Political Items
Rahm, Texas, Trump and Private Credit.
1. Rahm.
Here’s a story you’ll read more than 517 times between now and January, 2028. It’s about Rahm Emanuel’s nascent campaign for the Democratic presidential nomination. The story describes Mr. Emanuel’s effort(s) to push the party to the “center” or the “center left”. The question it asks is: Can that “positioning” work in party primaries and caucuses supposedly dominated by “activists” and “progressives”?
The talking heads aren’t sure! “Maybe, but probably not” seems to be the general consensus.
Here’s what recent history tells us:
In November of 2019, after nearly three years of the Trump presidency, the only question that mattered was posed by the Gallup Organization: Who can defeat Trump? I wrote about this at the time:
Democratic primary voters and caucus attendees are, as Gallup put it, “thinking strategically about (their) 2020 nominee.” Here’s what the Gallup data show: “Six in 10 Democrats and Democratic-leaning independents would prefer to see the party nominate the candidate with the best chance of beating President Donald Trump, even if that person does not share their views on key issues. By contrast, 36% say they would rather have the reverse: a candidate aligned with them on almost all the issues they care about, even if that person is not the most electable.” (Source: news.gallup.com)
How strong was this desire for a candidate with the best chance of beating President Donald Trump in the 2020 general election. I wrote about this at the time as well:
In the Iowa caucuses, former Vice President Joe Biden got 15% of the “first vote.” In New Hampshire eight days later, he got 8.4% of the primary vote. In the Nevada caucuses, 11 days after that, he got 20% of the “first alignment votes.” Last night in South Carolina. Mr. Biden got 48.4% of the vote, winning every county and beating the party’s putative front-runner, Sen. Bernie Sanders, by a margin of nearly two-and-a-half to one.
Shortly thereafter, Biden swept the “Super Tuesday” primaries and caucuses and — presto - won the Democratic presidential nomination. He didn’t win because Democrats remembered how much they loved Joe Biden. They didn’t. He won because Democrats thought he had the best chance of beating President Trump.
After three years of Trump 2.0, and (presumably) a Republican nominee who embraces the MAGA worldview, I suspect eight in ten Democrats and Democratic-leaning independents will nominate the candidate with the best chance of winning the general election.
So, can Emanuel’s “positioning” be successful in 2028?
Yes, it can. It may well be the winning strategy.
2. Texas primary vote:
Here’s the political statistic of the week:
The total number of votes cast in the GOP U.S. Senate primary was 2.166 million (to date).
The total number of votes cast in the Democratic U.S. Senate primary was 2.311 million (to date).
Not all the votes have been counted, so the vote totals will rise a bit.
But, if you had bet on the Democratic primary vote exceeding the GOP primary vote by 145,000 votes in Texas, you would have made a lot of money. Virtually everyone was on the other side of that bet. (Source: dallasnews.com)
3. It’s sort of an article of faith in the “mainstream” news media that President Trump’s war in Iran will end badly and do him grievous political harm. You don’t have to read between the lines of the coverage to get the gist.
But it’s possible that the Iran war will, by month’s end, be viewed as a success; brilliantly executed and quickly accomplished. Iran’s nuclear program: re-obliterated. Its ballistic missiles: seriously degraded at least and destroyed at best. Its regime: in shambles. Israel there to finish the job.
That’s not a far-fetched scenario. And it could be followed, post haste, by “regime change” or “regime changed” in Cuba. That could/may be accomplished without firing a shot.
Total up successful outcomes in Venezuela, Iran and Cuba within, say, six months, and Mr. Trump’s standing in “the court of public opinion” will, in all likelihood, improve. It will certainly dampen concerns about his “mental sharpness” and “erratic behavior”.
At the moment, according to a recent Washington Post-ABC News-IPSOS poll, “the percentage (of Americans) saying he lacks the mental sharpness to serve effectively as president has increased steadily over the past three years and now stands at 56 percent.” According to a more recent Reuters/IPSOS poll, “61% of respondents in the poll said they would describe Trump as having "become erratic with age." Those perceptions, if they persist and harden, are lethal threats to his presidency. Just ask Joe Biden.
If, on the other hand, those perceptions abate (“he’s crazy like a fox!), and gas prices retreat, and the Big Beautiful Bill boosts economic activity, and the misery index eases and the electorate’s gloomy mood begins to lift, Republicans will be much better positioned to hold their majority in the U.S. Senate. Yes, the GOP will likely lose the House. But holding one chamber of Congress is exponentially better than holding none.
The “mainstream” news media is rooting for a Blue tsunami. It may not be forthcoming. In fact, the 2026 midterms may be a replica of the 2022 mid-terms. At the time, many (including the Great Swami) forecast a Red wave. In the event, Team Blue held the Senate and lost the House.
4. On the other hand, things could go badly in Iran and a “bank run” of sorts could occur in the private credit markets. From Eurointelligence:
The expansion of private credit is truly alarming. According to Moody’s the volume of private credit under management has gone up from approximately half a trillion US dollar in 2015, to approximately $1.7 trillion in 2024. For this year, the projection is $2.2 trillion, and for 2030, it is close to $4 trillion.
We have a separate story on the EU now desperately trying to reopen some of the clogged Russian gas supplies. The refusal by France in December to accept burden-sharing for the proposed, and now defunct, Russian asset sequestration scheme was a telltale sign of fiscal constraints imposing themselves on geopolitical freedom of maneuver. Despite a high debt-to-GDP ratio, the US faces fewer constraints at the moment, but its ability to borrow on global markets depends critically on the future of the US dollar as the leading global currency and the credibility of US fiscal policy.
If the war in Iran ends the way Donald Trump says it will, the risk of this war turning into a global financial crisis would be much diminished. But if this is another American political miscalculation about the Middle East, geopolitics and finance might merge into a maelstrom. (Source: eurointelligence.com)
5. How concerned should we be about private credit liquidity?
Amid the worst start to the year for their stocks in more than a decade, leaders of Wall Street’s biggest private markets firms had a surprising message: investors have reason to be concerned.
From Blue Owl Capital Inc. to Blackstone Inc., private credit funds across the industry are facing a wave of withdrawals and analysts are warning default rates could soar if AI disrupts corporate America as much as some experts expect. And in private equity, managers are struggling to offload assets and return cash to investors, forcing them to turn to expensive forms of debt to extract returns from businesses they’ve acquired.
“People made choices: If you wanted a higher dividend, you could take more risk,” Apollo Global Management Inc. Chief Executive Officer Marc Rowan said on stage at the Bloomberg Invest conference. “That felt really good on the way up. That’s not going to feel so good on the way down.”
Rowan was among a chorus of executives warning of the additional troubles to come for the industry at the conference on Tuesday. Soros Fund Management Chief Investment Officer Dawn Fitzpatrick said investors in both private credit and private equity are in for “a painful 18 to 24 months.” (Source: bloomberg.com)