Welcome back to The Deep Dive. Today we are,
well, we're performing what I call a necessary
act of journalistic triage. That sounds about
right. Our mission is to navigate a stack of
source materials that aggressively mix the absolute
worst kind of political toxicity with these,
you know, quiet structural macroeconomic signals.
Right. We're moving from the theater of human
ego. straightened to the steady mathematical
predictability of the markets. And that tension
is exactly what makes this deep dive so critical.
The headlines, they're designed to hook you on
the drama, the chaos. Of course. But our goal
is to filter out that ego, the noise and, you
know, the policy posturing to focus on the data
that actually impacts your financial life. We're
finding the why behind the volatile political
what. So our deep dive today focuses on three
distinct areas. First, we have the astonishing
political and moral fallout from the president's
public comments after the death of director Rob
Reiner and his wife. Which is just unbelievable.
Then we examine two crucial, if under -reported,
policy decisions on fentanyl and cannabis. And
finally, we're going to ground ourselves with
a clear financial forecast, one that's dominated
by a Quad One environment and the market's reaction
to the latest Fed action. Okay, let's unpack
this. And we have to start with the political
cost of personal ego, because the sources, they
lead with a truly jaw -dropping headline. They
do. The president's reaction to the tragic death
of Rob Reiner and his wife. It was posted on
social media, and a lot of people just assumed
it had to be a parody account. Right, that was
the initial reaction. But it was verified, and
it was, as one source put it, a political and
moral low point. It was certainly chilling. The
core of the message, it... claimed that Reiner
passed away due to Trump derangement syndrome
caused by his raging obsession with the president.
And it went on to say his paranoia reached new
heights as the Trump administration surpassed
all goals and expectations of greatness. And
he didn't just walk it back. No, he doubled down.
At a press conference, he said he was not a fan
of Rob Reiner at all and added that Reiner was
very bad for our country. The analysis of this
behavior is so critical because it reveals a
clear, I mean, a predictable narcissistic pattern.
The president consistently makes these major
tragedies about himself. The death of a National
Guard soldier, the murder of Charlie Kirk. Exactly.
It's always about his perceived victimhood or
his greatness. This isn't just about being provocative.
It's a deeply ingrained worldview. You've mentioned
that idea before, Leta. Say moi. If the state
is me, then any criticism is bad for our country.
That's the logic. But is that too academic? I
mean, what if it's just pure cynical political
calculation to keep the base energized? That's
a fair challenge. And the data suggests it's
both. But that framework, l 'état, c 'est moi,
it explains why he feels justified going to such
extremes. From his perspective, attacking him
isn't political. It's an attack on America itself.
OK. But the calculation part, that's where the
hypocrisy becomes so obvious and, you know, so
politically damaging. Let's look at that hypocrisy,
because the contrast is just, it's stark. We're
talking orders of magnitude here. When Charlie
Kirk was tragically murdered, The argument from
the president's camp was that the media shouldn't
blame the whole Mangier movement for a few hotheads.
They demanded Jimmy Kimmel be fired for less.
Exactly. The trick is always to demand the entire
Democratic Party be held accountable for any
one extreme comment while arguing the opposite
for his own party. But in this case, the president
is pretty much by definition the one who speaks
for his whole party. The double standard is impossible
to ignore. And the cruel irony here. The cruel
irony is that when Crook died, Reiner had gone
on Piers Morgan's show and offered these remarkably
measured, decent condolences. That clip has since
gone viral, and it makes the president's comments
look even worse. Now, here's the key political
takeaway, because the condemnation wasn't just
from his usual opponents. It was cross spectrum.
Right. We saw a whole panel. Fox News just slamming
the message and more importantly evangelical
leaders like Russell Moore from Christianity
Today called it vile disgusting and immoral and
that's a crucial demographic when you lose prominent
respected evangelical voices on moral grounds
that's a structural political weakness. So the
grip is weakening. Well, what's equally telling
is the silence from mainstream Republican officeholders.
