It's all about S........

“If wars can be started by lies, peace can be started by truth” - Assange

GEOPOLITICS

USA

Prediction markets now show Donald Trump leading significantly over Kamala Harris for the Nov 5th elections. Elections are about momentum going into the last stretch of campaigns, and clearly DJT has it, while Harris’ campaign falters.

Eastern Europe

Russia reiterated its demands for peace, in particular neutrality for Ukraine, security for Russian speaking communities in Ukraine and integration of Eastern Ukraine regions (That Russia calls “reality on the ground”). Putin knows well that his greatest ally is time.

The West starts coming to the realization that this war is unlikely to be won and appears? to explore the idea of a post WWII scenario “à la German”, splitting Ukraine into a NATO entity, Russia retaining control over already occupied regions.

Meanwhile, Russia is deploying intercontinental ballistic missiles (ICBMs) on combat patrol. The “Yars” ICBMs are capable of delivering nuclear warheads across continents with an ability to evade missile defenses. The missiles are currently actively patrolling, ready for immediate use.

Middle East?

Israel continues to track down Hezbollah with continuous bombing of Lebanon and its capital Beirut, now extending to north Lebanon. Israel is also striking Hezbollah positions in Syria.

However, the IDF still has not responded to Iran’s recent missile strike, likely because of divergences between Israel and the US about the targets and the intensity of the response. While it is fair to assume that Israel’s intention is to strike the mollah’s regime hard, the US approach would be more measured as Washington might not be ready yet for a major escalation in the middle east, in the context of depleted weapon stocks.

The Pentagon also expressed frustration with Israel and the lack of coordination in military operations.

Meanwhile, Iran is developing its nuclear program with what is thought to be an underground nuclear test detected by seismic monitoring stations in Armenia. The signature of the shock identified is very similar to past nuclear tests by other nuclear powers.

Very soon, hitting Iran will be at a life threatening cost for the Jewish state. Some independent strategist suggest it might already be the case with the cooperation of Russia in all military sectors.

Russia is also conducting military training and exercises with Syria.

Asia

Chinese President Xi has expressed China’s readiness to deepen strategic coordination with North Korea, at a time North Korea closed all roads and railways with South Korea. North Korea highlighted the need for "more decisive measures" to safeguard the country's security.

Today, China's defense minister has called for more "strategic collaboration" with Russia.

In a few words about global geopolitics: global alliances are strengthening and nations are getting ready.

ECONOMY

What we’ve talked about for months is becoming a reality.

Core CPI inflation is rising again for the 1st time since March 2023, PPI inflation is rising as well (and previous months revised higher !), while more people filed for unemployment in September (but the record jobs report ???!!!??? that will be revised ??). How did the Fed declare victory against inflation?

So we have rising inflation with rising unemployment. I think we are now officially entitled to use the S word: stagflation !

The Fed's decision to cut by 50 basis points made no sense, in what was supposed to be a context of? "maximum employment".

The reason for this rate cut has to be something else: the interest of debt service of course, and potentially the banking sector. The Fed lies over and over, and the real economy has become more of a guessing game (not too difficult to guess though …).

The Fed is not trying to fight inflation. Inflation will pay for (some of ) the govt debt, and money printing will keep the Ponzi alive a little longer.

Meanwhile unsurprisingly, investors are looking for hedges especially with Gold which is on track to be the best-performing asset class of the year (after Bitcoin).

Gold appears to be rising due to longer-term macroeconomic concerns and Fed shenanigans, leading to the US debt crisis and inflation.

At a time the US national debt has soared by $12 trillion since the pandemic, and the US dollar lost ~25% of its value, gold strength only makes sense and gives us a warning about a crisis coming.

MARKETS

While conditions for US Equity markets rising have disappeared, namely the reasons for interest rate cuts, the S&P500 and the DJ Industrial Average made convincing new all time highs last week.

The S&P 500 currently has one of its best year-to-date performance in 24 years, up 22%, which is already twice the average annual return since 1957.

S&P500 volatility markets look more concerned with the VIX in slight backwardation short term with the election coming, and flat line term structure for 2025 indicating a total lack of clue.

As mentioned above, Gold strengthening expresses concerns as well.

Market conditions, especially in the US, are likely to stay the same until the elections, when the next US president will be know, and we'll also know if he is in a gridlock situation with congress.

See you next week, and in the meantime, happy investing !