Over the past couple weeks, markets have been kind of quiet. Price action has been kind of rangebound. We did see the major equity indexes trend a bit higher. And personally, I still think there's a good chance that we could hit S&P 500 7,000 on the S&P 500 by the end of the year.

The really interesting stuff though happened on the policy front. So last week, President Trump all but promised that the next Fed chair would be Kevin Hassett.

And Secretary Basson seems to be hinting on his next plan to have more control over the Federal Reserve.

So let's talk about developments on the Fed front. Secondly, and I think this is super super revolutionary, was that the White House released its national security strategy.

Now, a lot of it was stuff that we've been seeing, America first and so forth, but it had some really interesting things to say when it came to Europe and actually reading between the lines. Um, and honestly, it sounds like regime change from my perspective.

So, let's take a look at that document.

All right, starting with the Fed. So last week the Wall Street Journal reported that uh President Trump basically cancelled the second round interviews for Fed chair and that he had and President Trump suggested he had narrow down candidates to one person and that it would be announced in early February.

Now he also had this thing to say at a recent conference.

>> I guess a potential Fed chair is here too. I don't know who he's allowed to say that potential. He's a respected person that I can tell you. Thank you, Kevin.

>> Uh so basically there's uh you know we've already narrow down the Fed to one candidate. Oh by the way Kevin Hassid potential candidate great guy. So that kind of tells you all you need to know.

If you look at the betting markets it's very clear that everyone is becoming increasingly confident that Kevin Hassid will indeed be the next Fed chair.

So who is Kevin Hassid? Well, Kevin Hassik is basically the president's longtime economic adviser who's actually been there for um over a decade now.

So, if you look at his credentials, he's definitely someone that is wellqualified to be Fed Chair. He has a you know an econ from a fancy university. He's worked at the Fed before. He's held positions in uh influential conservative think tanks.

He's been in a part of the establishment um I guess mainstream Republican economic thinking for some time being economic adviserss to presidential candidate Mitt Romney, presidential candidate Mitt McCain and so forth.

And around the time of the uh President Trump's first term, he found his way into President Trump's sphere. And I guess that bet has really paid off in spades.

He rolled that Trump train first as chairman of the Council of Economic Advisors during Trump's first term. currently uh president of the National Economic Council, President Trump's current term, and now it looks like he's going to be Fed chair.

So all these positions very much what you would expect for to see in someone who ends up as Fed chair. For example, Berneni and Yelen were also previously chairman of U Council of Economic Advisors, you know, fancy academic credentials and so forth.

So on paper totally totally um reasonable choice. Now president will often say that he really prefers Secretary Vessent to be Fed chair and so forth.

Um but you know Secretary Bessant just isn't interested really likes being Treasury Secretary and if the announcement is not made until early January. It looks like Trump still has a few weeks to convince him. Um doesn't look like it's going to happen though.

So what does it mean to have Chair Hassid? Well, obviously it's going to mean that the Trump the Fed is going to be a little bit more dovish than you would expect.

Right now, I'm not saying that suddenly Chair Hasset is going to cut rates to zero and you know everything is going to go to the moon. But when you're making economic policy, there is always always a lot of um flexibility because a lot of judgment is discretionary.

For example, how restrictive is current monetary policy? you know, well, you know, we're around 4%, uh, housing is in recession, but then again, equity markets are going to the moon.

So, uh, I don't know, uh, modestly, moderately, mildly, not restrictive. So, you have a wide range of views on this and you could easily just have someone that's that says that actually we're super restrictive as Governor Myin would say, and that would argue for lower rates.

You can also have someone who values the employment mandate much more highly than the inflation mandate.

Again, having these two mandates really gives the Fed a lot of flexibility in balancing them. So, you could easily have a chair Hasset who says that, you know, my heart goes out to all the struggling Americans. Labor market is not good for many people. So, I want to cut rates.

So, you know, not saying they can cut rates zero, but you can easily see a path of policy that is lower than it would be under say a POW Fed.

So, that I think is very uh likely to happen. But again, many people will also note that the Fed is not one person. It's just not the Fed chair. You have governors, you have presidents that vote on a rotating basis, and some of them are pretty hawkish.

And it looks like Secretary Besson is suggesting a plan for them. Let's listen to what he said at a New York Times interview last week.

The Federal Reserve presidents in the regional banks were meant to be from their district. And now there's this idea of importing a like bright shiny object and three of the Federal Reserve member the uh for the regional banks two of them used to work at the New York Fed. One of them was on a committee at the New York Fed was in a New York investment bank. So, do they represent their district? So, I I I am going to start advocating going forward, not retroactively, that regional Fed presidents must have lived in their district for at least 3 years.