Only marginal opponents condemn the words. So
while his grip might be questioned on policy,
his personal control over the party remains chillingly
firm. They fear his base more than anything else.
Our source material called this behavior colossally
stupid from a strategic political standpoint.
Why that specific insult? Why is this more damaging
than others? Because he gains nothing. Any person
who would celebrate that was already in his camp.
These aren't policy failures. They're moral self
-sabotage. A thousand self -inflicted cuts. Exactly.
The data shows 80 % of his voters will forgive
policy positions they don't like, but the moral
breaking point is what erodes that marginal base.
The suburban moderate, the educated conservative
who just can't stomach the lack of class. He
just handed his opposition a free talking point.
A huge one. Before we move on, we have to recognize
the amazing body of work Rob Reiner leaves behind.
I mean, it's a brief moment of reflection amid
all this ugliness. A truly unbelievable resume.
We're talking a few good men. This is Pinel Tap,
the princess bride when Harry met Sally. It's
an incredible list. And what stood out in the
sources, and this is a major aha moment, is that
despite directing four of the most beloved films
of the last 40 years, he got zero Oscar nominations
for directing. Zero. That's astonishing. Just
one nomination for producing A Few Good Men.
It really highlights how quiet mastery can be
overlooked when spectacle takes center stage.
That is an amazing fact. OK, so we move from
the ultimate expression of personal ego and politics
to Policy moves that feel, I don't know, almost
equally driven by image. Policy theater. Let's
talk about that policy theater, starting with
the executive order designating illicit fentanyl
as a weapon of mass destruction, a WMD. This
is high stakes rhetorical maneuvering. The first
thing to clarify for you is the legal limit here.
In executive order, it can't just unilaterally
rewrite American law. WMD is legally defined.
It includes a biological agent. a toxin or radiation.
And fentanyl is a toxin. It is a toxin, but the
source material is clear. It is not a weapon
by any coherent meaning. It's a catastrophic
public health crisis, not a weapon of war. So
if it doesn't change the legal definition, what
does this WMD designation actually do? Why issue
the order? It primarily orders bureaucratic action.
It gives agencies the authority to apply tools
used for counterproliferation against drug cartels.
For instance? For instance, it allows the Department
of Defense to re -task intelligence gathering
and interdiction assets. But the geopolitical
context is where the smoke and mirrors appear.
Tell us about the geopolitical angle. Well, most
fentanyl in the U .S. originates in China. If
the EXO is serious, it should target China with
new restrictions. But it doesn't. The analysis
suggests that if that doesn't happen, the order
might just be a justification for an undeclared
war against Maduro in Venezuela. But Venezuela
isn't a major player. Not anymore. They cracked
down on fentanyl years ago. They're mostly focused
on cocaine now. The focus seems intentionally
misleading, directing attention away from the
source country, China, toward a politically convenient
target. Definitely raises some questions. OK,
let's shift gears to the second policy move.
This one has much more direct and positive economic
implications. Cannabis rescheduling. Right. The
administration is reportedly preparing to reclassify
cannabis from schedule one with heroin and LSD
down to schedule three. The key here is understanding
the magnitude of the economic shift this unlocks.
But we have to note what this is not. It does
not legalize or decriminalize cannabis at the
federal level. It's a regulatory move. So if
it's not legalization, why is the market so excited?
Where does the relevance concentrate? It's all
about two areas. Banking and most importantly
taxes. Let's focus on the tax side because this
is huge structural economic relief It all comes
down to section 280e of the tax code. Okay, so
for the business owners listening What's the
plain English version of 280e and why is moving
to schedule third so important for the industry's
bottom line right now because Cannabis is schedule
one or two 280e prevents state -licensed cannabis
businesses from deducting ordinary business expenses.
Meaning what exactly? Think about it. They can
deduct the cost of the goods they sell. But not
payroll, not rent, not utilities, not advertising.
