Welcome back to the deep dive. We've got a huge
stack of sources today really trying to cut through
a lot of noise, geopolitics, domestic turmoil
and these like massive shifts happening underneath
global finance. It's a lot to cover. We're seeing
everything from, you know, trade wars seemingly
decided on a whim via social media to some really
ugly local politics and deep structural changes
in the markets. Yeah, exactly. So our mission
is to kind of pull out the essential threads
for you. And the core theme, really, is trying
to understand these powerful systems, political,
financial, what we're calling the machine. We're
looking at what happens when ego, money, and
algorithms start driving policy and prices. OK,
let's unpack this. First up, the White House.
They released this donor list for the new ballroom
project, calling it, get this, semi -transparency.
Semi -transparency, yeah. I mean, right off the
bat, that tells you something, doesn't it? They
gave us names. Right. But crucially, zero dollar
amounts. You don't know who gave what. Is the
list even complete? We just don't know. So impossible
to really trace the influence. Pretty much. And
the official line was, well, maybe the donors
get their names etched on a pillar or something.
Which the sources immediately called out as...
you know, kind of tacky for the people's house.
Tacky, yes. But more importantly, it feels like
a distraction, doesn't it? It's hard to believe
a little name plaque is the only motivation for
these huge donations. No kidding. I mean, just
running down the names is like a master class
in potential influence. You've got the huge tech
companies, Amazon, Google, Metta, Microsoft.
Mm -hmm. And what do they want? Continued federal
contracts, right? AWS cloud stuff, AI development,
software deals. Keep that pipeline open. Definitely.
And then they're the policy place. The Adelson
Family Foundation clearly focused on Middle East
policy. Sure. And Altria Group, Reynolds American,
the tobacco giants, they're obviously interested
in limiting oversight on e -cigarettes, maybe
easing up regulations on flavored tobacco. And
a huge showing from crypto. Coinbase, Ripple,
Tether, the Winklevosses. All singing from the
same hymn sheet. Keep crypto unregulated. Protect
their market share. Then you've got Lockheed
Martin. Caterpillar, defense contracts, infrastructure
spending. Yeah. And this is why the sources argue
the outrage is, well, legitimate. Even if you
assume no direct, explicit quid pro quo, it's
almost impossible for someone putting that kind
of cash into the White House structure itself
not to create a conflict of interest down the
line. How can it not? And it wasn't just the
lack of transparency. The sources also point
to, like, outright lies about the project and
the incredible speed. Exactly. Remember, it was
first pitched as, you know, maybe freestanding
or just a small tweak to the east wing. And then
the whole wing got leveled. That's a fundamentally
different, much bigger project. So why the insane
rush to get it done? If it's just a vanity project,
it could wait. Well, the sources float two main
theories. The maybe more charitable one is that
the president is just high energy, impulsive.
One analyst called him walking id. Can't delay.
gratification. Okay, but what's the less charitable
theory, the darker one? The darker theory is
that the room is actually needed urgently for
grifting purposes. Grifting? Yeah, for holding
a large high -dollar fundraising events for his
pace or maybe his future library inside the White
House itself, collecting big donations monthly
before his term potentially ends. Wow, so if
that's the case you need the room now. you need
it operational immediately for that kind of urgent
revenue stream. And just to kind of underline
the self -aggrandizement aspect, the White House
website actually updated its official major events
timeline to include the ballroom. right alongside
five supposed achievements of the current administration,
and four completely false smears against Democrats.
False smears? Like what? The source lists them.
Clinton Alinsky, something false about Obama
and the Muslim Brotherhood, Biden and Trans Visibility
Day also false, and Hunter Biden cocaine, again,
flagged as false. So they're using the official
White House record to push campaign talking points
and Well, falsehoods, which really suggests this
isn't about history. It's about projecting power
now and kind of rewriting history as it happens.
OK, speaking of ego driving policy, let's talk
trade. This abrupt termination of trade talks
with Canada yesterday. The reason is. Well, it's
something else. It really is staggering. According
to the Globe and Mail, the Canadian paper, a
deal was essentially done like all but signed
staffers just waiting for the ink. pretty much
ready to announce and then the whole thing just
Collapses. Because of what? Because of a political
ad running in Ontario. Not even nationally in
Canada, but in Ontario. Yeah, run by the premier
there, Doug Ford. And the ad used a clip from
a 1987 speech by Ronald Reagan. Ronald Reagan,
what was he saying? Arguing against tariffs.
