Intention and Realization

The week ended on January 25, 2025, interesting news items to look at this week are:

1. Intention and Realization: 4 days after the inauguration of Trump, the mist begins to clear as to how Trump’s playbook will run. If we follow the money, DXY (US$ Index) has decidedly turned weaker from a high of 110.17 to Friday’s close of 107.47 ( a drop of 2.4% within 11 days). (Fig. 1).

The bucket list of Trump is long and drawn out but with many conflicting desires, Trump must prioritize. It is clear that Trump’s team’s own assessment is US, at its current state of health is in no position to fight Russia and China until her internal affliction is first remedied. Let’s analyze the many data points that allowed the many analysts to draw on the foregoing conclusion.

(i) In Trump’s inauguration speech and subsequent vast array of Executive Orders, Foreign Policy Issues are hardly dealt with. In order not to exhibit weakness Trump created smoke screens like renaming Gulf of Mexico to Gulf of America. Trump also freezes all foreign aid including all military aid except to Israel and Egypt and quietly thrown Ukraine under the bus. (Fig. 2)

It is clear that in Trump 2.0, he learns his lessons from his first term defeat and intends initially to remove all obstacles and challenges from the Deep State. With only two years until the mid-term election, battles that are not 100%  guaranteed of a solid victory, Trump will defer to deflect counter attacks by the Deep State. Hence we see Trump revokes the security clearance of a litany of ex staffers belonging to the Deep State, like John Boltan (hangers on who are in the know and acted as a go between the shadowy area of politics). (Fig. 3)

(ii)  First Salvo Against the Deep State - DOJ: In a piece by Tyler Durden of Zerohedge, Trump’s first salvo was DOJ. Intelligence, Investigation and Prosecution are the strongholds of the Deep State emanating from the traditions of Free Masonry and expectantly that is where the internal war began. (Fig. 4).

(iii) Lineup of Hatchet Man in Trump’s cabinet: There is certainly method in Trump’s madness. He appointed Rubio as Secretary of State, a war hawk but as US top diplomat Rubio cannot visit China because of China’s sanction. (Fig. 5).

So the negotiations with a peer enemy is restricted to Trump, Musk and Bessent. Rubio’s job is to clean up the swamp left behind by Hilary and Blinken and if he does not concentrate on his assigned role, he will be find himself in the waste bin quickly. A second hatchet man is Defence Secretary candidate Hegseth, a man who could not even name a single country within ASEAN. (Fig. 6).

Not that we should be too surprised because Trump also called Spain, a member of NATO a BRICS nation. (Fig. 7).

(iv) Trump goes to war with the Federal Reserve (Fig. 8): In quick succession, Trump mounted an attack on the Federal Reserve and try to force the Fed to bend the knee.

Ignoring the loud blasts over the megaphone diplomacy, Trump’s MAGA is prioritized as to draining the swap from within, build up fortress America through bait and hook for US Corporations to onshore manufacturing, and to reduce Federal Expenditures particularly those programs that Democrats derived their votes. To do that income tax cuts is needed as a stimuli and to be part financed by an increase in tariffs. The immediate consequence will be a further rise in deficits before efficiency kicks in for an overall lowering of Federal Spending. Trump’s rhetoric is an lowering of interest rates as early as February 2025.  The immediate market reaction after Trump declared his intentions at the Davos World Economic Forum was an acknowledgement of his intent but rejects his methodology as workable.  The FX value of USD precipitously dropped but interest rates on both Duration Treasuries (Fig. 9)

and Short Term Bill Rates went up a notch (Fig. 10)  

As we look back at various US initiatives like Indo-Pacific Economic Framework, QUAD 4, CHIPS and Science Act, we invariably found these programs like many others are now walking dead. By comparison, China announced “Make in China 2025” in 2015 and despite all the road blocks and trip wires set up by US, was deemed a mission success by none other than Western establishment media. (Fig. 11).

The number one and number two economies in the world both have very many smart people and I suppose the difference is in the case of US, all the programs need to be proven within 2 years but China has 10 years to cultivate the desire result. As I recall my time in Venture Capital investing, out of 100 projects, 70 to 85 usually goes belly up, 10 in the walking wounded league, 5 will pay the rent but just one to two hits will be enough to fund all the efforts and pay the bonuses. When public servants decide to abandon their roles in protecting and nourishing an ecosystem for talents to grow but directly employing public funds as risks capital, it is usually too little too late. In the context of the much hyped  AI competition, Artificial Analysis just posted on X that China’s DeepSeek is just as powerful as OpenAI but 25X cheaper. (Fig. 12).

What there is left of the US high tech stocks and economy when the final AI bubble bursts?

2. Major Shifts in Financial Markets for the period December 31, 2024 to January 25, 2025.

Key Financial Asset Category Performance: (Fig. 13)

Ruble (+12.27%), Bitcoin (+12.09%), Uranium (+10.13%), Copper (+7.56%), Silver (+6.10%), Gold (+5.56%), Dow (+4.67%), S&P500 (+3.86%), Nasdaq (+3.68%), Oil (+3.68%), AUD (+1.97%), Euro (+1.34%), Jpy (+0.81%), Rmb (0.77%), GBP (-0.25%) and USD Index (-0.95%).  As mist begins to clear on US political and economic directions, various asset classes are adjusting to the new found reality of Intentions and Realization. Be advised to protect yourselves from the fallout.

Ecclesiastes 9:11  I returned and saw under the sun that—The race is not to the swift, Nor the battle to the strong, Nor bread to the wise, Nor riches to men of understanding, Nor favor to men of skill; But time and chance happen to them all. 12  For man also does not know his time: Like fish taken in a cruel net, Like birds caught in a snare, So the sons of men are snared in an evil time, When it falls suddenly upon them. 

