Geopolitics: The title of most dangerous bad guy on the planet now goes to Doku Umarov, leader of the Chechen Islamic revolution in Russia’s North Caucasus region. Umarov ordered the twin suicide bombings in Moscow 2 days ago and today 11 people (including several police officers) were killed in Dagestan, a N. Caucasus region boiling with a low level but steadily increasing Islamic insurgency. The number of deaths at the hands of insurgents in Dagestan has doubled year over year and is set to double again this year.
This is what Umarov is saying on his website: “As you all know on March 29 in Moscow, two special operations were carried out to destroy the infidels and send a greeting to the FSB.” FSB is the new name for KGB.
The Chechen insurgency was originally motivated by nationalism and the desire for a separate (non-Russian) nation based on ethnicity. Under Umarov’s leadership the movement is now based purely on radical Islam, the desire for a Taliban style government that encompasses the N. Caucasus region. Umarov talks constantly of establishing a “Caliphate.” I think he is successfully trying to lock in his leadership role in front of a gigantic influx of bad guys from the Afpak region. And here’s why:
Combing the Pak media for Tuesday’s body count is frustrating because so many bad guys are getting killed nobody can accurately count them. Pak Air Force jets, Pak Army helicopters and artillery killed about 60 bad guys on Tuesday. Pakistan’s tribal lands have become a bad guy meat grinder.
The long term danger is that the good guys declare victory at some point in Afpak and ignore the deteriorating situation in the peripheral battle zones of the Long War. The short term danger is the bad guys attack Russia's energy pipelines into Europe, cutting off supplies, and triggering huge price increases worldwide.
Wednesday, March 31, 2010
Tuesday, March 30, 2010
The CIA's War
Editor's Note: Today's newsletter goes out before the bell.
Geopolitics: The Moscow terror bombing yesterday struck a subway station right next to FSB (new name for KGB) headquarters. The location of the attack sent a clear message: Russia’s intelligence agency is the bad guys’ main enemy, not the Russian Army. A similar message came out of a recent Pentagon update of its planned offensive in Kandahar. The Pentagon is saying that it needs more intelligence and less firepower to secure the city. In fact the Pentagon is now saying there won’t actually be an offensive in Kandahar in the traditional sense of the word, rather a massive armed infiltration.
The salient feature of the Cold War was nuclear weapons. In many ways the US Air Force was the most important branch of the armed services back then. The Air Force is the least important branch in the Long War. Originally the Pentagon had the Air Force operating drones. This has proven to be impractical and drones have since migrated to the Army and the CIA. In truth the Long War is the CIA’s war. It is vastly more important than conventional forces. What it needs the most is darkness, which is to say no oversight and no civilian meddling. Think of the CIA as a free market economy that flourishes best without interference.
Geopolitics: The Moscow terror bombing yesterday struck a subway station right next to FSB (new name for KGB) headquarters. The location of the attack sent a clear message: Russia’s intelligence agency is the bad guys’ main enemy, not the Russian Army. A similar message came out of a recent Pentagon update of its planned offensive in Kandahar. The Pentagon is saying that it needs more intelligence and less firepower to secure the city. In fact the Pentagon is now saying there won’t actually be an offensive in Kandahar in the traditional sense of the word, rather a massive armed infiltration.
The salient feature of the Cold War was nuclear weapons. In many ways the US Air Force was the most important branch of the armed services back then. The Air Force is the least important branch in the Long War. Originally the Pentagon had the Air Force operating drones. This has proven to be impractical and drones have since migrated to the Army and the CIA. In truth the Long War is the CIA’s war. It is vastly more important than conventional forces. What it needs the most is darkness, which is to say no oversight and no civilian meddling. Think of the CIA as a free market economy that flourishes best without interference.
Monday, March 29, 2010
Hellacious Whack-a-mole In 2 Years
Charts: The S&P 500 closed at 1173, up .6%. The index opened above 1170 and in early going it dropped, found support at 1170 and bounced above this key level. This is good chart action but volume was iffy. FXI (Chinese blue chips) closed above its 200-day moving average in good volume. So far in March it has crossed the 200-day line 7 times. If FXI trades above this level for four days in a row it will be technically significant and bullish for global stock markets. Yield on the US Treasury ten-year note ticked up a tiny bit but stayed below long term technical level of 3.95%. Last Thursday it hit this resistance level, bounced down and has stayed below ever since. It needs to stay below 3.95% this week. The dollar was down sharply today, a good sign.
Fundamentals: On Monday Greece successfully sold $6.7 billion worth of debt. This is why the dollar came down, emerging markets rallied, and the whole financial world heaved a sigh of relief.
Geopolitics: Six days ago the Pak Army launched an offensive against the Pak Taliban in a northern region of the tribal lands. The offensive has killed huge numbers of bad guys to date. Pak media reports claim that between 11 and 22 bad guys were killed on Sunday. Pak media also reports the deal for transferring drone technology from the CIA to the ISI has been finalized and the good guys in Pakistan are overjoyed at this terrific news.
There is no question that the bad guys are taking it on the chin in the Long War’s central battle zone in Afpak. But in the periphery battle zones of the Long War, far away from Afpak, the bad guys are doing much better. Over the weekend 38 civilians were killed in Moscow by Caucus based Islamic terrorists. Two Moscow subway stations were obliterated by female suicide bombers. Not good. Thousands of miles from Russia, the authoritative newsletter Intelligence Online, reports that Yemeni intelligence has been completely infiltrated by AQAP. This goes a long way to explaining why AQAP has been able to send so many terrorists into Saudi Arabia recently. Finally, Sudanese rebels claim to have shot down two army helicopters near Darfur, straining the recently announced peace treaty.