The sources confirm Reagan and the GOP back in
the 80s were strongly anti -protectionist. Reagan
warned back then that tariffs might feel good
short -term, but long -term they hurt every American
worker and consumer. He said they lead to retention.
retaliation, fierce trade wars, shrinking markets,
the whole classic argument against them. Wait,
wait. So a massive international trade deal impacting
billions gets torpedoed because the U .S. president
got mad about a 37 -year -old Reagan speech being
used in a Canadian provincial ad. That seems
to be exactly it. The fragility is. Well, it's
remarkable. What was the official reaction? The
social media post called the ad fraudulently
used, labeled it fake, and then just bang. Trade
negotiations with Canada are hereby terminated.
Wow. Now, did the Reagan Foundation object to
the ad? They did. They said it misrepresented
Reagan's words, and they hadn't given permission.
But the source is clear. The audio itself wasn't
fake, and the original speech was definitely
anti -protectionist. So negotiations ended over
what sounds like essentially a personal hissy
fit, as the source put it, aimed at a provincial
premier. That's the analysis, yeah. It seems
Canada's PM, Mark Carney, is now expected to
be, you know, know, the adult in the room. Like
Zelensky having to manage similar outbursts.
Exactly. Find a way to smooth it over diplomatically.
The big takeaway is just how much major policy
seems hostage to personal peak and instant reactions.
And that instability, that sort of chaos at the
top seems mirrored locally, too. Let's talk about
the New York City mayoral race. Sources are calling
it basically rock bottom. Oh, it's gotten incredibly
nasty. The second debate. Andrew Cuomo, running
as an independent, and Curtis Sliwa, the Republican.
Yeah. They apparently just spent the whole time
attacking the Democrat frontrunner, Zoran Mumdani.
And Mumdani. He hit back, apparently invited
one of Cuomo's sexual harassment accusers to
sit in the audience. So yeah, ugly. And then
Mayor Eric Adams jumped in. He did. He endorsed
Cuomo, which is interesting because As the source
rather bluntly puts it, Adams himself is about
as popular as Athlete's Foot right now. So the
endorsement might actually hurt Cuomo. The analysis
suggests it very well could, yeah. Doesn't seem
like a plus. But things got even worse, didn't
they, Cuomo on that radio show? Yeah, that was
really something. He was on a right -wing show,
and the host made this outrageous comment suggesting
Mom Donnie would be, quote, cheering if another
9 -11 happened. Cheering. And Cuomo apparently
laughed. seemed to agree and said, that's another
problem. Indefensible. You'd think that would
be the low point. But then came the ad. The AI
ad. The AI ad. His campaign posted it, then quickly
deleted it. The source called it unbelievable,
compared it directly to the racist 1988 Willie
Horton ad, said it was out and out bigotry. It
was actually in it. It was pure race baiting,
according to the description. Started showing
Mom Donnie gorging himself on rice, playing on
ethnic stereotypes right away. Then it cycled
through these supposed New Yorkers identified
sp - Specifically as an Italian wife beater,
a black shoplifter, a Latino gang member, a black
pimp. All apparently thrilled they could commit
crimes under Mom Donnie. That's just blatant,
reprehensible as the source says. What's the
strategy there? Is there even a strategy? Well,
the analysis basically calls it pure desperation.
Cuomo seems to be trying everything to peel off
some of Curtis Sliwa's conservative, maybe fear
-driven voters. But does the math even work for
him? The sources say no. The path to victory
just isn't there with that approach, which makes
resorting to this kind of AI generated bigotry
seem even more cynical and strategically bankrupt.
It's like the ego machine sacrificing any decency
for a long shot. So we've seen ego level a White
House wing crash trade talks. But what happens
when that very human chaos runs into systems
that are Well, not human at all. Let's shift
to the financial machine. Reminds me of that
old Paul Simon line. Staccato signals of constant
information, a loose affiliation of millionaires
and billionaires. That's the one. Still fits,
but the loose affiliation looks really different
now, doesn't it? Profoundly different. There's
been this huge structural shift in the U .S.
stock market over, say, the last 20 years. Think
back to 2005. Active fund managers, stock pickers,
controlled over 75 percent of mutual fund money.
