War: Ukraine-Russia
Ukraine’s Eastern Territory Still Being Nibbled Away but Russia’s losses piled higher, hitting 2,000 casualties (dead and wounded) in a day in late November (per the Ukrainian government). YouTube channels such as Covert Cabal that monitor Russia’s tank, personnel carriers and mobile missile launchers via satellite images of their storage depots noted that these locations are largely depleted, even of the oldest models. While there are still many armored vehicles present, Russia’s offensive warfighting capacity is rapidly declining. A ceasefire may give Russia a reprieve but likewise Trump may turn up the heat if Russia breaks it or drags its feet during negotiations. Remember that Trump increased the Ukrainian military training during his previous presidency and sent the Javelin missiles that Ukraine used to such great effect at the beginning of the Russian invasion. Europe too is slowly stepping up its military capacity, so there are too many unknowns at this time how the war will go in 2025.
Ukraine’s Wheat Harvest May Increase to up to 25 million metric tons next year from an expected 22 million tons this year thanks to a larger sowing area, per Reuters, as the sowing area could reach 5 million hectares in 2025 versus 4.6 million in 2024. Ukraine was seventh globally in wheat exports (Russia was fifth). Ukrainian steel makers have increased rolled steel production by +20.6% so far in 2024 and boosted exports by +53.5%, per the local steel producers’ union Ukrmetprom with output at 5.3 million metric tons in January-October versus 4.4 million tons a year earlier, and exports up to 3.7 million tons from 2.4 million. 
Meanwhile, the US sanctioned Gazprombank, the last major Russian financial institution exempt from penalties, closing a loophole that Washington kept open during the course of the war in Ukraine because the lender was key for European energy markets. As the graphic right shows, Russian natural gas exports have been important in supplying Europe. Meanwhile, Gazprom, the Russian natural gas provider, halted deliveries to Austria on November 16th, due to an arbitration award. However, with more US LNG terminals coming on-line, Europe is in a better position to move away as it depends on NG to cover energy shortfalls from wind and solar (such as recently happened in Germany). Other cases are pending, such as with Italy’s Eni. Meanwhile, Russia-China natural gas flows via the “The Power of Siberia” pipeline have reached maximum transport capacity ahead of schedule and will be watched closely as Russian flows move east sooner than many expected.
Macro: Asia
China’s October Trade Data reported that exports in USD terms jumped strongly from +2.4% y/y to +12.7% y/y, as automobile manufacturers rushed to send electric cars to Europe before tariffs hit. Imports decelerated further into an outright decline from +0.3% y/y to -2.3% y/y in October. Weak domestic demand exacerbated by shaky real estate markets was cited as the culprit. Retail sales gained +4.8% y/y versus +3.2% y/y last month as the annual Singles Day and Golden Week holidays supported demand. Meanwhile, industrial production was up +5.3% y/y last month (versus +5.4%), while the unemployment rate inched further down to 5.0% (vs. 5.1%), the lowest reading since June. 
Chinese property data for October remained weak once again, albeit showing some signs of sequential improvement following the recent package of policies to boost the property market. Floor space completions (important for base metals) have been consistently down on the year every month in 2024 so far, falling -19.6% y/y last month, with other metrics such as starts, sales by value and floor space and new homes likewise weak. The central government announced over $2.2 trillion in a variety of debt subsidies that basically swap out local government debts for central ones but the interest savings at about $17 billion per year to the GDP of the world’s second largest country would be just rounding error. In addition, there has been an estimated $2 to $8 trillion in off-balance sheet government debt piling up that would need attention. Compounding the issue was the reversal of foreign investment in China (see right) as companies tired of intellectual property theft, Chinese brands rose to greater prominence domestically and a faltering economy dissuaded investment. It is difficult to imagine a sudden reversal of this trend with Trump back in the White House next year.
Japan’s GDP eked out an annual rate of +0.9% growth in the July-September period as consumer spending held up, marking the second straight quarter of expansion, following +0.5% annualized growth in April-June. Exports grew +1.5% for the quarter. The new government of PM Ishiba approved a $250 billion bill to spend additional funds on technology investment as well as cash handouts and tax breaks to lower-income households. Markets extended the trend in interest rates higher as inflation remained above the central bank’s 2% target.