The Afpak theater has a long ways to go before victory can be declared. Way before then the CIA must get a better grip on the vast regions on the periphery of the Long War because someday there will be a hellacious whack-a-mole effect.
Fundamentals: On Monday Greece successfully sold $6.7 billion worth of debt. This is why the dollar came down, emerging markets rallied, and the whole financial world heaved a sigh of relief.
Geopolitics: Six days ago the Pak Army launched an offensive against the Pak Taliban in a northern region of the tribal lands. The offensive has killed huge numbers of bad guys to date. Pak media reports claim that between 11 and 22 bad guys were killed on Sunday. Pak media also reports the deal for transferring drone technology from the CIA to the ISI has been finalized and the good guys in Pakistan are overjoyed at this terrific news.
There is no question that the bad guys are taking it on the chin in the Long War’s central battle zone in Afpak. But in the periphery battle zones of the Long War, far away from Afpak, the bad guys are doing much better. Over the weekend 38 civilians were killed in Moscow by Caucus based Islamic terrorists. Two Moscow subway stations were obliterated by female suicide bombers. Not good. Thousands of miles from Russia, the authoritative newsletter Intelligence Online, reports that Yemeni intelligence has been completely infiltrated by AQAP. This goes a long way to explaining why AQAP has been able to send so many terrorists into Saudi Arabia recently. Finally, Sudanese rebels claim to have shot down two army helicopters near Darfur, straining the recently announced peace treaty.
The Afpak theater has a long ways to go before victory can be declared. Way before then the CIA must get a better grip on the vast regions on the periphery of the Long War because someday there will be a hellacious whack-a-mole effect.
Friday, March 26, 2010
Pak Army Kills 156 Bad Guys
Charts: The S&P 500 closed at 1167, up a fraction. The dollar was down today as were treasury yields. Both weakened into the close, good technically. FXI (Chinese blue chips) jumped 2% and is 1% away from the 200-day moving average. Today was a better chart day than the flat reading from the American index would lead you to believe.
Geopolitics: Today was proof of how geopolitics can rock world markets. The final bailout package for Greece clicked into place and the market was poised to rally when a South Korean warship suffered an explosion in its hull and started sinking in a fishing zone that has often seen North and South Koreas' navies clash. The S. Korean Navy combed the area with radar. They got a reading and fired forward guns (shoot first ask questions later). The reading turned out to be a flock of birds. Several birds were vaporized. There was no sign of North Korean warships. As traders began to digest the implications of the S. Korean Navy not finding any bad guys, global markets started to recover hesitantly.
The Russian stock market popped up while all this was going on because Hillary’s nuclear arms reduction treaty was finalized. Russian ADRs soared 2% even though the price of oil was down today. There is something like an 80% correlation between Russian stocks and oil.
Meanwhile, the media is ignoring the real geopolitical news of the last few days. The Pak Army has been advancing on a Taliban stronghold in the tribal lands that border N. Waziristan. In three days it has killed about 90 bad guys. On Friday, the Pak Air Force killed 66 bad guys. Bad guys are getting chewed up by the Pak Army and this probably explains the AQAP surge: the whack-a-mole effect is in full swing.
Specific Stocks: Calgon Carbon (CCC) is the leader in manufacturing activated carbon, the stuff inside smokestack scrubbers for coal-fired power plants, big municipal water plant filters, and the little water filters in your household Brita system. In the last year CCC’s stock has only gone up about 12%, even though its earnings have been growing stoutly. It has a PE of 25% while its peer Koppers Holding (KOP) which makes specialty carbon products for steel and railroads has a PE of 32%. CCC’s earnings have grown 3 times faster than KOP’s. The market is afraid of coal fired power plants because of global warming fears and hence the discount. But here’s the kicker, as the leader in activated carbon, CCC has special products that work in cleaning up illegal Chinese coal power plants, of which there are hundreds. When the Chinese government finds an illegal power plant, it doesn’t shut it down, it orders a cleanup, an endless supply of business for CCC.
Geopolitics: Today was proof of how geopolitics can rock world markets. The final bailout package for Greece clicked into place and the market was poised to rally when a South Korean warship suffered an explosion in its hull and started sinking in a fishing zone that has often seen North and South Koreas' navies clash. The S. Korean Navy combed the area with radar. They got a reading and fired forward guns (shoot first ask questions later). The reading turned out to be a flock of birds. Several birds were vaporized. There was no sign of North Korean warships. As traders began to digest the implications of the S. Korean Navy not finding any bad guys, global markets started to recover hesitantly.
The Russian stock market popped up while all this was going on because Hillary’s nuclear arms reduction treaty was finalized. Russian ADRs soared 2% even though the price of oil was down today. There is something like an 80% correlation between Russian stocks and oil.
Meanwhile, the media is ignoring the real geopolitical news of the last few days. The Pak Army has been advancing on a Taliban stronghold in the tribal lands that border N. Waziristan. In three days it has killed about 90 bad guys. On Friday, the Pak Air Force killed 66 bad guys. Bad guys are getting chewed up by the Pak Army and this probably explains the AQAP surge: the whack-a-mole effect is in full swing.
