“In the end, we all are thesum total of our actions” – Madame Chiang Kai-Shek
“It’syour road and yours alone”.
“Othersmay walk it with you,but no one can walk it for you”
“Whenyou want to help people, you tell them the truth. When you want to helpyourself, you tell them what they want to hear” – Thomas Sowell
Subject: Geopolitical Commentary/Ross Rant July 8th
-Trump’s c 5 months as US President has been intensive and marked by record multipleexecutive orders issued (143) and foreign policy decisionsthat have changed/challengedthe international landscape both contentious and transformative with hisAmerican First doctrine. This has led to Trump’s successful Middle Eastinitiative/visit, theUS/Isreal destruction(apparently) of Iran’s nuclear program, however, mixed on Ukraine; albeit perhaps a significantannouncement by Trump of further sanctions on Russia for Putin’s intransigence and US military supplies resumed last week
-Trump has decided to start a trade war, andwho does he choose to attack? The World! Trump has stated ‘that the US needed to go to (trade) war with nations not playingfair!”. The topoffender is China, which started the global trade war around 2006 and has ramped it up since Xi took office. Along with some other countries, Beijing has engaged in systemicmercantilist practices’! Some truth to that statement!
-US Tariffs are colliding with an economy that is, by anyhistorical or international standard, extraordinary! A worse slowdown does not necessarily mean a recession(US has 2-3% a year since 2022) The additional stimulation of Mr Trump’s “Big, Beautiful Bill” is also front-loaded and will provide a boost this year and next, which may obscure the impact of tariffs (even if it also creates an inflationarymess for the Fed). The US Treasury Dept advised that YTD inflows from Trump’s tariffs were US$113b; resultant in a US surplus in June 25
-Not a triumph for MrTrump—but not a disaster either!
-The quoteof the month has to be NATO’s Secretary's ‘Daddy has to sometimes use strong language’; President Trump appeareddelighted! The NATO Secretary obviously knows how to handle the ‘Donald’; our PM ought to take note!
-The Israel-Iran ceasefire is a big political achievement for President Trump, however, perhaps a moresignificant win, in economic terms, is his success in getting NATO allies toincrease their defence spending!
-There’sample room to question the negotiating tactics Trump used, but they wereeffective.
-the worldfinancial order may end up with a tri-polar currency world vis USD, Euro and an Asian currency (last decade USD reserves declined c 80% vis 58%) given excessive use by US of sanctions! WallStreet/investors thrive onthe rule of law and globalisation, both things whichTrump appears to spurn
-Zohran Mamdani, a leftist, socialist, populist, deliveredwhat many are calling the greatest political victory in New York City’s history securing the Democratic nomination in the recentmayoral primary running on aboldly progressive platform, including free public transit, city-run grocery stores, and aggressive housing reforms!!
The Democrats have failed to uniformly develop an effective response to Trump!
Mamdani is the result of the indoctrination ofstudents at universities and especially the elite ones.He won with the backing of young people who were motivated to go vote by socialmedia and promises of no rent increases, free transportation, and governmentrun groceries so cheap food. They also went for his anti-Semitism they learnedin universities. He will not win the mayoral race as the number of youngpeople voting for him will be far outnumbered by the grownups, and the Jews,older voters who did not come out in that heat, and the people whoactually made a life by working hard. He is the face of university educations today,and the base of the party- radical left.
-Albanese’(c33% of all Australian exports are to China!) the handsome Boy’s current6 day visit may be subject to the overhang of Trump generally (whom will be watching), US review of AUKUS, China’s resultant circumnavigation of Australia by Chinese War Ships etc the the geopolitical balance between US as Australia's critical geopolitical/military and China is Australia’s leading export market; PM Albanese willneed to be cautious with his narrative!!
- Some American’s see that the Trump administration’s assault America's rule of law, on free press, on toleration for social differences, on the findings of science, on education, and even on truth, the USA’s ‘culture of the Enlightenment’ is atrisk!’
-Trump’s America is changing the dynamics as to how the Trump/Vance US relates to the World! Therefore, Australia should scrap the UKUS Pillar 1, other than the docking facilities, given the Pentagon Review currently being undertaken! It is a terrible transaction with us Australians agreeing to invest US$3b each in the US and UK respective shipbuilding industries without any guarantees of delivery of nuclear powered submarines and spending the $368b on long range missiles, drone technology etc
- Ross’ Rant July 8 he states that Trump’s BBB is notgood and needs more work done by Congress, however, he also makes the statement that ‘Everything ingeopolitics is now very different and Trump has put the US as the real leaderagain’!!
