Doomberg: "For the Past 6 Years, China Has Declared Chemical Warfare on US Citizens"

The Fentanyl crisis, the shift to a multipolar world, the diplomatic blunder "we'll be paying for for the next decade," the consequences for energy, and 'deregulate, baby, deregulate.' Whew...!

The shift from a unipolar to a multipolar world is already happening, and has vast implications for energy. That’s one of my takeaways from

Doomberg

on Talking Markets yesterday (February 5). Lots to chew on from the green chicken:

Fentanyl: A War on America

President Trump has been clear that the main impetus behind tariffs is the fentanyl crisis, Doomberg said. “China has declared chemical warfare on military-aged US citizens for the past half-dozen years,” he said. “We lose, conservatively, 100,000 people a year to drug overdoses, of which 80% are fentanyl. It’s so deadly and so lethal that it is destroying American society. 100,000 deaths a year is a greater pace of loss than we suffered in the military in World War II.”

Statista

“It starts in China,” Doomberg said. “And Chinese organized crime and Mexican organized crime have collaborated on both bringing it across the border in Mexico, and the distribution of it.”

On the Canada side, Doomberg said: “There's vastly more fentanyl being produced in Canada than is being caught at the border,” and added to that, “the Canadian border is so long and so porous that there's no need for the drug cartels to cross crowded border crossings.”

According to the New York Times, “In the last six years, Canadian police have dismantled 47 fentanyl labs, including the largest ever last year in British Columbia, government officials said. That lab had enough material to produce 96 million opioid doses.”

🪢For more from Doomberg on the geopolitics of the fentanyl crisis, see ‘Undeclared’ from February 5.

Trump is Doing What He Said He’d Do

“If you look at everything that Trump said in 2023 when he recorded [the] Agenda 47 videos, he's following everything he said literally to a T,” Doomberg said. “[Opinions that] ‘orange man bad’ does not mean ‘orange man always wrong.’”

“He's provocative to a fault as a negotiating tactic,” Doomberg said. “On this particular issue, we think that he is 100 % right. Whether tariffs are the right instrument for the task, of course, can be debated.”

China: The “New Arsenal of Democracy”

During World War II, Detroit became the “Arsenal of Democracy” in response to FDR’s call: “We must have more ships, more guns, more planes - more of everything.”

Now, Doomberg says, “The new Arsenal of Democracy is China. We have basically outsourced our entire military supply chain to China. If we want to project international military power, we need to pause on China until we could build our own supply chains at home. And tightening the border and destroying fentanyl and destroying cartels that bring it into the country is a good start towards that end.”

“We need to get serious about reshoring and diversifying away from China, and we need to be nice enough with them to avoid true kinetic conflict until we do,” he said. “If we got into a war with China today, we would lose. There's just no doubt about it.”

The Shift to a Multipolar World

The US is “no longer the unipolar dominant hegemonic force on earth,” Doomberg said. Citing U.S. Secretary of State Marco Rubio’s comments recently, Doomberg said: “We have lost the war in Ukraine. Russia, in collaboration with China, has defeated NATO. How we internalize that loss and how we react to that loss is going to be a big theme of 2025.”

Additionally, Doomberg said, “We have pushed Russia and China [together] - the great calamity that American diplomacy has been trying to avoid for decades... It was a giant blunder to let Russia get close to China, and we are going to be paying for that blunder for the next decade.”

Multipolarity: The Implications for Energy

Unsurprisingly, a shift to multipolarity and what some are calling Russia’s victory in Ukraine (this is certainly not accepted across the board) “has huge implications for energy,” Doomberg said:

• “Russia’s victory means that Russia’s energy is going to flow with far less friction, and prices are coming down,” he said. “What would the price of oil be if peace were achieved tomorrow? You'd be lucky if the bid started with a 5. There's a huge amount of friction imposed in the markets today because of sanctions.”

• The big losers geopolitically in this scenario, apart from of course the Ukrainians, “are the Europeans,” Doomberg said. “They have decoupled from cheap energy. The war has lost and Trump is walking away from them and threatening to impose tariffs on them… [And] Putin has told the Europeans, ‘you have made you bed, now lie in it.’”
  🪢Pg 13 here for Putin’s full comments on this, courtesy of The Saf Group.

• If the Power of Siberia 2 pipeline between Russia and China gets built, “molecules will be permanently redirected away from Europe,” Doomberg said. “It is a decades in days kind of moment. And Trump is the sort of catalyst for that.”

• There’s a huge amount of friction in energy markets today, and “if you took away all that friction, if there was a grand summit tomorrow between Xi and Putin and Trump, and peace was achieved, we’re going to see a downdraft in commodity prices,” Doomberg said. “Trump has all but said he wants $40 oil. He wants to catalyze an economic manufacturing boom in the United States. Cheap energy does that.”

NOTE:

Doomberg

and team are currently working on a big piece which will be published later this week on this topic.

Energy in the US: “Deregulate, Baby, Deregulate”

💡”We’re bullish on the long-term demand for US-based natural gas,” Doomberg said. “Broadly speaking, the demand for natural gas is going to grow because it will be the bridging fuel for AI data centers.”

🪢More detail on this from Doomberg on Talking Markets in October 2024 here.

💡 “‘Drill, baby, drill’ is more about ‘deregulate, baby, deregulate,’” Doomberg said. “It’s not about forcing oil and gas companies to drill… If you remove the regulatory barriers, odds are pretty good that they’re going to drill.”

Doomberg’s Take on the EU

“There’s a wave coming that could take out the Brussels elite,” Doomberg said. “The European Union could fall apart.”

Like

Jacob Shapiro

, Doomberg says the thing to watch out for this month in Europe is the German election. “If it's a complete and utter chaotic outcome, that does not bode well for the EU,” Doomberg said. The potential for chaos comes from the sum of the AfD “surging in the polls” and other parties saying they won’t form a government with the AfD.

If that leads to a stalemate, “I think the country of Germany could break up,” Doomberg said. “There’s a huge divide between old East Germany and West Germany today.”

Here’s Jacobs’ take on it from Talking Markets on January 27:

One of the key Q1 events in Europe will be the German elections, Jacob says. “If the polls hold, they're probably going to get a strong center, right government. Europe needs it because Macron is completely handicapped by his election gamble that blew up in his face.”

If that happens, Germany might “wake up and put the European Union back in some of sort of position where it’s operating from a position of strength. Whereas right now, it’s on the back foot.” And that position of strength could involve a strengthening relationship with China.

A Dose of Optimism to Finish On

“The US is a buffered system. And we've reached a pretty significant extreme in the past four years socially, politically, financially,” Doomberg said. “Reversion to the mean is a very powerful phenomenon… The US is going to regress back to a better mean for more people. It will be imperfect. The path function will be difficult. But in my heart and in my soul, I believe the US is a buffered system. And there's only so far it can be stretched before it stretches back… I think in the end, history will look back at the election of 2024 and the first few weeks of the Trump administration as an important turning point and perhaps one that leads us all to a better place.”

To watch the full episode, right this way.

Enjoy,

Maggie

Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and determine if an allocation to oil aligns with your overall financial plan.