Specific Stocks: Calgon Carbon (CCC) is the leader in manufacturing activated carbon, the stuff inside smokestack scrubbers for coal-fired power plants, big municipal water plant filters, and the little water filters in your household Brita system. In the last year CCC’s stock has only gone up about 12%, even though its earnings have been growing stoutly. It has a PE of 25% while its peer Koppers Holding (KOP) which makes specialty carbon products for steel and railroads has a PE of 32%. CCC’s earnings have grown 3 times faster than KOP’s. The market is afraid of coal fired power plants because of global warming fears and hence the discount. But here’s the kicker, as the leader in activated carbon, CCC has special products that work in cleaning up illegal Chinese coal power plants, of which there are hundreds. When the Chinese government finds an illegal power plant, it doesn’t shut it down, it orders a cleanup, an endless supply of business for CCC.
Thursday, March 25, 2010
AQAP Is On The March
Charts: The S&P 500 closed at 1166, down .17%. The market was up all day but then experienced a bearish reversal into the close. FXI (Chinese blue chips) got shredded today. FXI is screeching down away from its 200-day moving average. The charts are overall worse than one would think merely from looking at the S&P 500.
Fundamentals: Progress was made overnight in bailing out Greece. This is good but it opens up a can of worms. Bond vigilantes are now attacking US government debt. Yield on the 10-year is shooting upward, now over 3.9%, nearing the 4% danger zone. In the middle of the trading day Fed Chief Bernanke tried to jawbone interest rates down. It is scary that he feels the need to do this and markets were unsettled by his performance. The dollar was up again today. High treasury yields equal a strong dollar: this hurts the carry trade, clobbers emerging market debt and while it should theoretically help emerging market exports into the US that salutary effect is potentially diminished by a weakened US consumer, not to mention US housing will be annihilated if interest rates keep rising.
Geopolitics: Russia and America have hammered out a nuclear weapons reduction treaty. By cementing US-Russia relations this treaty prevents India from embracing Russia, which allows the US to give more military aid to Pakistan. Meanwhile ground action in the Long War rages on. The Pak Army killed 21 bad guys in heaving fighting along the Afpak border. As the Pak Army digs into the border region, it uncovers better intelligence and some info leaks out to the press. A picture is emerging of AQAP (Al-Qaeda’s Yemeni franchise) being stronger and better organized than previously thought. There are rumors of Yemeni surgeons implanting explosive breast implants in female suicide bombers in secret Al-Qaeda clinics in the Pak tribal lands. While this might sound like a tabloid news item, it is not. AQAP’s underwear bomb also sounded goofy but was real. Also, Saudi security forces have recently arrested 113 AQAP bad guys inside the Kingdom. While it is good the Saudis have captured these bad guys, it is disturbing that there were so many and raises the question as to why the big AQAP surge all of a sudden. Finally, US Naval Intelligence issued a warning that AQAP is getting ready to attack shipping off the Yemeni coast. AQAP is on the march.
Fundamentals: Progress was made overnight in bailing out Greece. This is good but it opens up a can of worms. Bond vigilantes are now attacking US government debt. Yield on the 10-year is shooting upward, now over 3.9%, nearing the 4% danger zone. In the middle of the trading day Fed Chief Bernanke tried to jawbone interest rates down. It is scary that he feels the need to do this and markets were unsettled by his performance. The dollar was up again today. High treasury yields equal a strong dollar: this hurts the carry trade, clobbers emerging market debt and while it should theoretically help emerging market exports into the US that salutary effect is potentially diminished by a weakened US consumer, not to mention US housing will be annihilated if interest rates keep rising.
Geopolitics: Russia and America have hammered out a nuclear weapons reduction treaty. By cementing US-Russia relations this treaty prevents India from embracing Russia, which allows the US to give more military aid to Pakistan. Meanwhile ground action in the Long War rages on. The Pak Army killed 21 bad guys in heaving fighting along the Afpak border. As the Pak Army digs into the border region, it uncovers better intelligence and some info leaks out to the press. A picture is emerging of AQAP (Al-Qaeda’s Yemeni franchise) being stronger and better organized than previously thought. There are rumors of Yemeni surgeons implanting explosive breast implants in female suicide bombers in secret Al-Qaeda clinics in the Pak tribal lands. While this might sound like a tabloid news item, it is not. AQAP’s underwear bomb also sounded goofy but was real. Also, Saudi security forces have recently arrested 113 AQAP bad guys inside the Kingdom. While it is good the Saudis have captured these bad guys, it is disturbing that there were so many and raises the question as to why the big AQAP surge all of a sudden. Finally, US Naval Intelligence issued a warning that AQAP is getting ready to attack shipping off the Yemeni coast. AQAP is on the march.
Wednesday, March 24, 2010
CIA Still Extremely Pissed Off
Charts: The S&P 500 closed at 1168, down .6%. The index pushed below support at 1170, which is mildly bearish. FXI (index of Chinese blue chips) retreated sharply from its 200-day moving average, which is more than mildly bearish. All year we’ve seen emerging markets underperform. American leadership is good but the followers need to respond to the leader.
Fundamentals: Portugal’s debt was downgraded today. This caused the dollar to rock up. The strengthening dollar hurts emerging markets, the only true source of growth in the world economy. US housing data continues to weaken, which is causing US treasury yields to go up. Yield on the 10-year leaped by the greatest amount in 8 months. For the past three trading days the market has decided that Obama-Care won’t destroy the world economy for another couple years. Today the market is moving past Obama-Care and focusing on some of the other problems that have been with us for awhile, and getting worried again.
Geopolitics: CIA drones once again sent multiple salvos of Hellfire missiles into Taliban compounds and vehicles in North Waziristan. The ISI says that 6 bad guys were killed but once again their identity cannot be confirmed because the drones are more aggressive than usual and independent observers can’t get close to the killing zone. The CIA remains extremely pissed off. The group I have been calling the “North Waziristan Taliban” is actually called Hezb-e-Islami. These non-English names are impossible to remember or keep straight, so let’s stick with my terminology. A spokesman for the NW Taliban said today that his group is not actively negotiating with Karzai’s government. That is a lie of course, but it is evidence that the CIA’s tactic of literally blasting these peace talks apart is beginning to work.