>> So, basically, Secretary Besson is complaining that the way that the Federal Reserve Bank presidents are currently appointed is not in line with how they should be.

He's saying that historically, you know, let's say that you are a Federal Reserve president from Cleveland or from from Texas. Well, you know, you're supposed to represent the interests of your region just like a congressman of Nevada would should be representing interests of Nevada in Washington.

But what's happening right now is that say some of these fed presidents are not actually from their district, don't actually know anything about their district. they're just kind of people that parachuted in from New York. So, we should change that.

Now, that sounds totally reasonable, right? We want to have this regional representation to make sure that uh interests all across America are represented at the Fed.

Uh but when you kind of look into it, you'll see that well, who is he talking about? Ah, well, for example, President Beth Hammock of the Cleveland Fed don't doesn't seem to have any connection to that region as far as I can see.

Spent decades in Goldman Sachs, right? Working in Goldman Sachs in New York City, just kind of parachuted there in Cleveland. And by the way, she also happens to be very, very hawkish.

Uh, you could probably make the case for um, President Lori Logan in Texas as well. Spent decades living and working in New York at the New York Fed.

suddenly finds herself in Texas. Does she have any connection to nexus? Not that I'm aware of. Uh and now also coincidentally very very hawkish.

Now, Secretary Besson says he's not going to apply these rules retroactively. So we're not going to have a situation where like Lisa Cook where he trying to get rid of them, but they all are up for reappointment in February.

And I don't know if he's able to enforce this rule to get enough buyin from the Federal Reserve Board, but you know, it's it's just another kind of pathway to get more control over the Fed.

Kind of like how there's a lawsuit against U. Lisa Cook pending before the Supreme Court, whereas the president is alleging that, you know, Lisa Cook did something wrong with her mortgage documents, so she shouldn't be a Fed governor.

And we'll have the Supreme Court decide that. But again, this is an administration that is very resourceful and very determined to have more control of the Federal Reserve.

They view lower interest rates as a high priority. So, is this plan going to work? I have no idea. But I suspect that the regional Feds much easier to influence than the Federal Reserve governors. Governors are, you know, really a a position that has to be confirmed by the Senate.

higher profile regional bank presidents at the end of the day are appointments from the private sector entities. So I do think that uh Trump will have more influence over the Fed next year. How much more you know we'll just have to see how these paths pan out.

So, um, and you kind of see, you know, okay, so when it comes to market reaction, it's kind of hard to see how that could be cuz, you know, some people would say that, uh, you'll lose long end and so forth. But on the other hand, if you do have a politicized Fed, wouldn't they just do like yield control or something like that?

Now, the administration is aware that they don't want the market to freak out. And so, you do see the Treasury tweeting this out the past week saying that the bottom market loves President Trump.

So, so far at least it's not obvious to me that the market is really concerned about anything about the politization of the Fed.

So far, the price action, you know, lower yields, weaker dollar, higher gold is also consistent with um weaker labor market, which you did have some weak labor market news the past week.

So, it could be a situation like Liberation Day, which, you know, as I remember heading into Liberation Day, many people were were telling you that it was going to be a big deal. uh market didn't believe it and then and then we had some big moves. So let's let's uh look forward to see what happens next year.

Now the second thing I want to talk about is this super super interesting national uh security strategy document from the White House. Here it is. White House spelling out what they mean in terms of America first foreign policy.

Now a lot of it is stuff that we already know. You know balancing global trade, helping workers and so forth. And a lot of the stuff is a lot of things. It's stuff that we already see them doing, but now they're just, you know, kind of telling telling you how it is.

For example, there's a section that very spells out there's going to be a Trump coralarily to the Monroe Doctrine.

The Monroe doctrine was something put forth by President Monroe in the 1800s. And what the Monroe document said, and it was directed towards the European powers at the time, was that the Americas belongs to the United States.

this is our backyard. We will have control here. You stay out. At that time, again, there were many European colonies in the Americas, particularly from Spain.

And so, the America, the United States was just telling European powers to back off. We're not going to meddle in your affairs and you stay out of our sphere of influence.

The United States culturally speaking, for is really more of an isolationist country.

We want to want to do our own thing. And it really was um the political powers that kind of drag the public into the world wars. So uh what we see today America as you know kind of an empire is is kind of more of an aberration when it comes to American history.

Now Trump is basically saying that reaffirming that you know we want to have influence over uh the Americas and you already see that right?

