** “What we anticipate seldom occurs; what we least expected generally happens.” Benjamin Disraeli**
I’m an old guy. OK, not old: seasoned. Experienced. Not my first rodeo. I stayed up late watching the Carter/Ford returns when I was 15, and I always read the NYT business section (after the sports section, obviously; remember when The Times had an actual sports section?). Still, I can count on two hands the election seasons as potentially consequential as this one. Israel votes next Tuesday, and the U.S. midterms follow a week later. Ukraine feels like it’s heading for a denouement sooner rather than later. The Middle East is a tinderbox that needs only an infinitesimal spark, and two of the protagonists (Iran and Bibi) have every motive to strike the match. Then there’s the run-up to, and the fallout from, a U.S. midterm that will flip the House and (if you believe Kalshi) carries a 62% chance of the Senate going blue as well. That promises to be, umm, destabilizing. Buckle up, buttercup.
**THE STRIKE CALENDAR RUNS PAST 3 NOVEMBER, AND THE BARREL PRICES ONLY THE PAUSE.**I like Brent’s upside through options. I’M WRONG IF a Hormuz transit accord is signed before Israel votes on 27 October.**THE LONG END STILL CARRIES THE FISCAL BILL, ON THINNER EVIDENCE THAN LAST WEEK.**I like the 30-year from the short side through TLT puts. I’M WRONG IF the 10-year closes under 5.00%.**CREDIT IS BREAKING AT THE BOTTOM OF THE CAPITAL STRUCTURE FIRST.**I like private credit and high yield short, clean regional banks long. I’M WRONG IF CCC spreads come back inside 1,100bp.**MOST OF MY BOOK IS ONE BET: RATES HIGH ENOUGH, LONG ENOUGH, TO REPRICE CREDIT.**I’M WRONG IF the 2-year closes under 4.65% and the 10-year breaks 5%.
I think the market is trading a calendar, and the calendar has a hole in it.
THE SETUP. Three dates carry this tape, and the risk sits in the space between them:
Trump has said, “We will not be attacking Iran at any time prior to the midterms.” The FT reports he shut down an Israeli multi-day campaign set for the weekend of 10 October.
Israel votes on 27 October. The US votes on 3 November. That leaves seven days with no American election left to protect and an Israeli government either renewed or caretaking.
Amit Segal put the problem plainly (It’s Noon in Israel): “the enemy also gets a vote.” Waiting for every ballot to be counted buys Tehran a few more days of strangulation and costs it the initiative.
THE MIDTERMS. The odds have barely moved in a week, and early voting is open in more than 40 states:
Polymarket gives a Democratic sweep of both chambers 62.5%, the House alone about 91.5% and the Senate about 64.5%.
Trump’s approval is 36% in the Times/Siena poll, with Democrats up 11 on the generic ballot; Reuters/Ipsos has him at 31% and Democrats up 12.
Trump and allied PACs have committed more than $400 million; Michael Bloomberg is reported near $80 million on the other side.
The pre-election promises are pointed at the pump and the farm: $8 billion of diesel relief for farmers that pays out after the vote (NYT), year-round E15, the 15% ethanol blend corn growers want, offered to Kansas only if Roger Marshall is reelected, and a floated payment to every adult if Republicans hold Congress.
WHAT A SWEEP DOES TO MY TRADES. This is the part I have to argue against myself:
A Democratic House ends new fiscal packages through 2028. Less supply growth at the margin works against my long-end short.
A Democratic Senate blocks Fed nominations from January. Kalshi has Governor Cook leaving before the new Senate sits at under 10%, so the independence premium the long end has been charging gets cheaper.
Against that, the deficit is already baked: the stopgap expires 11 December, the full-year package the House framed in July added $95 billion, and the refunding estimates land on 2 and 4 November, the day before and the day after the vote.
The tails are political and Kalshi prices them: a national emergency declaration before Election Day at 13%, the Insurrection Act invoked by year-end at 17%. I would not trade either, and I would not be short volatility into them.
THE MIDDLE EAST. The modal path is a fortnight of pause and the tail is a weekend campaign:
Tom Barrack told the Doha security forum that “America as the guarantor to the world, for the last 80 years, it is no longer there” (WSJ). A third carrier is on its way anyway.
