This past month was dominated by domestic and international political issues with volatile headwinds impacting markets. Let's survey the landscape to see what these key stories are. Some of them are well-known but have hidden twists. Others are not well-known at all but will have equal or greater weight as time goes on.
The largest single political issue continues to be the affordability debate. Democrats claim that prices are too high and still going up and that incomes cannot keep up. This leaves Americans in the position of not being able to afford basics like food, gasoline and electricity. Steep price increases in categories like insurance, healthcare, property taxes and tuition are another burden.
In short, Americans can't afford to live a modest lifestyle, let alone aspire to the American Dream. Even older Baby Boomers who might be better off are distressed that their children can't afford to buy new houses or cars.
The Republicans answer that the higher prices were caused by Joe Biden's reckless deficit spending in 2021 through his pandemic relief act and in 2022 with the misnamed Inflation Reduction Act (which was the Green New Scam in disguise). Inflation did peak at 9.1% in June 2022 during Biden's administration. Republicans say that gas prices are coming down (true) and interest rates are coming down (also true).
The problem for Republicans is that voters always blame the party in power for a bad economy even if another party was to blame. Although price increases are slowing down, they are still increases and come on top of the high inflation from 2021-2023. Lower interest rates are more a sign of recession than stimulus. And unemployment just hit 4.6%, up from 3.3% not long ago.
The Democrats are winning this debate even if Democrat policies are to blame for the problem in the first place. Trump is trying to turn the perception around with a campaign- style series of speeches and rallies, but campaign buzz can't defeat the everyday experience of a bad economy. It's too early to forecast the mid-term election results, but the affordability issue does not bode well for Republicans.
Ironically, foreign policy has dominated the political news even in the midst of an affordability crisis and rising unemployment.
In global geopolitics, there are only three countries that really matter - the U.S., Russia and China. All others are secondary or even tertiary powers. This means the world is a three-handed poker game.
Poker players have a saying. If you're in a three-handed poker game and you don't know who the sucker is, you're the sucker. In other words, two players in the game will coordinate to defeat the other before they turn on each other.
Nixon knew this in 1971 when he pivoted to China so that the U.S. and China could destroy the Soviet Union. It worked. The Berlin Wall fell in 1989 and the Soviet Union was dissolved in 1991. Today, the main enemy is China. Therefore, the best policy for the U.S. is to align with Russia to defeat China.
If the U.S. does not do this and allows Russia and China to align against the U.S., then we are the sucker. The U.S. seems to have realized this recently. So, I expect the war in Ukraine will end with a Russian victory. Much closer U.S. relations with Russia will be the result. This sets up some excellent investment opportunities in Russia once the dust settles and the current financial sanctions are removed.
Trump is now moving quickly to start a full-scale war in Venezuela. Trump's War Department has been sinking drug boats heading from Venezuela to the U.S. Major military assets, including a full aircraft carrier battle group, have been advanced to positions near Venezuela. Several oil tankers leaving Venezuela have been seized by the U.S. Coast Guard. On December 16, Trump announced a complete embargo on all sanctioned oil tankers leaving Venezuela.
Removing Maduro. The Nicol?s Maduro regime in Venezuela has become the target of Donald Trump's new regime change policy. Trump has sunk drug boats leaving Venezuela and seized oil tankers with Venezuelan oil headed to countries on the U.S. sanctions list. Trump may not be far from attacking drug labs inside Venezuela. It remains to be seen if this regime change will work better than the failed efforts aimed at Iraq, Iran and Russia.
Bombing raids on land targets in Venezuela are probably just days away. None of this is to criticize Trump. Military efforts are often needed to defend U.S. interests and those of our closest allies. It's simply the case that being a "Peace President" as Trump claims to be is more difficult than it sounds. War and peace are part of the human condition and neither one is ending soon.
Another issue that came to the fore this month is the growing scandal around the use of an autopen to sign Joe Biden's name to critical documents. A lot has been written about Biden's dementia by White House insiders since Biden left office in January 2025. These accounts are efforts to cash in with books by Democrats who themselves covered up the mental decline. Now, they come out to report on the Biden dementia when they were the ones who covered it up in the first place.
These books are not worth the paper they're written on. For one thing, everyday Americans knew that Biden was mentally impaired in 2020. They don't need books in 2025 to tell them what they already know.
Remember in 2020 when Biden yelled at one his supporters at a town hall and called her "a lying dog-faced pony soldier!" What was that? Remember the time Biden tried to recite part of the Declaration of Independence and said, "We hold these truths to be self-evident. All men and women are created, by the, you know, you know the thing!" What a botch. (By the way, the original quote does not mention women. Biden was trying to be politically correct even as he butchered the actual quote).
