Well, 2026 is proving to be an interesting year! This quick takes will be focused on Iran and wider macro viewpoints.
Who is winning the war?
This is proving to be a very hard subject to answer but I will try. Whilst calling the war is obviously very hard I have been searching for credible observers who I can lean on to give me a clue. The best author to date Stephen Bryen who latest summary of the war can be found here and aligns with my own basecase (so far).
“Overall air defense systems and attacks on Iranian assets are paying off. Systems that are fully integrated are the future of effective air defense systems. Russian, Chinese and Iranian air defenses, on the other hand, mostly did not survive attacks from the US and Israel, apparently using stand off weapons to knock them out. From a broader strategic perspective this indicates that western systems (mainly US and Israel, plus some joint systems like NASAMS) are considerably better than their Russian and Chinese counterparts.
The major US and NATO concern is there are not enough interceptor missiles for a sustained conflict, meaning that (a) production of interceptor missiles must be stepped up and (b) that the best defense is an effective offense, that is, the best solution is to destroy the enemy assets on the ground before they can be used.
One can expect that most of Iran’s missile forces will be effectively neutralized in the next week, opening Iran up to systematic destruction of its military installations and equipment, strategic and tactical communications, and key regime support units (especially IRGC and police units). Iran’s naval assets also are being liquidated and naval bases, including Bandar Abbas and Chahbahar, severely damaged. This means that Iran’s ability to shut down the Straits of Hormuz and Gulf transit of oil is, at best, only a short term threat.”
I recommend you sign up for his free blog.
I also recommend this macro blog post on our wider global crisis, its a really good read. The author rarely posts but it is always fascinating reading. You can read it here.
On that note John Greers latest post is also a cracker about the end of the corporate-bureaucratic age which you can find here.
Happy New Year! I hope you all had a good Christmas and New Year break with your loved ones.
Well, in the end, whilst I was a bit cautious in my blogging my gut call that Trump would win the election was proven correct with Trump winning 306 EC votes, something I was privately forecasting to key friends a few weeks before Election Day but didn’t quite have the conviction to forecast on this blog. Lesson learnt is to be a bit more confident in my predictions but the key takeaway is I predicted Trump would likely win and also likely win the popular vote (something very few were predicting prior to the election, including the betting markets).
“BeardTree, granted. The question is purely how long they can keep going before hard physical limits come into play. What’s happened so far is that increasingly energy-poor grades of liquid fuels have been brought into the mix, so that notional production stays high but the net energy (energy yield minus energy cost of production) drops steadily. As long as they can keep playing that game, we can expect slow erosion of lifestyles rather than sudden discontinuities (from that cause, at least).”
Those are likely to include serious economic and political crises, including market crashes and a globalised banking crisis for the history books. If major economies have tipped or are tipping into economic contraction markets will at some stage price that into bond, equity and other asset markets. That will cause havoc for banks that lend credit and hold government and corporate bonds on their books (among many other assets).
My base case remains that this crisis will hit, certainly the United States, around 2029 but its possible it starts to impact other countries (hint, Germany and other stagnating European countries) earlier in the decade.
Either way, my personal message remains the same, Get out of debt, be sensible in spending, develop skills and alternative income streams, enjoy life and the opportunities that currently exist in our industrialised civilisation (like internet shopping, relatively cheap global travel etc).
From a geopolitical perspective, I expect at some point in 2025 some kind of deal between Ukraine, Russia and the West that ends the war. I’m sure both sides will declare victory but if the Russians carry on their military progress it will be a de facto win for the Russians.
Syria, despite the best hopes of some in the West, is likely to descend into anarchy and sectarian war as the new Islamist government shows its true colours.
Iran, having lost its external empire of proxies and terrorists in 2024, looks very vulnerable to an internal revolution. I don’t know if it will but I wouldn’t be shocked if some kind of crisis – maybe severe water shortages or the grid going down – triggers protests that lead to the overthrow of the Mullahs.
I don’t think we will see any clash in East Asia – at least in 2025 – over Taiwan. The election of President Trump provides the opportunity for a Grand Bargain between the United States and China. Whether a war or near-war happens later on this decade remains to be seen but Trump is less likely to trigger a war over Taiwan than any other US political leader.
Europe will continue to economically stagnate, hobbled by expensive energy, unsustainable welfare systems and a political-regulatory system that crushes the private sector. I don’t see any elections within Europe that really changes that dynamic for the foreseeable future. My sense is 2029/2030 is when the revolutionary tides comes for the failing European political class and we see populist and insurgents come to power in western Europe. A good case on why Europe will fall is made by this author here.
What happens in America, specifically whether Musk and his allies can really transform the US federal government into a leaner and more productive apparatus will be fascinating to watch. DOGE has the potential to transform the West’s politics and is already exerting pressure on a failing Europe to start de-regulating. It won’t happen of course, at least for a few years, but one can see the winds of change howling across the Atlantic.
