🔮 Pete Hegseth in Trouble
PLUS: Assad hangs on • Shock Hunter Biden pardon • Kash Patel readies the Epstein list • Macro update
Odds for Pete Hegseth to be confirmed as Secretary of Defense dropped to 34% overnight following the publication of a New Yorker article about his behavior in 2013 - 2016 while he led Concerned Veterans for America. The report alleges that:
Hegseth was repeatedly drunk at official events “to the point of needing to be carried out”;
He sexually pursued the organization’s female staffers, whom they divided into two groups—the ‘party girls’ and the ‘not party girls”; and
He ignored reports of sexual assault carried out by his staff
The New Yorker article marks the steepest decline in Hegseth’s confirmation odds to date. Previous declines came with the NYT publication of an article alleging sexual assault by Hegseth in 2017 (November 20) and publication of an email from his mother calling him an abuser of women (November 29).
Assad Hangs On
Syria’s 13-year civil war escalated on Saturday as Islamist rebels took over Syria’s second largest city of Aleppo, including a military airbase. At the same time, social media lit up with reports of a coup underway in Damascus against president Bashar al-Assad.
After Aleppo fell, the market for Assad to remain in power through year-end plunged as low as 64%, but rebounded sharply after Assad returned to Damascus and vowed to fight on. Where things stand now:
Damascus is quiet, and Assad seems firmly in control of the capital.
Hiyat Tahrir ash-Sham, Syria’s most powerful Islamist faction allegedly backed by Turkey, now controls most of Aleppo and captured a significant amount of military equipment.
Russia and Syria have conducted airstrikes on rebel positions in Aleppo, although these do not seem to be impacting control of the city.
The current round of fighting has seen over 417 dead, including 44 civilians, and 14,000 displaced persons, according to the Syrian Observatory for Human Rights.
The US military is conducting airstrikes against Iranian militia groups along the Syrian-Iraqi border.
Backed by Tehran and Moscow, Assad is holding firm in Damascus but increasingly leads a rump state being carved up by neighboring powers and militias. With the fall of Aleppo, the Syrian government now controls about 60% of pre-war Syria.
Kash Patel to FBI?
On Saturday, Donald Trump announced Kash Patel as his pick to lead the FBI. Patel began his career as a public defender in Florida and rose to prominence defending Trump against the Russia investigations and January 6 prosecutions.
Opposition to Patel comes on two main lines, that he is underqualified for the job as he did not rise through the ranks of the FBI and that he is fundamentally antagonistic to the organization he is picked to lead.
But this is a feature not a bug for Trumpworld, who believes that the FBI’s crime-fighting mission has been corrupted by political persecution of Trump; they have also pushed back on the inexperience claims.
What About Wray?
One wrinkle with appointing Patel is that the existing FBI director, Christopher Wray, is seven years into a ten-year term, meaning he would have to be fired or resign to leave a vacancy.
On Sunday, Wray released a statement making it clear that he has no plans to step aside. The market, however, believes that Trump is highly likely to fire Wray within his first 100 days in office (🔮85% odds).
What Will Patel Do?
One of Patel’s signature issues has been calling for release of the Jeffrey Epstein client list, which he says the FBI is burying. Following news of his appointment, the market on whether the list will be released within Trump’s first 100 days spiked to nearly a one-in-three chance.
Patel has also called for more transparency on the JFK assassination, however this market on Polymarket does not seem to have been impacted by the announcement and remains steady at around 40%.
A Pardon for Hunter
On Sunday night the White House announced that Joe Biden had issued a sweeping pardon for his son Hunter, something Biden had repeatedly insisted he had no intentions to do.
There was immediate speculation on X as to whether the pardon was connected to the Kash Patel appointment, however the market chart does not reveal any jumps on the Patel news; it was a total surprise.
What Kind of Economy Will Trump Inherit?
As Bitcoin threatens to break $100k (🔮70% odds before year end), and memecoin charts go to the moon, three events in early December will give us a better sense of what kind of economy Trump will face when he is sworn in on January 20 (🔮94.5% odds for Trump to be inaugurated).
Friday December 6: November Jobs Report
October job growth was surprisingly weak with only 12,000 jobs added, compared to more robust growth in August and September. The three most likely scenarios priced now on Polymarket are:
150-200k jobs added (🔮27%)
200k-250k jobs added (🔮27%)
> 250k jobs added (🔮 26%)
All three options would be fairly strong job growth, although it is notable that the lowest band (150-200k) has been the fastest growing scenario in recent days.
December 11: November CPI
The market for November’s inflation data has been fairly steady, with a roughly 30% chance of exceeding 2.8% year-over-year. All of the most likely scenarios for inflation imply a CPI well above the Fed’s 2% target, and an acceleration over the past three months:
August 2024: 2.5%
September 2024: 2.4%
October 2024: 2.6%
December 18: Fed Meeting
The mentions market for Powell’s December 18 press conference indicates he is expected to overwhelmingly focus on price growth, with a 79% chance he mentions “inflation” 40+ times.
Yet the most likely outcomes are a quarter point cut (🔮68% odds), which would continue the rate cutting cycle meant to fight inflation. Polymarket users are slightly more bullish on the cut scenario than CME traders, who are currently pricing a 65.7% chance for a quarter point cut.
During the campaign, Trump attacked Powell for cutting interest rates to help Democrats, but - unlike the FBI director position - Trump has less of a free hand to remove the Fed Chair, who can only be fired for cause. Polymarket users are only pricing a 9% chance that Trump removes Powell in the first 100 days.
Disclaimer
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