Macro: US
Powell Delivered The Expected 25 Basis Point Cut at the November meeting, but October inflation actually ticked higher, reaching +2.6% for overall price increases and +3.3% for core inflation (which excludes food and energy). Most economic indicators show growth though unemployment ticked up in November to 4.2% despite payrolls growing by +227,000, more than the estimate of +202,000 and October’s gain was revised
upwards by +26,000. Hourly earnings again increased m/m healthily by +0.4% and the average duration of unemployment held at 22.9 weeks, the longest stretch in two-and-a-half years. Retail sales grew more than expected with an upward revision for September as did durable goods. However, many of these metrics are growing at a slowing rate, pushing market bets for another rate cut at the Fed’s December 17-18th meeting. The busiest maritime trade complex in the US continued to move near-record levels of imports last month as businesses brought goods in ahead of potential tariff increases and sought to avoid labor-related disruptions at alternate ports. “The Port of Los Angeles handled a robust 905,000 container units in October,” Executive Director Gene Seroka told reporters. “That’s a 25% gain over last year and is the first time the port handled more than 900,000 containers for four months in a row.”
On the Worrying Side, the delinquency rate of office mortgages that have been securitized into commercial mortgage-backed securities (CMBS) spiked by a full percentage point in November for the second month in a row, to 10.4%, now just a hair below the worst months during the Financial Crisis meltdown when
office CMBS delinquency rates peaked at 10.7%, according to data by Trepp. Also, the share of US credit card debt that is delinquent 90+ days jumped to 11.1% in Q3 2024, the highest level since 2011. This is the 5th consecutive quarter of increases, the longest streak since the 2008 Financial Crisis. This share exceeded the 2020 peak and has been rising at a pace only seen during recessions. At the same time, credit card debt hit $1.17 trillion, a new record. This means a whopping ~$130 billion of credit card debt is on the verge of a default, with younger borrowers (18-39) at much higher risk than older ones. Finally, automobile loan 90+ days delinquent also is trending higher, approaching its 2010 highs of roughly 6%.
We Generally Avoid Talking about the stock market but with Warren Buffett whittling down stocks as market capitalization reaches 2x GDP (aka “The Buffett Rule”) and the left graphic noting that stock prices are at very high P/Es, earnings growth has lofty expectations and profit margins are at historic highs, which combined means that any little wavering could cascade lower in short order. $2 trillion in deficit spending as seen under Biden may have propelled equities higher but it is uncertain whether Trump will continue the massive deficit tradition or will his DOGE team be able to rein in spending. We shall see.
Macro: Europe
Eurozone Inflation Rose to +2.3% in November, defying rate cuts for the ECB, which is expected to still cut at their December 12th meeting. Core inflation remained at +2.7%. Two main crises are unfolding in Europe: 
1) the pending industrial strikes and layoffs and 2) budget deficit battles in France that upended Macron’s government. Regarding the first, Volkswagen’s workers went on a one-day strike to protest plant closings and layoffs; further negotiations are set to begin for December 9th. Bosch announced 5,500 job cuts and Thyssenkrupp announced plans to cut its steel division’s headcount by 40% or 11,000 positions (half by actual reduction and half by asset sales to other firms) as it cuts steel production by 25%. The declining auto market, outdated technology and higher energy costs were all cited. Sweden’s Northvolt battery start-up went bankrupt, potentially ending Europe’s attempts to compete with the US and China in that technology. With $30 million in cash and $5.8 billion in debt, the battery firm has consumed $15 billion in equity and debt capital as it has so far failed to increase production. Perhaps the graph right sums up Germany’s (and Europe’s) problem as its industrial base evaporates. On the second, events are still in play but Marine Le Pen’s party and the far left Nouveau Front Populaire joined forces to vote out Macron’s government over a budget calling for €60 billion in tax increases and spending cuts to reduce the budget deficit from over 6% to almost 5%… seems small but part of the motivation is revenge by Le Pen for being blocked by the other parties from assuming the presidential title at the last election, despite having the largest share of the popular vote. The earliest parliamentary elections can be held is in the summer of 2025, so while France will undoubtedly muddle through in the short term, the lack of direction and unwillingness to reform will hamstrung its capabilities.
All the best in your investing!
David Burkart, CFA
Coloma Capital Futures®, LLC
www.colomacapllc.com
Special contributor to aiSource