E161: US strikes Houthis, market instability, Q1 rate cuts in doubt, Carta's major mishap, DEI

Following the January 2024 U.S. and allied strikes on Houthi targets in Yemen, the conflict in the Middle East will continue to escalate and ultimately lead to a larger war in which the United States and Israel directly go to war with Iran (no specific end-date given, but implied medium-term geopolitical trajectory).

“So I don't think this is going to have any impact other than to escalate the conflict in the Middle East and put us on a path to war with Iran… I think that's where this is all headed, is a larger war in the Middle East that features the US and Israel going to war with Iran.” View on YouTube

The January 2024 U.S.-led missile strike on Houthi targets in Yemen will fail to deter the Houthis from further attacks on shipping; Houthi disruption of Red Sea trade will continue despite the strike, at least over the ensuing months of 2024.

“So this missile strike last night is not going to deter them. It's not going to stop them. They're very determined, very tough fighters.” View on YouTube

The Yemen/Houthi-related conflict and broader Middle East tensions will produce at most a short-lived rally-around-the-flag effect for President Biden; if the conflict is still active by November 2024, Biden’s political standing going into the election will be weakened because he will appear to have lost control of events.

“I don't think wagging the dog is going to work. I think there'll be a short term rally around the flag effect. But I think that overall, if this conflict is still going on in November, it's going to weaken Biden by making him look like a president who's lost control of events.” View on YouTube

Because of lagging components of inflation such as insurance and other cost items, U.S. interest rates will remain at or near their July 2023 peak (5.25–5.5% Fed funds range) for longer than the futures market was predicting in January 2024 (i.e., cuts will be delayed beyond the then-expected March 2024 start and likely beyond mid-2024).

“So there's a number of these. It's not just car insurance, but there's a lot of things that are going to linger for a while, and they're going to be very hard to work their way through the system very quickly. And as a result, it may be the case that rates are going to need to stay higher for longer.” View on YouTube

For calendar year 2024, the U.S. economy and markets will experience a "bumpy landing" rather than a smooth soft landing: volatility and economic/tightening shocks will undermine the late-2023 stock market rally and prevent a straight-line, low-volatility continuation upward.

“Yeah, my prediction for the year was bumpy landing. I thought soft landing was a little too optimistic, and I also thought that this big stock market rally that we had in November December was too much, too soon.” View on YouTube

In the months following this January 2024 discussion, attacks on U.S. military bases in Iraq and Syria will continue rather than cease.

“Another thing I think we're likely to see in the Middle East is continued attacks on US military bases in Iraq and Syria.” View on YouTube

Conditional: If the Middle East conflict escalates into a wider regional war during 2024 that triggers an oil price shock, then the Federal Reserve will not implement the large interest-rate cuts that the market was pricing in as of late 2023; planned 2024 rate cuts would be delayed or canceled due to renewed inflation.

“If it develops into a wider regional war, then I think you could see an oil shock. And if there's an oil shock, I think you can kiss rate cuts goodbye, because that's going to percolate through the whole economy and have a big impact on inflation.” View on YouTube

Disney will fail to make a sufficient course correction away from politicized content in its franchises (including Star Wars) in the near future following 2023, and this failure will persist rather than being quickly reversed.

“So we'll just have to see. My sense is that they have not made the course correction they need.” View on YouTube

DEI-based hiring and promotion practices will eventually be rolled back ('cleansed') in Hollywood and in symphony orchestras, after a prior rollback occurs first in high-stakes professions (e.g., pilots, certain doctors/surgeons) where only skill-based criteria are accepted.

“What's much easier if you want to dismantle die, which will eventually come and cleanse Hollywood? And the symphony is if you go to the jobs where it's irrefutable... and then eventually it'll come back in Hollywood and the symphony will also get cleansed.” View on YouTube

If there is any aviation incident or serious near-incident involving commercial pilots after the adoption of DEI-oriented hiring standards, there will be lawsuits that specifically focus on whether DEI-based selection overrode pure skill ranking, demanding disclosure of pilot training records and comparative candidate performance, leading to significant legal and public controversy.

“heaven forbid, if there is an incident or a near incident, you're going to see lawsuits that are going to focus on this issue. Show me the training records of the pilots and show me, show me how they fared relative to alternative folks that you either did hire or didn't hire. And you know, why was this selection? It's going to be a mess.” View on YouTube

Harvard University is likely to face legal or public challenges scrutinizing its presidential selection process, with specific focus on whether diversity or identity considerations improperly influenced the choice, analogous to potential DEI-related lawsuits in other domains.

“We might even see that with Harvard and their selection of their president. Like, why was this person selected as president? Right.” View on YouTube