So, uh, you have Treasury giving an emergency loan to an ally in Argentina, shoring up President Malay, who was a friend of Washington, and you have Trump setting out all sorts of uh, battleships outside of Venezuela, uh, basically trying to get Maduro out, and President Maduro over there is not a friend of Washington.

So, he he's already doing these things, right? He's just telling you what we kind of have already inferred in the document.

He also spells out some interesting things when it comes to China. First off, he does note that in Latin America, a lot of these countries have, you know, strong business relationships with China.

Does want to encourage these countries to, you know, I'll say think long term and try to make a case that it makes a lot more sense for the United States to be your best business partner in the long term than these other people.

He doesn't actually name China, I don't believe. uh but with regards to China does have something to give to Ankushi and that is reaffirms that uh Taiwan is just going to stay as it is preserve the status quo no clear support of Taiwan independence and of course um no declaration that China Taiwan is a province of China so again just affirming we're going to keep things as it is steady the ship and I think that is you know uh probably makes Akoshi happy

so again just affirming we're going to keep things as it is steady the ship and I think that is you know uh probably makes Akoshi happy

I don't think it's realistic to expect that uh America would just give Taiwan away, at least without getting something a lot of things in return.

Um but I think what was most interesting in this document is Trump's stance towards Europe. In it, he's basically saying that, you know, he thinks that the democratic process in Europe is broken and so that's why you're getting all these bizarre outcomes.

And the example he he's giving is peace uh in Europe whereas um you know the the population in Europe overwhelmingly will like to have peace but then all these elites who are sitting on very thin margins are just kind of pushing the Ukraine war and he he doesn't like it and it actually reminds me of a speech that Vice President Vance gave a few months ago in Munich.

Let's listen to it where the organizers of this very conference have banned lawmakers representing populist parties on both the left and the right from participating in these conversations.

Now again, we don't have to agree with everything or anything that people say. But when people represent when political leaders represent an important constituency, it is incumbent upon us to at least participate in dialogue with them.

Now, to many of us on the other side of the Atlantic, it looks more and more like old entrenched interests hiding behind ugly Soviet era words like misinformation and disinformation who simply don't like the idea that somebody with an alternative viewpoint might express a different opinion or god forbid vote a different way or even worse win an election.

So what he's saying is something that I think from his perspective feels uh kind of like a dja vu. So what he's saying of course is that all these people in Europe they are basically incumbents.

They have the political power. They don't want to give it up and they're you know rigging the system so that they stay in power and it's causing tremendous damage uh to their to to their people to their economies because their policies just don't work.

Now, this is something I think he feels strongly about because he thinks that's what happened in the United States. Now, this is something that's totally human and we see this all all over the world in in all over in any organization, right?

If you're a boomer and say a big Fortune 500 company, you have a lot of benefits, you have a lot of power in making a lot of money, you don't want to give it up. And so, you you kind of use your power to protect your p position.

You see this in United States Congress as well. You have all these people who are, you know, sometimes seen now, but you know, just cling on to their seats, not wanting to let go of their power and just kind of using the machine that they built up the same power.

Not sure if these guys even understand what they're doing, but you know, they they don't want to leave. And that's obviously not in the interest of United States.

And of course, when Trump was running for election, you had tremendous tremendous opposition from established powers.

You have uh for example, you had all these officials from state governors come out and say that Trump was a bad person. We got to get him off the ballot. Uh you had all these lawsuits put out against them that were uh in many cases just totally totally frivolous.

So basically the weaponization of government power, the judicial uh system against Trump and at the end of the day he he did prevail.

And so if you're from the Trump team, you really feel that you know this is something that is a problem. And then you look at Europe. What's happening in Europe?

You see that well you look at in Germany for example you see that one of the most popular political parties in Germany the major opposition party AFD.

Well the government there is thinking about banning them right just ban your political opposition. It doesn't seem democratic right you look at Romania where the candidate who was poised to win was more sympathetic towards Russia.

Well that conction got anoldled right. So uh then you look at maybe France you know looks like uh Le Pen's party was most popular parliament in France and then somehow the establishment works together with other powers to kind of push them out of power.

So you get the sense that a lot of these guys are running a running policies that don't work and war on Ukraine, mass migration, uh shutting down nuclear energy plants when you have a energy crisis is is just not good policy.

But usually you would expect there to be some sort of democratic you know mechanism where uh old management can be swept out to get new management in to steer the country towards a better direction. But that doesn't always happen because old management has powerful political powers.

And it looks like the administration thinks that the reason that that the Europe can't change course is that these these established powers are blocking the the mechanisms preventing it from working.

And that's kind of a big difference between Europe and the US. In in the US, we all know that we have a more dynamic economy, right?

