coming week and a paid deep dive analysis of the most important global event along with predictions and skin in the game. For now any other articles will be ad hoc based on global developments. Thanks for the support and let’s dive into the current dramas.
Weekly Recap
What a week month! This is a weekly, but considering it’s the first article in a while and that we are at the end of July, the phrase seems fitting. I can definitely say that the last few weeks were one of the most wild times in recent political history. Starting from the disastrous debate, going through the Trump assassination attempt and finally arriving at the Biden drop out letter followed by death speculation and ultimately an unimpressive speech. Unprecedented times we live in.
That being said, I had a great month prediction-wise - with all the predictions being thrown around on X, I didn’t miss the beat on the most important events:
Biden dropping out after the disastrous debate
Kamala Harris becoming the presumptive nominee immediately after
Biden not being dead (sic!)
Some other non-political bets, like no Tesla Robotaxi event
I didn’t really play the GOP VP game, but this is changing with the Dem VP choice - the next article, out asap will focus on the Kamala running mate choice (afaik I don’t have much time to take a position here so trying to accelerate). I feel that this is crucial for the Democratic Party to chose a good VP that can tone down a bit Kamala’s progressive policies and sustain the new campaign’s good momentum ahead of the DNC. Side note on this: this analysis will be posted as free article, but from then on they will be available for paying subscribers only, so if you like my content remember to subscribe.
Focusing on the wider world, we had some new developments in the Middle East with a missiles exchange between Houthis and Israel. This is yet another enemy that is now actively engaged with Israel, after somewhat indirect involvement by blocking the Bab al-Mandab Strait. This is coupled with Benjamin Netanyahu doing a roadshow in Congress and behind closed doors, pitching continuation of the war and requesting equity injection for military CAPEX. Wonder if he took any bankers with him…
In other old news we had a joint Russia China visit near Alaska with both countries being bolder and bolder in showcasing mutual cooperation and a rogue Russian missile landing on Romanian territory. The “quiet period” never seems to last with these wars.
Before we move to the global outlook, a brief on financial world. Highly anticipated ETH spot ETF was launched this week with serious inflows (with no impact on ETH price). Crypto got some major regulatory wins this year which is bullish on the long term perspective. Additionally we had the worst day on stocks in a year - interested to see the sentiment impact on fed rates.
Global Outlook this week
After pretty wild 2 weeks (especially in US) we are bound for a bit of a relief looking towards another busy week. I just took a look at my first post on this Substack and even then we knew that this year is going to be wild. So let’s dive into it and see what lies ahead.
US Elections
After a wild month we are back to regular programing on the elections front. Let’s start with most recent Polymarket odds to set the tone for the outlook.
Kamala Harris is having her political honeymoon and whatever you may think about the assistance MSM gives her, we can clearly see that the Democrats passed the unity test. I can safely say that making the nomination official is just a formality and there was zero competition / insubordination / etc. from the party and its people. I hold some Yes position on this happening.
My take on Kamala did not change though - this is largely the same person as 4Y ago - fringe leftist policies, no Presidential gravitas and subpar track record. I lack the determination to scrutinize all the new polls, but saw here and there that there might be a case of Democrat overrepresentation in the samples. My base case for her is still the same - she will enjoy higher polling and MSM favorability throughout VP pick (if good) and strong DNC performance, followed by gradual odds decrease with an ultimate test of her ability upon the second first presidential debate. I did hold some opportunistic Yes on Kamala winning presidency, but exited the position once the odds approached high 30s.
Yes, despite the leftist pundits propaganda, I am in on the debate happening with details announced after making Kamala an official nominee. I am not alone in this prediction:
On top of that the virtual roll vote is set to begin on the 1st of August - as mentioned before from my POV this is only a formality.
Coming around to Trump, I cannot deny that he had an extraordinarily strong month starting from the debate, through the assassination attempt up to the strong performance at the RNC. But since Biden dropping out and Kamala taking the MSM spotlight I can see the momentum slowing down significantly. Some on the left and right throw around opinions that the Trump campaign was not really prepared for the hot swap. My take is different - Kamala has serious political flaws that were out in the open in 2020 (see her primaries results and debates to get the essence of it) and surely Trump remembers them. I think that the step back from the limelight is intentional to ensure that Kamala will be officially nominated. Once the formalities are out of the way we can expect renewed offense from team Trump targeting her policies and track record. This is in line with my expectations around Kamala’s odds dropping between the DNC and the first debate.
According to campaign schedule, we can expect some usual appearances from Trump along with JD Vance events - I am looking forward to seeing him perform on stage.
Ending on the US Elections, with recent dramas we managed to get some good prices on prediction markets for some Democrat related events:
No on ActBlue to raise over 14.5b USD cumulative by 31st of July at 91c - easy money as current fundraising stands at 14.26b USD, making a 240 million USD move an impossibility
No on JD Vance replaced as VP nominee at 88c - despite the leftist propaganda, there is nothing tangible pointing in this direction
Yes on Biden speaking at the DNC at 61c (sic!) - during “Biden is dead” drama there were some serious discounts on Biden related events. He has already had COVID so there is nothing short of death that would prevent the speech
Yes on Democratic ticket being female P and male VP at 91c - I am yet to provide a proper analysis on VP pick, but even now I see no option for the all female ticket
And that’s a wrap on US Elections this week. Oh wait, forgot about RFK Jr. Being honest, I had kind of high (to be taken with a grain of salt) hopes for his campaign - not to win, but rather to make some substantial noise, enough to be invited for the debates. That clearly didn’t happened and while he will get a (high) single-digit result I doubt it will be enough to skew the results either way.