Ross Rant July 8
Weall agree the Big Bill is not good and there needs to be a lot more done byCongress to attack the deficit. What keeps being ignored is that there are twomore reconciliation bills set to be drafted in the next few months according toJohnson. Nobody has any idea what will be in these bills, nor if they willdirectly attack spending. We all also need to recognize Congress has 535 individuals whose maininterest, especially in the House, is the next election. As a result, they have very narrow focus and what is good for the nation is often not perceived by members as good for their reelection, so they demand bad ideas get taken regardless of if they make good sense-take the raising of SALT to $40,000 as an example. My point is Congressis a conglomeration of rather dumb people who think primarily of themselves andnot what is best. So, the Bill is not what we would have wanted nor all that Trump wanted, but is a pasted together set of rules and laws that were stitched together to get it passed.
Havingsaid all that, there are some good things in the Bill that should materiallyhelp the economy grow from here, and other parts that do save material amountsof spending. The biggest thing is the accelerated depreciation sections whichallow corporations to write off capital investments including the factorybuilding as a tax-deductible expense in year one.
Thereare a lot of capital projects that have been on hold all year due to all theuncertainties around will this Bill get passed, and tariffs, as well as all thegeopolitical issues. We now know the Bill passed, and the geopolitical issuesare much more under control. Tariffs have proven not to be the massive issuethey were thought to have been in April. So far, they have not caused muchincrease in inflation, and big retailers have found ways to mitigate theimpact. Now we know more trade deals will get put into place by August 1,and the whole issue of uncertainty and economic damage from tariffs will havebeen mitigated.
SCOTUShas ruled for Trump to allow him much more leeway to carry out his policyagenda, and it has stopped much of the judge shopping and lawfare to getrestraining orders nationally. This will free up Trump to carry out much moreof DOGE reforms and to make many more cuts to spending. The saving fromMedicaid are not nearly as much as is needed, but they made a good start. No,millions of deserving people are not going to lose their healthcare. Mainlyable-bodied people living on the dole will need to work to get coverage. A verygood and needed change which should have gone much further. In addition,the major reduction in regulations will not just cut costs for corporations bya lot, but it will also move many projects ahead much more expeditiously whichcuts costs and helps growth. Lastly, AI is now making inroads very quickly andthis is a major boost to productivity in many places. Productivity is key tokeeping inflation down.
Mypoint of all of this is, the economywill now move ahead better as the list of uncertainties is much reduced, and ascapital projects now begin to move forward. Inflation may rise a little in the next 60 days as the forward buying inventory runs out and as some new tariffs kick in, but overall, the impact on inflation will not be great. The economy is slowing, jobs will be less plentiful for a short time, and inflation will likely tick up a little, but not much. By Q4 the economy should be moving ahead at a 2.5%-3.0% growth rate. This will substantially mitigate the deficit that so many are concerned about, and about which the CBO is wrong again. I believe Kevin Hassett’s models are more correct. The Fed is likely to wait until September to cut, and the ten-year will likely bounce around 4.2%-4.5% for the rest of the year. This means mortgage rates stay around 6.5 -6.75%. However, investment grade corporate bond spreads will remain very tight as duration and economic risks are seen to mitigate, and as inflation does not pop up much. It will take until October for all of this to settle out.
Anew report by Axios which interviewed numerous Dem Congressmen was veryrevealing and scary. They say they are being hounded by their youngconstituents to be far more radical and to storm the White House andresort to violence if needed. One even reported being told they need topossibly get shot in order to get rid of Trump. Someone told me of a youngperson at Goldman who voted for Mamdani so that tells you how indoctrinatedthey are. They got this mindset from protesting on campus. This is why it is sonecessary for Trump to come down hard on Harvard and Penn and Columbia toreverse this. The professors are the children of the sixties and seventiesantiwar protestors, and they never had a real job. They were in many casesraised as helicopter kids and never had to sacrifice to earn a living like somany of us had to do. They taught the recent generations they are entitled, andthey show their ideology as the only acceptable way to think. There are almost no conservative professors at major universities anymore, so it is group think, DEI hiring of professors and no tolerance for any opposing views. We should expect much more violence and threats to ICE and to administration rules and laws and institutions. Just look at what happens with select district court judges who get selected by plaintiffs to rule against Trump policies. It is the same ideology.