Karzai is worried about his fate when American troops begin to be withdrawn from Afghanistan in about a year. America wants the Pak Army to essentially replace the US Army/USMC when this happens. This would make Karzai a figurehead at best. Right now the top generals of the Pak Army are in Washington DC negotiating a massive increase in military aid and weaponry. Karzai is having kittens.
Fundamentals: Portugal’s debt was downgraded today. This caused the dollar to rock up. The strengthening dollar hurts emerging markets, the only true source of growth in the world economy. US housing data continues to weaken, which is causing US treasury yields to go up. Yield on the 10-year leaped by the greatest amount in 8 months. For the past three trading days the market has decided that Obama-Care won’t destroy the world economy for another couple years. Today the market is moving past Obama-Care and focusing on some of the other problems that have been with us for awhile, and getting worried again.
Geopolitics: CIA drones once again sent multiple salvos of Hellfire missiles into Taliban compounds and vehicles in North Waziristan. The ISI says that 6 bad guys were killed but once again their identity cannot be confirmed because the drones are more aggressive than usual and independent observers can’t get close to the killing zone. The CIA remains extremely pissed off. The group I have been calling the “North Waziristan Taliban” is actually called Hezb-e-Islami. These non-English names are impossible to remember or keep straight, so let’s stick with my terminology. A spokesman for the NW Taliban said today that his group is not actively negotiating with Karzai’s government. That is a lie of course, but it is evidence that the CIA’s tactic of literally blasting these peace talks apart is beginning to work.
Karzai is worried about his fate when American troops begin to be withdrawn from Afghanistan in about a year. America wants the Pak Army to essentially replace the US Army/USMC when this happens. This would make Karzai a figurehead at best. Right now the top generals of the Pak Army are in Washington DC negotiating a massive increase in military aid and weaponry. Karzai is having kittens.
Tuesday, March 23, 2010
CIA Extremely Pissed At Karzai
Charts: the S&P 500 closed at 1174, up .7%. The index successfully tested support at 1154 twice since Friday. It bounced up against resistance at 1170 once, got knocked down, regrouped and popped through, bullish chart action. FXI is the blue chip index of China. Today it almost broke above its 200-day moving average. FXI’s chart action had been saying China was in a bear market. US leadership is fine, but in today’s global market it is technically significant for FXI to move above the 200-day line. Meanwhile, oil has been unable to breach resistance at $83 a barrel, good for China and America.
Fundamentals: Obama-Care front loads taxes and back loads benefits. It will probably lower the deficit for the next couple years and then massively raise it for the next few decades. Even the bond market doesn’t look years ahead and the stock market certainly doesn’t.
Every year the big iron ore miners and steel mills negotiate an annual ore contract. The talks are breaking down. Currently the spot price is about twice as high as the contract price because of Chinese demand. The biggest ore miner, VALE, is sensibly telling the big European mills that the contract price must double. The European mills are freaking out and trying to take legal action against VALE rather than hammer out a deal. The contract system is probably going to be destroyed and the price of ore is set to double. Steel represents 80%-90% of industrial metals, so the contract system collapsing is huge news and creates all sorts of losers and winners.
Geopolitics: Hillary made a speech in front of the most powerful Israeli lobby, blasting Israel with verbal bombs like this: “New construction in E. Jerusalem or the W. Bank undermines mutual trust and endangers… talks… that both sides want and need.” Slamming Israel in front of its lobby is incredibly bold. If Israel freezes settlement building, a Palestinian state will arise all by itself, even without peace talks. This would be a deadly blow to Al-Qaeda. It gets something like $500 million a year from wealthy Arabs who mostly give because of the Israeli/Palestinian conflict.
Israeli PM Netanyahu is in DC and firing back at Hillary, trying to play tough guy, big mistake. Defense Secretary Gates is talking about selling F35 Joint Strike Fighters to the United Arab Emirates. No Arab country has ever been offered a weapons system this advanced before. If Arab countries were allowed to buy the F35, Israel would be in big trouble.
On Sunday CIA drones killed 8 bad guys in N. Waziristan. Who was killed is not known because a drone wolf pack stayed in place and kept killing anybody that tried to help the wounded or even get close. The CIA does this only when it is extremely pissed off. The anger is probably due to ongoing Karzai/Taliban peace talks. Karzai better watch his step.
Fundamentals: Obama-Care front loads taxes and back loads benefits. It will probably lower the deficit for the next couple years and then massively raise it for the next few decades. Even the bond market doesn’t look years ahead and the stock market certainly doesn’t.
Every year the big iron ore miners and steel mills negotiate an annual ore contract. The talks are breaking down. Currently the spot price is about twice as high as the contract price because of Chinese demand. The biggest ore miner, VALE, is sensibly telling the big European mills that the contract price must double. The European mills are freaking out and trying to take legal action against VALE rather than hammer out a deal. The contract system is probably going to be destroyed and the price of ore is set to double. Steel represents 80%-90% of industrial metals, so the contract system collapsing is huge news and creates all sorts of losers and winners.