The Saudi, Pakistani and Turkish defense pact the Gulf calls the Mecca Pact is the hedge the region is buying against that message.
Middle East oil exports are back above pre-war levels on Pentagon escorts and pipelines that bypass the strait (WSJ). Refined products are the shortage: diesel cracks are above their 2022 peaks.
Gallup finds 26% of Israelis and 32% of West Bank and East Jerusalem residents support a two-state outcome. Among Israelis who approve of their own leadership, it is 5%.
**UKRAINE.**Steve Witkoff meets Putin in St. Petersburg today with an updated proposal, after Moscow released Stephen Hubbard, detained for more than four years. The WSJ reports Elon Musk ordered SpaceX to throttle the military Starlink service Ukraine uses to intercept drones (WSJ); Zelensky says US intelligence sharing has resumed. I read a Ukraine framework as the administration’s fastest route to cheaper diesel before 3 November, through Russian product. That moves the crack, a tail for my Brent options and nothing for the long end.**THE CASE AGAINST.**The strongest objection to the energy call is that the barrel has already priced the pause and the tail together. Brent printed $111.99 intraday Tuesday and settled under $110 on reports of Iranian mediation through Pakistan, so the first settle above $110 still has not come. Unless the Israeli vote produces a government with a reason to move before the American one, the week between could pass quietly and the options decay. I would believe that on a signed transit accord.
The calendar is earnings and supply, and the options market prices the Fed week, today’s sessions less so.
**10:30, the weekly petroleum report.**API showed a 4.93 million barrel crude draw against 1.3 million expected. A draw near that size with Brent over $110 is the settle I am waiting for.**13:00, the $13 billion 20-year auction.**The prior stopped at 5.420%. A tail with the 20-year back above 5.50% is the supply read.**Before the open, AT&T, Abbott, Northern Trust, Moody’s and CME.**CME’s quarterly volume tells me who is paying to hedge rates.**After the close, Meta, Tesla, Lam Research, Texas Instruments and IBM.**Meta’s 2027 capex guide, expected near $193 billion, is the number.**28 October, the FOMC.**Options price a 1.93% move in the S&P for the decision and 2.16% for September core PCE, month over month, the next morning.
The housing data suggests transmission is working, but equities don't care. Single-family permits are at 845,000, the lowest since March 2023, and the 30-year mortgage rate was 7.40% on 15 October, up 1.11 points on the year. Mortgage rates lead permits by about six months at a correlation of minus 0.53, so I expect the next two permit prints to stay near the low.
Capital One and SpaceX point opposite ways on the same question: Capital One says the consumer is fine, and SpaceX says the money for AI is still there at a price.
**CAPITAL ONE.**Earnings of $6.69 beat by more than a dollar, domestic card charge-offs fell 73bp to 3.98%, and the company released $225 million of reserves and bought back $2.6 billion of stock. The card borrower I was worried about is paying. I moved to the long side of consumer credit through Sallie Mae, which reports tomorrow.**SPACEX AND SUPERMICRO.**SpaceX grew sales 161% to $14.6 billion on capex of $19.6 billion, and Supermicro preannounced sales of $18.5 to $19.5 billion against $14.9 billion expected. The same morning NextDC cut guidance after its power supplier stopped work, and DayOne may shrink its IPO (Bloomberg). Demand is real, and I like the Meta downside into tonight anyway, because the financing bill is the question.**UNITED.**Revenue rose 17% to a record and fuel expense rose 62%, and the fourth-quarter guide of $0.50 to $1.50 sits well under the $1.89 the street had. A fuel buyer short pays on the same high barrel as my Brent options, so I see it as the same bet twice.
Behind the wall this morning:
THE BOOK: 13 live lines, 3 new today, each with the factor it monetizes, its size and the condition that kills it.
FLOWS AND POSITIONING: hedge funds sold tech at 2.6 standard deviations over five sessions, the most since 2016, into record short ETF volume, and what the systematic money does next.
FINANCIALS: Chubb’s underwriting turning, CCC paper through 1,300bp, and the two financials trades I want on today.
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