Watching Body Language and Counting of Chips

The week ended on January 18, 2025, interesting news items to look at this week are: 

1. Watching Body Language and Counting of Chips: From Sun Tze “Art of War 1:18-19 “¹⁸ All warfare is based on deception. ¹⁹ Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.” (Fig. 1).

War is based on deception and in this era of global conflict, how does one navigate through the rough seas to keep one’s head above the troubled waters. I do not know any sure win method but the one thing that would guarantee losses is to assume one knows it all and stopped learning.  Allow me to draw an analogy between war and a game of poker. To the extent both are games of deception, some tried and tested techniques in poker games may well prove to be useful in understanding geopolitics.

(i) Watch Body Language: Intentions behind public statements by politicians often needs to be decipher because such statements could be for pure domestic consumption despite topics having cross border significance. This is further complicated by an often lack of accountability between a politician’s words and deeds. Politicians comes with a diversity of styles and mannerism. What an experienced poker player would look for are consistencies and inconsistencies in their opponents’ body language beyond the act and facade that their opponent put up. In gaming, one poker player’s style may be intimidation and others employ a charm offensive to relax and  disarm their opponents. To the detriment of an US ally, Biden’s charm offensive proved to be much more lethal than Trump’s threat. Now, this week’s interesting news is Biden was quick to claim credit for the Israeli/HAMS Gaza cease fire deal but defer the banning of Tik Tok to Trump. Given China has administratively forbid a sale of Tik Tok to US interests, neither Bidden nor Trump would want to face the wrath of 170 million US Tik Tok users because all 3 branches of US Government, the Administration, Congress nor US Courts could provide proof of Tik Tok posing a national security risk. Let's not forget, a week or so earlier Meta has announced it will get rid of factcheckers and allow more political content because most young Americans saw through the decoy of factcheck as a tool for opinion censorship and distanced the controlled social platforms. (Fig. 2).

On Thursday, Trump’s incoming National Security Advisor, Mike Waltz, said the new administration will not ban TikTok in the United States if there is a workable deal. (Fig. 3)

The telltale sign of Tik Tok’s true value in American politics is in both Biden and Trump use Tik Tok in their presidential election campaign to reach young American voters. Remember it was during Trump 1.0 that pro Meta lobbyist pushed to hijack Tik Tok from China and it was Biden who signed off on the Law. Nonetheless, China saw through the US bluff as soon as US Congress enacted the relevant legislation in March 2024 (Fig. 4).

Now the real danger in allowing your poker opponent to correctly interpret your involuntary body language will make it very hard for you to predict your opponent’s reactions. Hence the constant request by Administration Officials to visit, talk and dialogue with their counterparts in China, the desire for guardrails despite nonstop provocation against the Chinese.  As anxiety of US grew, the rest of the Global South have also get accustomed to US’s peculiar body language and played accordingly. Vietnam, India, Mexico and now Turkyie all have learn this skill and became bold.

(ii) Counting of Chips: Another important tool of Poker Players is to watch how frequently your opponent count their chips. The Russians meticulously count and tabulate NATO’s equipment shipment and Ukraine’s consumption but NATO just take Ukraine’s fictional propaganda report on Russia without factcheck and do not even know where NATO’s supplies has gone.  All the talk on maximum pressure on Russia and Iran are just that - talk. That is why Global South correctly interpret the name of NATO as “No Action Talk Only”. As the incoming US Envoy to Ukraine and Russia Kellogg said “the United States must return to the policy of "maximum pressure" and that the Iranian regime's weakness has reopened what the future of Iran will look like” (Fig. 5),

Russia and Iran steadfastly progress to sign off on a Strategic Partnership Treaty fighting sanctions and squaring up to adversaries. (Fig. 6).

So as Trump take office on Monday, let’s keep a clear head of what is likely to happen by watching the body language and the counting of chips. Warfare will be limited as US wants the war in Ukraine and Middle East to wind down and concentrate on enemy number 1 - China. Analyst Pepe Escobar puts it very well when he said US will try her best to destabilize weaker BRICS members to get to China and loots her allies, so expect uncontrolled chaos to happen.

2. Major Shifts in Financial Markets for the three weeks December 31, 2024 to January 18, 2025.

(i) Key Financial Asset Category Performance: (Fig. 7)

Bitcoin (+11.34%), Copper (+8.19%), Ruble (+7.10%), Oil (+6.89%), Silver (+5.18%), Gold (+2.98%), Uranium (+2.94%), Dow (+2.43%), S&P500 (+1.94%), Nasdaq (+1.65%), USD Index (+0.81%), Jpy (+0.67%), AUD (+0.04%), Rmb (-0.35%), Euro (-0.78%), and GBP (-2.85%).  Well it is Friday and weekend before Trump’s inauguration, so expect the familiar NY manipulators to put on a show. Bitcoin was bid up by 5% and Precious Metals suppressed. In my opinion, it is just background noise and would not change the megatrend.

(ii) Fed Funds Rate and Duration Treasuries: With a 0.1% core inflation rate lower than consensus expectation for December 2024, the Powers that be quickly pushed Bond Prices up and yields lower to arrest the January trend of interest rates moving in opposite direction against the stated political desire. (Fig. 8).

(i) Short Term Interest Rate: Short Duration rates remained steady and the market is pricing the next Fed rate cut to be around June 2025. (Fig. 9)

John 14:27  Peace I leave with you, My peace I give to you; not as the world gives do I give to you. Let not your heart be troubled, neither let it be afraid.