Geopolitics: Hillary made a speech in front of the most powerful Israeli lobby, blasting Israel with verbal bombs like this: “New construction in E. Jerusalem or the W. Bank undermines mutual trust and endangers… talks… that both sides want and need.” Slamming Israel in front of its lobby is incredibly bold. If Israel freezes settlement building, a Palestinian state will arise all by itself, even without peace talks. This would be a deadly blow to Al-Qaeda. It gets something like $500 million a year from wealthy Arabs who mostly give because of the Israeli/Palestinian conflict.
Israeli PM Netanyahu is in DC and firing back at Hillary, trying to play tough guy, big mistake. Defense Secretary Gates is talking about selling F35 Joint Strike Fighters to the United Arab Emirates. No Arab country has ever been offered a weapons system this advanced before. If Arab countries were allowed to buy the F35, Israel would be in big trouble.
On Sunday CIA drones killed 8 bad guys in N. Waziristan. Who was killed is not known because a drone wolf pack stayed in place and kept killing anybody that tried to help the wounded or even get close. The CIA does this only when it is extremely pissed off. The anger is probably due to ongoing Karzai/Taliban peace talks. Karzai better watch his step.
Sunday, March 21, 2010
Give Peace A Chance? CIA says: NO WAY!
Geopolitics: The UN was negotiating a peace deal with the Afghan Taliban when the CIA and ISI arrested the Taliban’s lead negotiator, #2 Chieftain Mullah Baradar, supposedly destroying the chance for a diplomatic end to the Long War. Darn. Along the same lines, last week CIA drones killed several leaders of the North Waziristan Taliban. The NW Taliban has been actively negotiating a peace treaty with Afghan President Karzai, probably a deal was close before the drones hit Taliban houses and cars with 3 separate salvos of Hellfire missiles. The peace deal literally went up in flames. A Pattern is clear, whenever one of the Talibans makes serious progress in crafting a peace treaty with one of America’s weak-kneed junior partners, the CIA arrests or kills the bad guy leaders trying to hammer out a peace treaty. In all probability the mere act of negotiating exposes the bad guy leaders to danger since the UN or Karzai’s government is easily infiltrated by the CIA and ISI. Going forward, UN diplomats or Karzai’s diplomats will probably also be in danger if they try to negotiate a peace deal with a Taliban chieftain because CIA Director Panetta has publically said he is willing to strike bad guys in urban areas at any time. And yet Gen. McChrystal says he is open to peace talks with the Taliban. This is just spin from McChrystal.
By destroying peace deals, the CIA is controlling public opinion in America. If American voters learned of a peace treaty between Karzai and the Taliban, they would demand US troops come home immediately. Of course any peace treaty wouldn’t be worth the paper it’s written on and US troops would have to return someday in bigger numbers. This is exactly what happened to Pakistan in the Swat Valley and elsewhere.
The Long War is not going well in the Caucus Mountains of Russia. The heart of the Caucus Islamic insurgency, Chechnya, is relatively stable but the rebellion is spreading outward. The hardest hit region is Dagestan. The number of police officers killed by bad guys in Dagestan doubled between 2008 and 2009. In a vicious cycle, the bad guys wreck the local economy and then enjoy a rush of recruits from jobless young men, which allows them to wreck the economy even more. This is one of the reasons why the Russian stock market has a very low P/E ratio.
By destroying peace deals, the CIA is controlling public opinion in America. If American voters learned of a peace treaty between Karzai and the Taliban, they would demand US troops come home immediately. Of course any peace treaty wouldn’t be worth the paper it’s written on and US troops would have to return someday in bigger numbers. This is exactly what happened to Pakistan in the Swat Valley and elsewhere.
The Long War is not going well in the Caucus Mountains of Russia. The heart of the Caucus Islamic insurgency, Chechnya, is relatively stable but the rebellion is spreading outward. The hardest hit region is Dagestan. The number of police officers killed by bad guys in Dagestan doubled between 2008 and 2009. In a vicious cycle, the bad guys wreck the local economy and then enjoy a rush of recruits from jobless young men, which allows them to wreck the economy even more. This is one of the reasons why the Russian stock market has a very low P/E ratio.
Friday, March 19, 2010
Osama bin Laden Please Help Us!!!
Charts: The S&P 500 closed at 1160, down .5%. Today was a tripling witching options expiration day, so volume data is less meaningful. The index tested its closest support level (1154) and bounced up off support. This is good technical action, especially considering the fundamental news was really bad, although geopolitics continues to be really good.
Fundamentals: India raised interest rates overnight. Inflation is heating up in emerging markets, thus the concern over rate hikes and slowing growth.
Greece is saying that it can’t sell any more debt unless the IMF and/or Germany cobble together a genuine support program. Germany has been trying to get away with jaw-boning Greek credit spreads down. Greece can sell debt but wants to do so at the lower rates that will come with an implicit guarantee. It is put up or shut up time for all the actors in the Greek drama.
Stocks levered to emerging market growth took big hits today.
Geopolitics: In a Washington Post interview CIA Director Panetta said Al-Qaeda was in such disarray that one of its lieutenants, in an intercepted message, pleaded with Osama bin Laden to come out of hiding and provide leadership. OBL and a handful of top leaders are apparently dug down very deep somewhere in Pakistan and are in pure survival mode. Panetta went on to say, “It’s pretty clear from all the intelligence we are getting that they are having a very difficult time putting together any kind of command and control; that they are scrambling. And that we really do have them on the run.” This speaks to a huge whack-a-mole effect at some point. To that end, the Director says the CIA is willing to strike in urban areas or anywhere. He goes on to explain that the CIA has been involved in the interrogation of #2 Taliban Commander Mullah Baradar somewhere in Pakistan and significant intelligence is being acquired. Obviously these interrogations are gloves off and the CIA is not being constrained by human rights organizations or the US Congress. That Panetta would openly admit as much speaks to the massive political insulation he has built between his agency and liberal lawmakers in DC.