Atennis friend is a professor at a technical college in Brooklyn. His studentsare low income and 25% foreign. He teaches math. The dropout rate is high, andgraduation rate is very low. He said many of the kids are just not willing toput in the time and effort to learn, and it has gotten much worse in the pastseveral years. The foreign kids on the other hand do try hard. Some kids whodrop out come back in a later time and then they work hard. This is indicativeof what has happened to even low-income kids who were like we were at that age,but we knew if we did not work hard, we did not eat. There were nogovernment programs to take care of us if we were too lazy. All of the war onpoverty programs may have been one of the worst things that ever happened. Theytook away the drive to fend for oneself. My biggest fear when I was young wasbeing homeless and unemployed, so I did whatever was required to get ahead andbe successful.
Itis now clear the bombing of Fordow was a major success and was the inflectionpoint for geopolitics. It is very likely the Iranians left that 900 pounds ofenriched uranium at Fordow thinking it would be safer there than elsewhere.They must have realized Israel had Mossad agents everywhere and so they wouldnot be able to move and hide it that much material and centrifuges. Once allthe scientists were killed, they had to know Israel was deeply inside the nukeprogram and knew everything. They never understood the power the US bombs wouldbring and the precision of the bombs to be able to go right down the air shaftswhich Iran thought they could cover with concrete. When the US sent the B2bombers back to the US from Diego Garcia, I presume that was to fool theIranians that they were not going to be used to attack. It is simplyinconceivable Israel did not know exactly where the enriched uranium was. Theyknew everything else in detail and the destroying the enriched uranium was thewhole point of attacking Iran. 12, 30,000lb specially designed bombs hit one after the other down those air shafts, so even if there were baffles to prevent over pressure, those would have been blown away and the bombs would have likely had a final clean shot to the bottom. The effect was similar to a small nuke. The overpressure would have created so much vibration and movement that the very delicate centrifuges would have all been destroyed.
Irannow has a choice- continue to hold out or actually try to make a deal that isacceptable to Trump and Israel. Lebanon has now agreed to dismantle Hezbollah and to disarm them, and try to have an Abraham accord with Isreal.is now in negotiation with Israel to do the same. Hamas is nearly wiped out and is being dismantled. The remaining hostages will get freed in the next several months and then remaining Hamas fighters will need to be sent to some other place. The Houthis are now on their own and just an annoyance. The Red Sea will be reopened. Everything in geopolitics is now very different and Trump has put the US as the real leader again. They all now know he will use fearsome weapons to attack if needed. The era of Obama/Biden weakness and capitulation is ended.
Isold my oil over a week ago and expect it will stay mostly in the $61-$66 rangefor much of the year. It is unlikely Trump will need to shut down Iran oilwhich would hurt China as well and Trump wants to try to do a bigger deal withChina. Russian oil might get shut off, but the OPEC group and the US canmake up for that. I still hold gold; over 15% in short term Ts; and uranium, and I am up over 12% for the YTD, so I expect the market to end the year up over 10%.
Therewill be more trade deals within a week and so the market will likely rally whenseveral more get announced. The drop Monday based on the Japan and S Korea newtariffs is just a negotiation position which will go away.
By Q4 a lot will be in a much better place and the stock market will bein a better mood. The dollar will be higher as the US economy moves up inQ4.
JOEL ROSS
PRINCIPAL
CITADEL REALTY ADVISORS
http://www.citadelrealty.comMr.Ross began his career in Wall St as an investment banker in 1965, where hehandled public offerings, mergers & acquisitions, leveraged buyouts, andother corporate advisory matters for a variety of clients. During the seventieshe was CEO of North American operations for a UK based conglomerate where heacquired and oversaw six companies. He also sat on the parent company board. In1981, he began his own firm handling leveraged buyouts and investment banking,as well as financing real estate syndications. In 1984 Mr. Ross began providinginvestment banking services and arranging financing for real estatetransactions with his own firm, Ross Properties, Inc.
The Period of Enlightenment teaches that science and scientists, not religion or politicians, should decide scientific questions, that democratic elections, fair and honest, should decide our leaders, that toleration, not intolerance, should determine how we treat fellow human beings, that education is what raises us from superstition and bigotry to a better life, that impartial justice rests on the rule of law and due process, that freedom and progress go hand in hand, and, above all, that truth is society’s highest achievement