They're taxed on their gross profit, not their
net income. Wow. So they're being taxed on revenue
before they even account for the cost of running
the actual business. Precisely. Moving to Schedule
3 means 280E no longer applies. This allows these
companies to finally deduct those common operating
expenses. Which is transformative relief. It
dramatically lowers their effective tax rates,
frees up capital, and moves them closer to real
profitability. And what about banking? Schedule
I has been the biggest hurdle there, right? Absolutely.
Moving away from Schedule A creates the room
for banks to reassess the risk. It doesn't flip
a switch overnight, but it signals to regulators
that the federal attitude is normalizing. Over
time, that should lower costs and increase access
to capital. So we've seen the volatility of the
political theater. Now let's pivot and ground
ourselves in the objective data. We're moving
from human chaos to mathematical certainty. To
the financial sources, which provide a very clear
roadmap. defined by the macroeconomic quads.
And we are firmly in a Quad One environment.
The hedge IGIP model confirms this is the forecast
for January. And to connect that to the big picture,
Quad One means... Growth is accelerating up and
inflation is slowing down. This is the optimal
environment for cyclical equity markets. And
the Federal Reserve's move last week just concerned
that forecast. They delivered a dovish cut, 75
basis points of easing in 2025, plus QE light.
And the market's reaction to rates told us everything
we need to know about the longevity of Quad 1.
What did it tell us? The rates reaction was the
clearest confirmation of the cyclical growth
theme. We saw long end yields pushed to a bullish
trend while the short end stayed bearish. And
the result was a steepening yield curve. A dramatic
steepening yield curve to new cycle highs. OK,
hold on. For the non -trader listening, why should
we care if the curve steepens? What does that
tell us about the future? Think of it like a
weather forecast. A flat or inverted curve is
the market pricing and fear, a recession. A steepening
curve is the exact opposite. It signals the market
is predicting robust future economic growth.
So it confirms the cyclical growth theme is in
motion. It's a huge confirmation. That clarifies
why it's such a critical forward indicator. Let's
look at volatility, the other key signal. The
U .S. equity volatility, the VIX, is holding
steady at 15 .74. This is firmly in what the
sources call the investable bucket. between 9
and 19. Right. And the plain English takeaway
here is that the market is confident. Falling
volatility means consensus is high. Dips are
confirmation points for the Quad 1 signal, not
warning signs. It's a green light for cyclical
risk. And we saw that sentiment reflected in
market rotation. The NASDAQ 100 and S &P 500
were actually a bit lower because of AI exhaustion.
Capital wasn't leaving. It was just rotating.
Precisely. That capital rotated straight into
areas that thrive in Quad One. Cyclicals, internationals,
and especially small caps. And small caps have
been on a tear. They've led the Nasdaq 100 by
over five percent in the last month alone. That
is textbook confirmation of the cyclical growth
theme. And finally, even commodities are flashing
quad one. Absolutely. Silver, a key pro cyclical
expression, ripped to fresh all time highs. That
surge was driven by the perfect alignment of
a down dollar and that dovish Fed cut. And oil?
Oil remains bearish trade and trend, which is
great for the consumer. Lower energy costs act
like a tax cut. So we have journeyed through
the extremes of political behavior, from vile
personal comments to these quiet but profound
economic shifts, all while the macro landscape
points clearly toward Quad One growth. And if
there's one core lesson here, it's this. The
political drama... Like, the president endorsing
both candidates in a primary or this WMD declaration,
it reveals more about ego and self -interest
than strategic governance. They're distractions.
They are. In stark contrast, the market signals,
Quad One, VIX compression, the steepening curve,
they provide a clearer, more objective roadmap
for where real resources are actually moving.
It provides clarity when everything else feels
uncertain. So here's a final provocative thought
for you, the learner, to consider this week.
Given that $100 ,000 in cash now buys only about
$79 ,430 worth of goods because inflation's averaged
over 4 % since early 2020, how should you reconcile
the high -volatility drama of political theater
with these stable growth -oriented signals flashing
bright green in the financial markets? Which
signal should you prioritize in the week ahead
when deciding where to allocate your focus and
your capital?