Welcome to the Deep Dive. Today, we are tackling
a stack of sources that really presents a radical
split screen of reality. It's pretty jarring,
isn't it? It is. On one side, you've got these
high stakes, incredibly emotional political controversies
just dominating the news cycle. And on the other,
you have the cold hard structural data of global
macroeconomics. It's pointing to a very definite
future. the, let's say, analytical desk of a
quant investor. But we have to bridge that gap.
I mean, our whole mission in this deep dive is
to cut through that immediate political noise.
Right. Things like the tragedy in DC, the weaponization
of federal agencies. We need to see the systemic
actions being taken. But then, yeah, pivot completely.
And decipher the economic forecast that's quietly
driving everything under the surface. Exactly.
So we're looking at three core topics today.
First, that political reaction, the immediate
scapegoating that followed the Beckstrom tragedy.
Then we'll get into a detailed look at how specific,
and often pretty obscure, federal agencies are
being weaponized for political gain. And finally,
we make that big shift to the markets, to the
prediction of a coming Quad Four economic environment.
So let's start with the immediate reality of
that political firestorm. OK, let's unpack this.
The flashpoint is the recent shooting in D .C.
that resulted in the death of National Guard
member Sarah Beckstrom. She was only 20 years
old from West Virginia. And the shooter was identified
as Rahmanullah Lakanwal, an Afghan who is relocated
here under Operation Allies Welcome. The political
response was, I mean, it was instantaneous. And
very targeted. The initial argument from the
opposition really hit two main points. What were
they? First, that the program Operation Allies
Welcome should have never existed in the first
place. And second, that the vetting was just
poor. OK, so let's dig into that. What's the
context for a program like this? Well, it's a
common, if you know, morally complex wartime
trade off. These programs are designed to quickly
move locals who help the U .S. military. Translators'
intelligence assets. Exactly. Move them to the
front of the immigration line. It's partly a
thank you, but it's also critical to protect
them from retaliation. In this case, from the
Taliban. So we've seen this before. Oh, yeah.
Similar things happen during the Iraq War. It's
a calculation, right? You're trading the risk
of importing a few potential problems to protect
thousands of lives, both American and local allied
lives. And what about that vetting argument?
It seems to always focus on the one failure to
define the whole system. And that's the thing.
You have to look at the numbers. Around 120 ,000
people came over through Operation Allies Welcome.
OK. So if Lock and Walls is that one tragic exception,
that means the system had a 99 .99916 % success
rate. That's an incredibly robust safety margin.
It is. But the narrative is just driven by the
failure. And what's more, the political blame
aimed at the previous administration gets complicated
by the timeline. How so? Lock and Wall's final
asylum approval came through in April. Which
was after the current administration took office
on January 20th. Exactly. So the blame game isn't
as simple as it's being presented. But even with
statistics like that, the political impact of
one tragic event, especially, you know, when
it's framed as a brown person committing violence
against a young white woman, it's just massive.
And that's the core question, isn't it? The math
doesn't seem to matter because the political
utility of the distraction is just too high.
It's a pivot to scapegoating. A very swift pivot
to open xenophobia. We saw the USCIS director,
Ed Lowe, list 19 countries of concern. And the
observation from the sources is that these countries
are basically defined by having the wrong religion
or ethnicity. Or both. And the rhetoric escalated
fast. The former president talking about banning
immigration from third world countries. And Senator
Tuberville calling for a ban and deportation
of all Muslims. I mean, think about the implications
of that for someone like Dr. Mehmet Oz, a U .S.
official. It's incredibly aggressive theater.
Even the DHS posted on social media around Thanksgiving
that there's no room at the table for invaders.
Especially when you put it up against the actual
evidence. Which is, you know, consistent globally.
Research shows immigrants, including undocumented
immigrants, are statistically less likely to
commit crimes than native -born citizens. And
why is that difference so stark? It really boils
down to deterrence and consequence. For someone
who's undocumented, even a minor crime carries
this nuclear consequence of deportation. You
lose everything. Your job, your family. Everything.