Hillary was supposed to negotiate with Russian PM Medvedev (good guy) today over nuclear weapons but Russian Pres. Putin (bad guy) horned in on the action. Elbowing Medvedev out of the way, Putin told Hillary that Russia is going forward with plans to build a nuclear reactor in Iran. Putin’s action was part of a long running power struggle that he is having with Medvedev. America needs Medvedev to win before it can go forward with creating a US-Russia alliance, which would be cemented by a nuclear arms reduction treaty. If such a treaty were to materialize, then it would actually be great if Russia built reactors in Iran and controlled fissile material there.
Fundamentals: India raised interest rates overnight. Inflation is heating up in emerging markets, thus the concern over rate hikes and slowing growth.
Greece is saying that it can’t sell any more debt unless the IMF and/or Germany cobble together a genuine support program. Germany has been trying to get away with jaw-boning Greek credit spreads down. Greece can sell debt but wants to do so at the lower rates that will come with an implicit guarantee. It is put up or shut up time for all the actors in the Greek drama.
Stocks levered to emerging market growth took big hits today.
Geopolitics: In a Washington Post interview CIA Director Panetta said Al-Qaeda was in such disarray that one of its lieutenants, in an intercepted message, pleaded with Osama bin Laden to come out of hiding and provide leadership. OBL and a handful of top leaders are apparently dug down very deep somewhere in Pakistan and are in pure survival mode. Panetta went on to say, “It’s pretty clear from all the intelligence we are getting that they are having a very difficult time putting together any kind of command and control; that they are scrambling. And that we really do have them on the run.” This speaks to a huge whack-a-mole effect at some point. To that end, the Director says the CIA is willing to strike in urban areas or anywhere. He goes on to explain that the CIA has been involved in the interrogation of #2 Taliban Commander Mullah Baradar somewhere in Pakistan and significant intelligence is being acquired. Obviously these interrogations are gloves off and the CIA is not being constrained by human rights organizations or the US Congress. That Panetta would openly admit as much speaks to the massive political insulation he has built between his agency and liberal lawmakers in DC.
Hillary was supposed to negotiate with Russian PM Medvedev (good guy) today over nuclear weapons but Russian Pres. Putin (bad guy) horned in on the action. Elbowing Medvedev out of the way, Putin told Hillary that Russia is going forward with plans to build a nuclear reactor in Iran. Putin’s action was part of a long running power struggle that he is having with Medvedev. America needs Medvedev to win before it can go forward with creating a US-Russia alliance, which would be cemented by a nuclear arms reduction treaty. If such a treaty were to materialize, then it would actually be great if Russia built reactors in Iran and controlled fissile material there.
Thursday, March 18, 2010
Night Is The Kingdom of The Taliban
Charts: The S&P 500 closed at 1166, down a fraction. The market is digesting its torrid gains. Oil continued retreating from technical resistance after it hit $83 a barrel.
Fundamentals: Retail inflation came in tame today. Employment data was slightly soft but roughly inline. Obama-Care is gaining momentum but still up in the air (scary). European countries are trimming their deficits while the US Congress is busy shoveling pork with both hands. So there is a shift of sovereign debt away from virtually every country on Earth to America. These are the questions for the 21st century: Is buying US debt becoming a sort of global tax? Who pays for the bread and circuses of the United States of Rome?
Geopolitics: CIA drones last week killed a Yemeni linked Al-Qaeda leader who organized the December massacre of 7 CIA officers. The recent drone strike was in Pakistan and the Dec. massacre was in Afghanistan but it is interesting that the bad guy was linked to AQAP. Evidently Al-Qaeda must reach out to its outer provinces to find quality leadership. In a recent interview CIA Director Panetta said Afpak Al-Qaeda/Taliban leadership has been seriously degraded. As we’ve seen, there has probably been old-fashioned assassination alongside high tech drone attacks. The lack of bad guy leadership is evident in Marja. Taliban fighters are coming out at night and brutalizing the local citizenry with tactics that include beheading. One tribal elder told the New York Times, “After dark the city is like the kingdom of the Taliban.” In the long run such brutality will hurt the bad guys. In the short run it will slow down the advance on Kandahar because conquered territory is not yet pacified.
Hillary is off to Russia to hammer out the final details in a nuclear weapons reduction treaty. Pres. Obama is directly involved in the negotiations. When and if the treaty is finalized, US-Russian relations will take a big jump forward. India is already backing off from its recent craziness at the prospect of the Russian bear and American eagle making nice.
And Israel is also inching away from its anti-US craziness, allowing Palestinians more freedom of movement, backing away from its recent crackdown.
Fundamentals: Retail inflation came in tame today. Employment data was slightly soft but roughly inline. Obama-Care is gaining momentum but still up in the air (scary). European countries are trimming their deficits while the US Congress is busy shoveling pork with both hands. So there is a shift of sovereign debt away from virtually every country on Earth to America. These are the questions for the 21st century: Is buying US debt becoming a sort of global tax? Who pays for the bread and circuses of the United States of Rome?