So, how did Biden run the government if he was mentally incompetent? The answer is he didn't. His staff did. And they signed hundreds of orders, pardons and other documents in Biden's name with an autopen. That's only legal if Biden knew what was being signed, understood it, and gave his specific consent in each case. None of that happened. The staff just went out of control and used the autopen to sign whatever they wanted with little or no oversight by Biden.
Trump could have fought these orders one-by-one, but in true Trump style he has simply declared anything signed by the Biden autopen to be null and void. That's actually straightforward when it comes to executive orders. Any president can undo the executive orders of his predecessors.
The issue becomes more difficult when it comes to pardons, That's an explicit Article II power of the president not subject to review by Congress. But the fact remains that if Biden was unaware of the pardons being signed, then the use of the autopen was illegal, and the pardon is of no effect. The challenge is to prove that's the case for each individual pardon.
Biden staffers have already claimed the Fifth Amendment and refused to testify about the autopen. What's important about declaring the pardons void is not whether Trump will win in the end, but whether he can move forward with prosecutions of gangsters like Anthony Fauci and let Fauci appeal the issue to the Supreme Court. As they say in Washington - the prosecution is the punishment.
Some analysts take the autopen case one step further. They ask about the validity of 237 federal judges, including Supreme Court Justice Ketanji Brown Jackson. Were they legally appointed? Were their appointments signed with an autopen? Did Biden even know what was going on? If not, those judicial appointments may be non-binding, and the judges may be stripped of their standing as judges.
What about the rulings made by those judges while on the bench if their appointments were themselves illegal? You can see the serious ramifications of an out-of-control White House. In the end, the stripping of authority from 237 judges is unlikely to happen. But that possibility suggests that the next time there's a presidential election with an 80-year-old senile candidate, you should vote for the other side.
There have also been recent developments related to the never-ending lawsuits against Trump dating back to 2016. We all know the story of Democrat lawfare waged against Donald Trump. The Democrats were infected with Trump Derangement Syndrome (TDS), which is a contagious mental illness in my view. They found it impossible to think rationally about any Trump policies. It was not a question of rational disagreement or policy differences. It was a simple case of rage against Trump.
Democrats were so fearful of a first Trump administration (let alone the second) that they would stop at nothing to destroy him. These efforts included two impeachments on trumped-up charges, and a banking fraud case for supposedly overestimating the value of Mar-a-Lago, which is actually worth over twenty times what Trump said. That case resulted in a $500 million-plus judgment against Trump.
Then there was the criminal prosecution in Manhattan on a legal theory that even left-wing lawyers said made no sense. Trump wrote "legal fees" in the memo section of a check to his lawyer and somehow that became the basis for 34 felony convictions and a potential 136-year jail sentence. The Biden-weaponized Justice Department also pursued criminal cases against Trump for the January 6, 2021 "insurrection," which was actually an inside job by Nancy Pelosi and the Biden FBI.
In addition, there was the $85 million defamation judgment against Trump for supposed sexual assault of a woman who is a bit of a sex addict and has a cat named Vagina. There were no witnesses to the assault, and the NY State legislature passed a one-time bill to allow the case to go forward years after the statute of limitations had expired. Then there were the two attempted assassinations of Trump including the Butler, Pennsylvania attempt where Trump was shot in the head.
What is less well-known is that one-by-one these cases have been reversed or overruled. The defamation case and the felony convictions are on appeal. The Mar-a-Lago valuation case had the judgement amount radically reduced, even as the judgment itself remains on appeal. The January 6 cases were dismissed, and the left-wing prosecutor Jack Smith may himself face criminal charges for mishandling evidence. Of course, the two impeachments failed to gain a conviction in the Senate.
Now comes another result in Trump's favor. There was a state law RICO case in Georgia brought by DA Fani Willis that accused Trump and 19 co-defendants of interfering with the election results in Georgia in 2020. It turns out that Willis was having an affair with the lawyer she hired to prosecute the case and was using state money to pay for vacations with her lover. The state of Georgia forced her out of the case and then later determined that the case itself should be dismissed.
There's a lot in the judge's opinion that exonerates Trump and supports his view that the case was improper. In the end, the judge said, "it is not illegal to question or challenge election results." Slowly but surely the rule of law is beginning to prevail, and the TDS Democrats are being put back in the box where they belong.
Give Trump enormous credit for draining the swamp and dismantling the Deep State. The Deep State is so deep that it takes time to root out all of the progressive bad actors and to rescind all of the rules and regulations they dumped on the rest of us under Biden and Obama. Still, Trump has made enormous progress in just ten months.
Another example this month is Trump's elimination of Biden's fuel economy standards for automobiles and trucks. This has nothing to do with pollution. That ended decades ago with the elimination of lead from gasoline and other measures.