Native -born citizens just don't face that same
level of systemic punishment for, say, a petty
offense. The cost of failure is just exponentially
higher. But politically, that fact is just ignored.
Immediately. So if the data says the narrative
is false, why the intense grandstanding right
now? What's the why now? Well, the sources point
to a few drivers and they aren't mutually exclusive.
Could just be instinctive bigotry being leveraged.
Or a distraction from other political problems.
For sure. But the most important strategic reason
flagged is probably the tactical shift in public
narrative. If you think you're losing the argument
on the economy, shifting the fight from the economy
is bad to the emotional ground of those damn
immigrants are the problem is, well, it's a proven
political lifeline. And that leads us right into
our second topic. The idea that these tactics
have moved beyond just narratives and into the
systemic weaponization of the federal government
itself. The comparison to the past is really
something. Yeah. You know, Nixon was criticized
for using the IRS against his enemies. A single
agency. Right. Today, the strategy seems to be
using the entire executive branch as a tool chest.
Law professors reviewing this say top aides are
literally asking, okay, we have this agency,
what's the most damaging thing we can do with
it? And what's so interesting is the use of obscure
agencies, not just the big ones like the Department
of Justice. Because the goal isn't always a conviction.
A lot of the time, the real goal is just reputational
damage, financial exhaustion, and distraction.
Give us an example. Take the Federal Housing
Finance Agency, the FHFA. Most people have never
even heard of it, but it controls a ton of U
.S. mortgage data. So the administration puts
a crony, Bill Pult, in charge to dig up dirt.
He finds that Senator Adam Schiff had dual primary
residences in two different states. Which is
pretty common for members of Congress, isn't
it? Very common. But the goal isn't a slam dunk
criminal case. The order goes to the DOJ to indict
Schiff. So even if the case falls apart later,
the political win is already in the bag. Schiff
has to spend millions on his defense. His name
is dragged through the mud in attack ads and
his time is spent in court, not campaigning.
The punishment is the process. The punishment
is the process. And we see that same approach
used against institutions. Like with Harvard.
Absolutely. The Department of Commerce is trying
to strip them of patents worth millions, arguing
some of the research was federally funded. Even
though that's standard practice? It's not just
standard, it's encouraged by the contracts. They
want universities to patent these things so they
get licensed and benefit the economy. And what
about HHS? The Department of Health and Human
Services is being used to block research grants
for vital medical research. It's a clear political
move to cater to the anti -science, anti -vaccine
sentiments in the base. Then you've got the FCC
for the media. The Federal Communications Commission,
yeah. Threatening broadcast licenses, blocking
mergers. The message is pretty clear. Pay tribute.
or face the consequences, suppress unfavorable
coverage. Which brings us to the explicit use
of the DOD and DOJ as basically personal weapons
against political rivals who are also veterans.
Yeah, that drama with Senator Mark Kelly was
a prime example. The DOD threatened to revoke
his security clearances. And he's a decorated
veteran, a Democrat from Arizona. and his supposed
crime. He simply reminded service members of
their legal right, which is embedded in the Uniform
Code of Military Justice, to disobey illegal
orders. This was all centered around that video
from the Seditious Six, as they were called.
Right, six Democratic veterans. The SEC DEF,
Pete Hegseth, and FBI Director Cash Patel threatened
them with investigation and even court martial.
But was there any real legal jeopardy there?
The sources say the odds of a conviction were
miniscule. Kelly is a civilian. Recalling a former
service member for speech is legally unprecedented.
It's protected by the First Amendment. And the
speech and debate clause for a sitting member
of Congress. The truth is in absolute defense.
So legally, it was mostly just theater. So what
was the political trap here? It seems it was
strategically laid by the Democrats. They chose
the participants perfectly. How so? Three men.
three women, representing the three biggest branches
of the armed services, all from critical swing
states. They baited the administration into threatening
them. And the administration walked right into
it. Hook, line and sinker. They elevated these
six people into high profile leaders of the resistance.
It was a massive media and fundraising win for
their opponents. So we've established this pattern,
intense political chaos, distraction, weaponization
of government. Now, let's pivot and ask that
question we started with. Is this all designed
to distract from a struggling economy? Exactly.