Geopolitics: CIA drones last week killed a Yemeni linked Al-Qaeda leader who organized the December massacre of 7 CIA officers. The recent drone strike was in Pakistan and the Dec. massacre was in Afghanistan but it is interesting that the bad guy was linked to AQAP. Evidently Al-Qaeda must reach out to its outer provinces to find quality leadership. In a recent interview CIA Director Panetta said Afpak Al-Qaeda/Taliban leadership has been seriously degraded. As we’ve seen, there has probably been old-fashioned assassination alongside high tech drone attacks. The lack of bad guy leadership is evident in Marja. Taliban fighters are coming out at night and brutalizing the local citizenry with tactics that include beheading. One tribal elder told the New York Times, “After dark the city is like the kingdom of the Taliban.” In the long run such brutality will hurt the bad guys. In the short run it will slow down the advance on Kandahar because conquered territory is not yet pacified.
Hillary is off to Russia to hammer out the final details in a nuclear weapons reduction treaty. Pres. Obama is directly involved in the negotiations. When and if the treaty is finalized, US-Russian relations will take a big jump forward. India is already backing off from its recent craziness at the prospect of the Russian bear and American eagle making nice.
And Israel is also inching away from its anti-US craziness, allowing Palestinians more freedom of movement, backing away from its recent crackdown.
Wednesday, March 17, 2010
General Petraeus Hates Israel
Charts: The S&P 500 closed at 1166, up .6%. Resistance is at 1070. Oil hit $83 a barrel, encountered technical resistance and fell back slightly. Oil tends to trade in a very technical manner, so if it breaks above $83 it will probably keep going.
Fundamentals: Wholesale inflation came in cooler than expected. This validates the Fed’s ultra-low interest rate policy. If the Fed really can keep rates this low for another year, then lofty stock P/E ratios can be justified a while longer and earnings can play catch up to these lofty valuations. It all boils down to tame inflation for a long time. The greatest inflation threat on the horizon is soaring oil prices.
Geopolitics: Over the past few days CIA drones have killed perhaps two dozen bad guy leaders in repeated strikes against North Waziristan Taliban compounds. The NW Taliban is led by Hafiz Gul Bahadur, who has made various peace deals here and there, playing both ends against the middle, but remains one of the top bad guys in the world. The NW Taliban may be providing sanctuary for the upper echelon of Al-Qaeda, possibly Osama bin Laden. There has been speculation that Al-Qaeda leaders have moved into the slums of Karachi but the latest drone strikes suggest otherwise.
In January a team led by Gen. David Petraeus made a report to the Joint Chiefs castigating Israel and showing that it is causing major harm to the US in the Long War. Since Petraeus is the greatest military mind of our generation let’s take this as a given: Israel under its current leadership is a deadly enemy to the US. Right now there is bloody rioting in E. Jerusalem as Palestinian protestors are tangling with Israeli security forces. Pres. Obama has canceled a scheduled trip of US special envoy Mitchell to Tel Aviv, effectively scuttling peace talks, slapping Israel in the face, and aiding the Palestinians. Republicans in Congress are attacking the President because he is step by step dismantling the US/Israeli alliance. The Republicans are 100% brain dead on this issue and Obama is doing the right thing.
Fundamentals: Wholesale inflation came in cooler than expected. This validates the Fed’s ultra-low interest rate policy. If the Fed really can keep rates this low for another year, then lofty stock P/E ratios can be justified a while longer and earnings can play catch up to these lofty valuations. It all boils down to tame inflation for a long time. The greatest inflation threat on the horizon is soaring oil prices.
Geopolitics: Over the past few days CIA drones have killed perhaps two dozen bad guy leaders in repeated strikes against North Waziristan Taliban compounds. The NW Taliban is led by Hafiz Gul Bahadur, who has made various peace deals here and there, playing both ends against the middle, but remains one of the top bad guys in the world. The NW Taliban may be providing sanctuary for the upper echelon of Al-Qaeda, possibly Osama bin Laden. There has been speculation that Al-Qaeda leaders have moved into the slums of Karachi but the latest drone strikes suggest otherwise.
In January a team led by Gen. David Petraeus made a report to the Joint Chiefs castigating Israel and showing that it is causing major harm to the US in the Long War. Since Petraeus is the greatest military mind of our generation let’s take this as a given: Israel under its current leadership is a deadly enemy to the US. Right now there is bloody rioting in E. Jerusalem as Palestinian protestors are tangling with Israeli security forces. Pres. Obama has canceled a scheduled trip of US special envoy Mitchell to Tel Aviv, effectively scuttling peace talks, slapping Israel in the face, and aiding the Palestinians. Republicans in Congress are attacking the President because he is step by step dismantling the US/Israeli alliance. The Republicans are 100% brain dead on this issue and Obama is doing the right thing.
Tuesday, March 16, 2010
Old-fashioned CIA Assassination
Charts: The S&P 500 closed at 1159, up .8%. Over the past several trading days the index has been defeated by the 1150 resistance level 6 times. In moderate volume it broke through this barrier, signaling possible continuation in the current rally leg. Support is now 1154.
Fundamentals: Greek debt was given a thumbs-up by a rating agency, cooling fears of default. The Fed says interest rates will remain low for a long time. Also, the Fed says that while it still plans to stop buying mortgage backed securities in a few weeks if housing softened dramatically, then the buys would restart. That’s the good news. Rumors are swirling of another rate hike in China, the bad news.
Geopolitics: The Afghan Army killed 5 bad guys Monday without help from NATO. It killed 9 bad guys (including a Taliban commander) on Sunday with NATO back up. Over the weekend the Taliban tried to blow up a prison in Kandahar to release hundreds of imprisoned Taliban fighters but failed because Afghan Intelligence knew about the plot ahead of time. This paints a picture of Afghan forces making rapid progress. However, the Afghan Taliban is making and planting 22 IEDs every day, that’s 8000 a year. NATO and the Afghan Army are encircling Kandahar by taking over numerous small villages on the big city’s periphery. The Afghan government is sending 1500 extra police to Kandahar to help control the city as the noose tightens. The Battle of Kandahar is coming faster than expected.