Everyone wants clean air and water, and we have it, thanks to environmental regulations enacted as far back as the Nixon administration. (Nixon was the one who signed the Environmental Protection Act and created the Environmental Protection Agency to his credit). Instead, these fuel economy standards were designed by Biden to drive internal combustion engines off the road and to replace all cars and trucks in the U.S. with electric vehicles (EVs).
Once you realize that EVs are just glorified golf carts and are completely non-feasible to run a large, developed economy (leave aside the near absence of charging stations), you can see how destructive Biden's plan was. Under Biden's plan, the elites would have EV's (or private jets) and the rest of us would walk or use bicycles.
Now, that's over. Thanks to Trump, we can get back to developing efficient and clean vehicles powered by gasoline, diesel or natural gas in some cases. Trump is dismantling the Biden regime one stupid rule at a time.
But Trump's opponents never quit and this month was no exception. Neo-Marxist NGOs financed by the far left have filed over 200 lawsuits in federal courts to stop almost every initiative President Trump has taken. These lawsuits have involved immigration, vaccines, tariffs, the Green New Scam, sinking drug boats and more. The politically motivated plaintiffs shop around for jurisdictions like Rhode Island or California where the odds of getting a radical judge are much better.
Instead of applying the law, these judges stretch their interpretations (or simply make things up) to achieve the desired left-wing result. The result often plays out in the form of nationwide injunctions, which are themselves illegal. The entire anti-Trump legal circus is nothing less than a full-scale judicial assault on the executive branch.
That's the bad news. The good news is that the district court rulings are being appealed to the circuit courts and in many cases, the Supreme Court. Trump's batting average at the district court level is about .100 (or 10%), but his batting average at the circuit court level is close to .500 and at the Supreme Court level, Trump's success rate is more like .900.
If the progressives are losing landmark cases at the Supreme Court, why bother? Why not just let the Deep State do their thing without giving Trump historic wins that will set the law in stone for the next 100 years?
There are two answers to this. One is that delay itself is a kind of victory. If the left can force Trump to litigate every move he makes, it ties the White House in knots. The second reason is more insidious. The left plans to ignore the Supreme Court and rely on rogue district court judges to get what they want by using ever more tortured readings of the law. The remedy for that is impeachment of judges or even abolishing some courts (which Congress can do), but the Congress is not ready for that yet.
Meanwhile, Trump victories pile up. The latest is a case just argued before the Supreme Court and likely to be decided next June. It would allow the president to fire heads and members of hundreds of so-called independent agencies and commissions set up by Congress to perform executive functions. The court will likely say that violates the separation of powers, and if a commission is performing an executive branch function, then the president can fire members at any time for any reason.
This is perhaps the greatest single threat to the Deep State. And it's likely coming in Trump's favor in a matter of months. This is good news for investors because it will put an end to much ridiculous regulation and open the door for more productive use of capital and higher stock market returns.
Another major narrative of this past month is that MAGA is fracturing. Lots of conservatives are just leaving Congress and putting more seats in play. The Indiana legislature, which is dominated by Republicans, refused to go along with Trump’s redistricting plan. That will cost Republicans two seats they could have added. Marjorie Taylor Greene was an original MAGA leader and now she is being driven into the wilderness. Trump is threatening to primary Republicans who don’t agree with his policies. It’s a bit of a mess.
It’s too soon to call the mid-term elections. I’ll start doing that this summer when we have more information. But it’s not too soon to point to the possibility of a Republican loss of the House of Representatives. That’s definitely in the air, and there’s a lot of evidence to support that conclusion. Republicans are definitely worried as of now.
The implications of Democrat control of the House for the market are huge. Here’s a summary:
1. Democrats will move quickly to impeach Trump (again) and probably Pete Hegseth (war crimes), Kristi Noem (rights of immigrants) and perhaps others. This will tie up the House, prevent much from getting done, and preoccupy markets by creating uncertainty.
2. Democrats will control committees, which means they can hold endless hearings and create phony scandals. They will revive fake Russia scandals and a lot more.
3. Democrats will not be able to undo whatever Trump has accomplished so far (because Republicans will still control the Senate), but they will prevent any further progress on Trump tax cuts and deregulation. That’s negative for markets.
4. The Green New Scam will be brought back to life.
This past month was a mixed bag. Trump had some important legal victories, but the lawsuits just kept coming. Republicans are gaining in the redistricting wars but are losing the affordability war. And finally, there's the specter of a shooting war in Venezuela in a world already preoccupied with Gaza and Ukraine.
We have little doubt that the month ahead will be no less tumultuous than the month that just ended.
The Daily Reckoning