So we have to shift from that chaos to the cold,
structured world of macro data guided by a quantitative
framework. Right. And this is where we move from
the subjective to the systematic. The framework
here is the hedge -eye growth inflation policy
model. the GIP model. And it just strips out
the noise? It does. It uses real -time economic
data, GDP, CPI, all that, to map the economy
into one of four regimes, or quads. Okay, so
what does that cold hard data tell us is coming
next? The critical finding in our sources is
that the GIP model is now casting a quad four
for December. Let's make sure we define Quad
Four very clearly for everyone. Quad Four is
the most bearish environment for stocks and other
risk assets. It's when both economic growth is
decelerating, so trending down, and inflation
is also decelerating. Disinflation and slowing
growth. Exactly. It's an environment with structural
recessionary pressures. And the financial markets
are already confirming this call way ahead of
the headlines. Absolutely. If you look at the
core Quad Four hedges, the U .S. dollar is still
bullish on both its short -term and intermediate
-term signals. It's the classic flight to safety
asset. It does well when global growth and inflation
are weakening. And the bond market is screaming
it. It really is. U .S. Treasury yields are doing,
and this is a quote, classic Quad Four things.
The two -year yield is grinding lower. The 10
-year put in a big lower high. Which means investors
are certain that falling rates are coming. They're
expecting the Fed to have to cut rates to respond
to that slowing growth. And that certainty has
just crushed bond market volatility. Completely.
The move of index? which measures bond volatile,
has collapsed by over a thousand basis points.
That is a massive drop. It suggests the market
is very certain about the path from here, lower
rates ahead. And while stock market volatility,
the VIX, is low, the setup is described as extremely
fragile going into a monthly Quad 4. Very fragile.
So is this just a U .S. thing or is it global?
It is definitely global. Germany, the engine
of Europe, is slowing rapidly, potentially into
a recession. And critically, China has slipped
back into Quad 4. So the Shanghai Stock Index
is flashing a sell signal. It's flipped to a
bearish trend signal. Yes. When the world's two
largest economies are in a structural deceleration,
the global outlook is pretty clear. OK, so let's
talk actionable insights. What works in Quad
4 and what gets hurt? Quad 4 systematically favors
long duration assets, things where the cash flows
are far in the future, so they become more valuable
when interest rates fall. So that's why precious
metals are doing well. Exactly. Gold and silver
remain bullish trend. They're supported by falling
yields and that low bond volatility. And what
about the commodities that are tied directly
to economic activity? They're really struggling.
The cyclicals, things that depend on strong immediate
growth like lumber, orange juice, cocoa, they've
all had steep painful drawdowns. The market is
signaling that future demand is cooling off fast.
That's the signal, yeah. And finally, on the
equity side, where should the focus be? The stand
-at -long sector continues to be health care.
The ticker is XLV. It performs well in Quad 4
because it's stable, it's non -cyclical. It acts
kind of like a bond. It's seen as a long duration
bond proxy sector, yes. And conversely, the sources
are strongly advising caution against chasing
those late cycle cyclicals. Like industrials,
XLI. Exactly. Industrials thrive when growth
is peaking, not when it's structurally declining.
In this environment, you want to be positioned
for stability and safety, not for aggressive
growth. So this deep dive has really given us
a view into two wildly different worlds. One
is just defined by this intense targeted political
reaction fueled by instinct and distraction.
And the other is defined by cold hard data pointing
towards systemic economic deceleration and rising
recessionary pressures. The central finding here
seems to be this clear structural breakdown in
growth that's happening at the same time as all
this political volatility and institutional weaponization.
Right. One side of the coin is screaming instability,
while the other is quietly whispering about a
structural retreat in the global economy. Which
leaves us with a final thought for you, connecting
these two worlds. If the political theater and
scapegoating we've analyzed are meant, at least
in part, to shift the narrative away from a bad
economy. And if the economic prediction of a
Quad Four for December proves correct, signaling
even more deceleration and economic pain ahead.
Then how much more extreme and targeted should
we expect the political scapegoating and institutional
weaponization to become in response to that underlying
and intensifying economic weakness?