Woke politics has peaked and is now on the decline. Once the higher education system – which is slowly going bankrupt anyway – starts to crumble the ideological centre of wokeness will go with it. That’s a good thing and will restore sanity to our politics.
A few analysts I follow are predicting that Artificial Intelligence (AI) will save us in the 2030s and beyond. Supposedly AI will help unleash a new era of cheap energy powered by fusion and SMR’s (small modular reactors), our economies will become vastly more productive and so on. I’m not saying that AI doesn’t have potential and won’t make major advances in certain areas (like biotech, financial services and defence) but I can’t help but feel sceptical on a number of grounds – the energy cost of the data centres – the issues around hallucinations and the usual hype cycle we see in AI going back to the 20th century. So for me, whilst the jury is out, I’m on the sceptical side that AI will, at best give us a few more years, maybe, but it doesn’t fundamentally change the LTG BAU model I’ve been tracking since the early 2000s.
Its nearly that time of the four year presidential cycle again! The polls are close, very close in some of the swing states and tensions are high as America gears up to choose their next president next week.
So where are we on the state of play? Early voting has overall been positive for Republicans, and in particular in Nevada where its looking increasingly likely that Trump will win that state. The so-called Sunbelt states in general are looking promising for the Republicans, including Arizona, Georgia and North Carolina.
Where things are looking far more difficult to predict is the so-called Rust Belt states; Wisconsin (WI), Michigan (MI) and Pennsylvania (PA). In the public polls, Trump has a narrow lead in PA but its effectively a tie in the other two states. I screen my polling to those pollsters who had the best success in 2020 and the overall map they are showing is the following:
As you can see, the overall picture seems to be a likely Trump win but PA is the key state. There are tentative signs that after sliding slowly over the last week or so, the Harris campaign has stabilised and could prevail in at least WI and MI.
One thing is for certain, WI and MI will be extremely close, with PA only a bit closer to the Trump side of things.
My own view is that either side can win this election but I would be surprised but not shocked if Harris pulls of a victory. However, my base case – with around 60% confidence – is Trump will win with 287 plus EC votes and quite possibly a win in the popular vote.
Historically the Rust Belt states vote together so history would suggest Trump should win all three states taking his EC lead to 312. It is simply too hard to say whether this happens this time or not though.
There is also the risk, certainly backed by the recent polling in places like New Hampshire or Virginia, that the Republicans might be able to flip one or more states, on a particularly good night, on top of the Rust Belt. We simply don’t know.
“With the crisis in the South China Sea now more or less permanent, the lack of mission-capable ships is the main reason why last December the Navy dedicated a remarkably small strike group to Operation Prosperity Guardian in the Red Sea, consisting of one aircraft carrier and three escorting destroyers. The British provided one destroyer, while Denmark and Greece promised a frigate each. The Netherlands, Norway, and Australia are together sending two-dozen military personnel in all, but no vessels. Singapore’s navy is providing a center “to support information sharing and engagement outreach to the commercial shipping community.”
This amounts to an utter debacle, effectively the U.S. has zero contribution from all but Britain. Australia’s refusal to send ships is a particularly unpleasant shock to the administration. Some nominal members of the operation have even refused to announce their participation in public for fear of being linked to Israel and suffering military or terrorist reprisals.
U.S. military bases in the region—notably in Bahrain, right across the Gulf from Iran—appear potentially more vulnerable than ever before.
Coupled with the looming defeat of the Armed Forces of Ukraine, likely followed by a major Russian offensive come summer, the global mix is becoming volatile in the extreme.”
“America is a naval empire. It, like the old British empire, rests on being able to keep the shipping lines open and on using naval power (and air power) to hurt nations while those nations can’t fight back. In the 19th century the Brits would park ironclads off the coast and just pound cities, and there was nothing those cities could do in return.
This is, then, one of the key moments in the end of Western hegemony. The point at which we no longer have deterrence; at which we can no longer “big foot” other nations.
The end of Western dominance is close, very close. I can taste it, like a hint of salt on a sea breeze. The Chinese are only behind in a few technological areas. Once other nations can get everything they need from China/Russia and other lesser nations they will be free to throw off the Western order, because the new and improved missiles make “stand off and bomb” far less effective than it used to be.”
“Civilians must prepare for all-out war with Russia in the next 20 years, a top Nato military official has warned.
While armed forces are primed for the outbreak of war, private citizens need to be ready for a conflict that would require wholesale change in their lives, Adml Rob Bauer said on Thursday.”
Growing talk about bringing back national service and a return to a war economy across Europe now. The war drums are starting to beat louder and louder.
forecastingintelligence 