Democrats Outperform, Crypto's Lehman Moment, and Ukraine Liberates Kherson
None of these storylines are close to over.
It turns out most voters don’t care much for election deniers. Many also don’t vote for candidates who want to exclude multiple groups from American democracy. As we have seen from modern Republicans, they may hate government, unless it’s used to inject you with their “morality.”
Republicans should have cleaned up during this Midterm Election cycle. They should have gained some 50 or 60 seats in the House and won a majority in the Senate. As it currently stands, the Democrats clinched the Senate and still have a chance to win a majority in the House. Although current margins favor Republicans, making it likely they will have a small majority, handing Kevin McCarthy the gavel.
Even if Republicans do hang onto a small majority in the House, that outcome is a far cry from what was expected. Political fundamentals always favor the party not in power heading into a Midterm Election cycle. The party in power has to play defense against two years of decisions, while the party not in power can poke holes and place blame.
So how did the Democrats pull this off?
The Republicans beat themselves. They went along with numerous Trump-appointed candidates, the majority of whom lost. Badly.
The Democrats also played the abortion card. I think they could have played it even better, but what they did was largely effective. That’s what happens when conservative justices on the Supreme Court overturn 50 years of precedent (that was reaffirmed multiple times) solely because abortion was not a historical right in their cherry-picked version of history.
Whatever you may think of abortion as a policy matter, you cannot like that outcome for stare decisis and the overall institutional credibility of the court.
The Democrats outperformed. But the Republicans did not have a bad night everywhere. Florida gave us a picture of what the future might look like. We broke that down here, in addition to analyzing how the Democrats were able to outperform. We also analyzed what Republicans need to do with the largest elephant in the room, Donald Trump.
You can also listen to the podcast version here:
Crypto’s Lehman Moment
This past week was probably the wildest ever in crypto markets. FTX exploded in about five days. One of the largest companies in the crypto market literally failed, going from a $32 billion valuation to basically $0, in less than a week.
As with Lehman’s default in 2008, the contagion here is unlikely limited to FTX. I mean, look at the scale we’re talking about here:
Wondering who SBF is? That acronym stands for Sam Bankman-Fried. He was the founder of the now bankrupt FTX and its sister company, Alameda Research.
The story of his downfall is one that will be discussed and studied for years to come. Crypto markets that had already lost about $1 trillion since spring were further destabilized following the news that FTX likely misappropriated customer funds to make risky loans and trades.
The story is still very much unfolding by the day and hour. But we broke down what we can learn from this ordeal based on what we do know. And for what it’s worth I’m still bullish on crypto’s future. I’m not sure what form it will take, but so long as there are large intermediaries (like FTX) in the current crypto market structure, it needs a better regulatory framework more akin to what currently exists in traditional finance.
You can read more thoughts here and/or listen to the following podcast:
And if you’re new to crypto, check out Matt Levine’s recent comprehensive article called The Crypto Story. He’s probably my favorite finance writer, and this story is a must read for anyone interested in the space.
Funny that it was published just days before the chaos ensued.
Liberation of Kherson
It’s crazy that this comes in third. Ukraine is fighting back the Russian invaders, one city at a time.
They recently expelled the Russians from Kherson, a strategically important city on the west bank of the Dnipro river. The Russians were forced to retreat after Ukraine continued to pressure their supply lines across the Dnipro river, in addition to barraging them with western artillery.
The Kyiv Independent has the full story and a great breakdown of Russia’s humiliating defeat. I’ve found it’s one of the best sources for news on the war from a Ukrainian perspective.
For the week ahead…
Expect more analysis and updates on the FTX saga, a likely announcement from Donald Trump on his 2024 plans, and the final outcomes of the Midterm Elections.
On a lighter note, enjoy some ice skating at Bryant Park here in New York City. I guess it’s never too early to celebrate the most magical time of year.
Have a good week.
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