And today. Today, it's less than 50%. All that
money flowed into passive index funds, and really
importantly, into quant -driven strategies. Quant
-driven, like algorithms. Exactly. Factor ETFs,
multi -strategy hedge funds, high -frequency
trading bots. These systems look for persistent
factors that drive returns. And the biggest winner
from this shift, momentum. Momentum, just buying
what's going up, selling what's going down. Simple
idea. But it works over time. It has historically
generated positive returns, yes. And now you
have trillions of dollars in automated systems
designed specifically to capture that momentum
premium. Which changes things. It fundamentally
changes the market. Because once you start systematically
exploiting a factor like momentum, the act of
exploiting it actually reinforces it. The system
becomes different. OK, this sounds like we're
getting into George Soros territory. His idea...
of reflexivity. Precisely. Saurus's general theory
of reflexivity. It's this crucial concept, a
two -way feedback loop. How does it work? So
participants' biases and perceptions affect prices.
People believe tech will go up, so they buy tech,
pushing prices up. That's step one. But then
step two is crucial. Those rising prices then
feedback and change or reinforce the original
perception. See? Tech is going up. I was right.
So the act of betting on momentum makes momentum
stronger. The algorithms chasing it actually
create more of it. You got it. The algorithmic
machine feeds on itself. It's a self -fulfilling
prophecy to an extent. But here's the danger,
the consequence that the source is warned about.
This concentration of money, all chasing the
same factor, amplified by reflexivity, creates
these huge pockets of instability. And eventually
you get momentum crashes. Where everyone runs
for the exit at the same time. Exactly. The system
becomes fragile because everyone's on the same
side of the boat. It highlights that markets
are these complex adaptive systems driven by
feedback loops and bursts of collective behavior,
not just rational analysis of company earnings.
Which makes understanding the structure maybe
more important than predicting the next data
point. Speeding of data points, we finally got
the CPI inflation report yesterday. It was delayed,
right? Yeah, delayed by the government shut down
the second longest one ever, apparently. So what
did the numbers show? Overall, maybe a touch
cooler than feared. Year -over -year headline
CPI was 3%, up a bit from August, but slightly
under what people expected. And core CPI? Without
food and energy? That actually eased a little,
down to 3 % from 3 .1%. So moving slightly in
the right direction, maybe. Any details stand
out? Yeah, the shelter component housing costs
cooled off quite a bit. Owner's equivalent rent
had its smallest monthly game since early 2021.
That's encouraging. But there's always a but.
But we are seeing things like apparel and household
furnishings ticking up. The sources suggest that's
likely the tariff pass through starting to bite.
The costs are getting passed to consumers. OK,
so mixed signals. But you mentioned something
crucial about this report. Yes. And this is the
really critical warning coming from the economists
in our sources. You need to hear this. This CPI
report is probably the last solid quality report
we're going to get for a while. Last solid one.
Why? Until when? Until maybe early next spring
because the ongoing government shutdown means
the Bureau of Labor Statistics, the BLS, they
just don't have the staff or resources. So they
can't collect the data properly. Right. They'll
be forced to basically impute or rather guess
estimates for the next few months. They won't
have the detailed on the ground data they need
to calculate it accurately. Hold on. So. The
BLS might be guessing inflation numbers, and
the Federal Reserve relies heavily on those numbers
to set interest rate policy. That's the potential
systemic risk right there. You have policy decisions
potentially based on, well, guesstimates. Feeding
into a market structure that you just described
is already potentially unstable and reflexive.
Exactly. Flawed data, fragile structure. And
despite inflation still being at 3%, that's a
full point above the Fed's 2 % target. The market
is still pricing in a Fed rate cut next week.
Which tells you why. What? It tells you the market's
anticipation. The structural expectation of future
Fed action and money flows is driving things
more than the actual possibly flawed current
data. OK, so wrapping this up, we've really covered
a lot. The ego machine where politics gets driven
by personal spats, vanity, even outright bigotry.
And the algorithmic machine in finance, where
market structure itself, these reflexive feedback
loops, are creating new kinds of instability.
It feels like in both these complex systems,
politics and markets, trying to predict the next
specific event, the next tweet, the next CPI
print is maybe less important than understanding
the underlying structure. That's what the sources
suggest. Success isn't about prediction. It's
about observing that structure, understanding
the dynamics, and managing risk with discipline.
So the final thought for you listening to this.
If our political outcomes are increasingly driven
by personal impulses, this walking aid, and our
market outcomes are driven by these self -feeding
algorithmic loops, reflexivity, what happens
when that unpredictable human element meets automated
fragility? Is the real danger not any single
ascent? but the structure of these powerful systems
themselves. Is that the biggest systemic risk
we face? Something to chew on this week.