Middle East
After Israel-Houthi exchange and continued fire exchange between Hezbollah and IDF on the northern border (in addition to the Gaza operation) we saw Netanyahu on a roadshow in US with meetings in Congress, with Biden, Harris and Trump and probably a lot of meetings behind closed doors.
As always, such trips have only one goal - fundraising. And not for the next unicorn, for war. So however they will try to spin it, baseline expectation is for wars in the region to continue for the foreseeable future.
Now he’s back and we are bound to see the effects of the trip. I expect that 3 things were discussed:
Gaza ceasefire: here we can expect to see some ceasefire proposal in the coming weeks that will probably be rejected by Hamas. With Gaza utterly destroyed there is really nothing Israel can give to sweeten the deal. Considering Israel’s stance (no 2 state solution) I don’t see any other way forward than complete control takeover by IDF ie. no ceasefire deal in the end.
Houthi problem: how to approach the irritating danger from them. They can’t really do much harm from this far away, but rouge missiles and expensive counterstrikes are an exchange Israel would rather avoid. They have bigger fish to fry so I expect some US commitment to shoot down their missiles ie. increased US personnel in the region.
Hezbollah: the Lebanese group is giving Israel a big headache in the north. Continued airstrikes are decreasing mainly civilian morale and Israel is a bit fed up with it. Supposedly Lebanon invasion plans are ready, but the new offensive would require a green light from US. My take is that this was heavily discussed and
we can expect either defined red lines or increased prep.I wrote this part on Saturday morning, now we now that US as given its green light. Current odds for invasion before September are quite low, but we already had a few bumps and I sold my Yes position on one of these for some nice profit, as despite the green light I don’t see ground invasion as imminent. The end of August deadline is IMO a tough one.
Not all of this will materialize this week, but that’s the baseline direction I’m seeing this development going in.
Ukraine-Russia war
Being honest, there was so much happening in USA and ME that Ukraine was pushed out of the main news cycle. No wonder, there is really nothing much happening right now there. We have continued Russian strikes on critical infra like power plants and Ukrainian responses by sending missiles into Russian territory. Besides some rogue rockets, situation stabilized a bit for the time being.
I don’t see any major developments in the coming week - all we see is development of the current baseline scenario: Russia is trying to severely weaken Ukrainian infra before winter while Ukraine is looking for some territorial gains to position itself better for negotiations in the event of Trump victory. A bit of a stalemate situation if you ask me. We should be back into more events on this front once the F-16s are in action.
For now even prediction markets are silent on this front so I have no exposure to Ukraine war events.
Europe
After French and UK elections, European situation quieted a bit. We have some (usual) drama between right-wing governments (Hungary, Slovakia, Italy) and EU leadership on oil lines being blocked and “freedom of press”. Nothing out of the ordinary.
In recent events we had Ursula voted in for the second term as well as rogue rockets in Romania. Similarly to Polish encounters with Russian rockets, NATO will let it be for now.
For the next few weeks we will have Olympic Games in Paris. We can expect some drama there (as we have already seen on some soccer matches), but I am short of predicting some major terrorist attack. I don’t think such attack / false flag would be beneficial to any party to both conflicts we have now. I’ll also let you be your own judge on the opening ceremony.
Asia
Due to lack of sufficient time, I don’t really cover Asia in depth now as there are no markets to take position on besides North Korean nuke (doubtful) and Taiwan invasion in 2024 (doubtful as well).
What we see in the region so far is China getting more and more comfortable as the leader of the region as well as more cooperation between China, North Korea and Russia which is expected.
Let me know if you are interested in Asia to cover it in the future in more detail.
LatAm
Similarly to the above, the region isn’t really interesting from global events perspective. We had some elections this year and occasional drama with Argentina, but other than that the situation there is relatively stable for the time being.
As above, let me know if you would like to see LatAm coverage in more detail.
Finance
For financial world we are bound for some important stuff. All eyes will be on the Fed as with recent turbulences on the stock market, some are predicting a rate cut. Polymarket is quite clear though that this is still to early as seen below.
Additionally we are awaiting US job market data, but considering numerous downward revisions, I don’t really put a lot of faith in these.
I personally, despite my financial background, stay away from taking positions on these markets due to:
unreliable data (eg. job market)
no specific alpha
not always the decision is based on economical data, often it’s related to policy, election cycle, etc.
Anyway, if I ever decide to take some positions, I’ll let you know and I will continue to provide you with high-level outlook for you to remain informed.
For out of US schedule, we have Bank of England meeting on the 1st of August (suspect no cut yet) as well as BOJ meeting on the 30th of July. No comment on the Japanese front as besides knowing there are some currency troubles I have too little insight to provide a proper analysis of the situation at this time.
Wrap up
That’s all for the coming week. As this is the first post in the series, your feedback on content is appreciated. As mentioned next on schedule is analysis on the VP pick so remember to subscribe - this analysis post will be free, but starting next week, deep dives will be for paying subscribers only.
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.