Uh for example, a company can easily fire all its workers. And that dynamism is, you know, it's sad to lose your job, but it also allows businesses to, you know, quickly right size.

It makes the company more competitive and it allows workers to go and um, you know, find skills that more find jobs that more uh suit them more, right? So, it's uh it's more of a competitive, more of a brutal landscape.

And competition, you know, it has costs and minuses. One of the pluses of course is competition breeds more economic growth, more uh I guess productivity.

So that's the same in the US political system as well. So for example, President Trump, he went and he challenged the Bush dynasty during the Republican primary.

Right at that time, the Bush name was very very powerful. You had George Bush, George H.W. Bush. There were two presidents from that family and you had Jeb Bush who wanted to be presidential candidate in 2016 for the Republican party, former governor of Florida.

And you know, this guy is a huge name, nice guy. And you know, just Trump, this guy from reality TV just kind of kind of totally ate his lunch and it was honestly wasn't even close.

And you had basically one set of elites in the Republican party totally vanquished in that side that that part of the party believed in things like you know free trade and so forth and now the Republican party doesn't believe in that at all.

So you had a very fluid, a very dynamic political system where one group of people was able to uh really take over the Republican party and of course take over the nation by defeating another very powerful political dynasty, the Clintons.

And today, America has a very different trajectory today than it did in the past. You have different people in power, much more influential tech sector, for example.

You have, you know, Elon, you have, um, Jensen Hang, all these people hanging out in the White House, a White House policy that's much more pro tech, and you have a White House that's, you know, uh, has very different views on on trade.

So, this is a to very different views on um, energy as well, right? You don't have any more of this green stuff. You have drill baby drill. We have a nuclear renaissance.

So, the US political system is fluid. You have elites fighting it out and different sets of elites taking power and changing direction of the country.

The downside of this is that there's a lot of policy volatility. You have, you know, tariff on, tariff off, maybe the next president, maybe president Accazio Ortez uh takes all the tariffs off. I don't know.

But this makes it difficult for anyone to plan. Uh and you know, it kind of makes things chaotic. But the good part of this is that if the nation is heading towards uh a wrong direction, it can change course, right?

So we were having tremendous tremendous amounts of illegal immigration. That's not happening anymore. And I and I think the public broadly is happy about that.

So again, cost and minuses to this kind of political system in Euroland because uh I guess they prioritize stability.

They can't change course. And if you look at the economic data, it doesn't does seem like they're heading to nowhere, right? Low growth, higher social unrest, and you know, a war that doesn't seem to end.

And so what is the administration proposing? Well, it's kind of spelling it out to you. They are quote unquote cultivating uh some resistance in Europe.

What does that mean? What does cultivating resistance in Europe mean?

Uh, that sounds like regime change to me. That sounds like, you know, color revolution stuff, which is something the United States has been doing for decades across the world, especially in Latin America.

And what the United States does very well, right? You know, you have this government that pops up in some kind of u US sphere of influence and you know, suddenly, you know, we have all this propaganda campaign, bad things happen or, you know, this guy just disappears and so we have in place by a US puppet.

It sounds like the US wants to do that to Europe and I think that's truly revolutionary because on the surface you would say that US and Europe are are allies.

Maybe a few decades ago you can even see them as equal partners but it's very clear today that's not the case.

uh US is going and you know negotiating peace directly with Russia totally ignoring Europe telling them that you guys don't matter and maybe they're telling them today that you know we think you are we want to get rid of you and so what is that I mean that's just kind of mindblowing and mind and really changing how this and I actually think they'll go to succeed because a lot of the European current elite they are losing popular support and you know If you had maybe free elections, maybe they would lose today.

And maybe if you had maybe free elections, maybe they would lose today.

And maybe if you have a huge propaganda campaign from the CIA or something like that, maybe they would definitely lose more. And well, what would replace them?

Someone that thinks more like the US. And what would that be? Ah, that'd be someone who um doesn't like illegal immigration, who is more businessoriented, who would, you know, not so much in green energy, would probably want to emphasize nuclear power, less regulation, more industrialization, and and of course to be more collaborative with Russia.

Maybe we have Russian gas again and so forth. So maybe it's a good thing for for for Euroland in the long run.

And so I don't know how this is going to turn out, but I do think that this is a serious turning point in the Atlantic relationship and really it's going to be so exciting to see how it turns out.

All right, so next week we have the Fed meeting. Everyone knows Fed is going to cut rates kind of signaled it and um let's see uh I'll be back to talk about what uh what my thoughts when that happens.

Outside chance that we could have some maybe some signaling of when the Fed is going to uh restart reserve management purchases as well.