In Yemen, the truce with the Houthi rebels is holding so the Yemeni Air Force has started a bombing campaign against Al-Qaeda positions. The Yemeni government says that AQAP is planning big terror strikes and its campaign is disrupting the bad guys.
The New York Times says that a former Defense Intelligence operative named Michael Furlong has been running an assassination ring in Afghanistan and funding it by siphoning money from an innocent-sounding US program to “study the tribal landscape.” Furlong has no provable CIA connections but the good guys doing his dirty work are former CIA officers and CIA-linked Delta Force soldiers. The CIA says it is positively shocked that a rogue clandestine operation has been running under its nose and it only assassinates bad guys with drones, never the old-fashioned way (yeah right). It is a sad commentary on the folks here at Dave’s Geopolitical Market Update, but we actually like rogue CIA operations and buy stocks when we hear about them.
Fundamentals: Greek debt was given a thumbs-up by a rating agency, cooling fears of default. The Fed says interest rates will remain low for a long time. Also, the Fed says that while it still plans to stop buying mortgage backed securities in a few weeks if housing softened dramatically, then the buys would restart. That’s the good news. Rumors are swirling of another rate hike in China, the bad news.
Geopolitics: The Afghan Army killed 5 bad guys Monday without help from NATO. It killed 9 bad guys (including a Taliban commander) on Sunday with NATO back up. Over the weekend the Taliban tried to blow up a prison in Kandahar to release hundreds of imprisoned Taliban fighters but failed because Afghan Intelligence knew about the plot ahead of time. This paints a picture of Afghan forces making rapid progress. However, the Afghan Taliban is making and planting 22 IEDs every day, that’s 8000 a year. NATO and the Afghan Army are encircling Kandahar by taking over numerous small villages on the big city’s periphery. The Afghan government is sending 1500 extra police to Kandahar to help control the city as the noose tightens. The Battle of Kandahar is coming faster than expected.
In Yemen, the truce with the Houthi rebels is holding so the Yemeni Air Force has started a bombing campaign against Al-Qaeda positions. The Yemeni government says that AQAP is planning big terror strikes and its campaign is disrupting the bad guys.
The New York Times says that a former Defense Intelligence operative named Michael Furlong has been running an assassination ring in Afghanistan and funding it by siphoning money from an innocent-sounding US program to “study the tribal landscape.” Furlong has no provable CIA connections but the good guys doing his dirty work are former CIA officers and CIA-linked Delta Force soldiers. The CIA says it is positively shocked that a rogue clandestine operation has been running under its nose and it only assassinates bad guys with drones, never the old-fashioned way (yeah right). It is a sad commentary on the folks here at Dave’s Geopolitical Market Update, but we actually like rogue CIA operations and buy stocks when we hear about them.
Sunday, March 14, 2010
Israel's Hand Grenade & Oceanic Pain For India
Charts: Large caps and mega-caps have been exhibiting stalling behavior, which is bearish. When the S&P 500 hits 1150 volume goes up and it churns futilely against resistance without breaking through. It would be much better if volume were to fall off as it bumps against resistance. The mega-cap Dow is showing an even worst stalling pattern, small caps not so much.
Geopolitics: Last week VP Joe Biden and Israeli PM Netanyahu were getting ready for a state dinner in Israel when both men learned that Israeli Interior Minister Eli Yishai had (from out of the blue) approved 1600 new settler housing units in E. Jerusalem. Netanyahu was as shocked as Biden and the unprecedented action by the notoriously ultra-hawkish Interior Minister amounted to a palace coup. Biden reacted poorly to this hand grenade by cravenly begging the Palestinians to not cancel the opening of peace talks. Biden should have stormed angrily out of Israel and threatened to cut off military aid. The next day Hillary salvaged the situation somewhat by using the strongest anti-Israeli language ever recorded by an American diplomat. The above incident supports my theory that the CIA has been stepping on Mossad over the last couple years. Palestinian/Israeli peace talks are sure to be scuttled, a victory for Israeli hardliners. On the other hand, Mossad and the other hardliners are playing a dangerous game and putting a lot of faith in pro-Israeli lobbyists in America.
Russia and India had their big powwow and the Russians left the meeting wondering if India had gone insane. India says it will buy $15 billion worth of Russian warplanes and 19 Russian nuclear reactors (worth maybe $60 billion). Then India proposed an anti-Taliban/anti-Pakistan/anti-American military alliance consisting of Uzbekistan, Tajikistan, Russia, and India. In panicky and hysterical tones India explained that America was about to realign the Taliban with Pakistan, pull all its troops out of Afghanistan, and turn the whole region over to Osama bin Laden (!). Russia wants to take as much money from India as possible but wants nothing to do with this bizarre idea of a new anti-American military alliance. A couple days after the Russian/Indian meeting Russia and America made big strides in perfecting the START anti-nuclear missile treaty, a move toward cementing the fledgling Russo-American alliance and probably Russia’s way of subtly sidelining India.
Like Israel, India is playing with fire and here’s why: The biggest single insurgency in the world is India’s huge Maoist separatist movement, which is gobbling up territory in the Asian giant’s interior. India’s Maoist guerilla movement is bigger than any one Islamic separatist movement, but it is mostly contained to India, and definitely not linked to the global Islamic revolution. Obama’s CIA is as ruthless as Eisenhower’s CIA of the 1950s. If the ruthless spooks from Langley were to turn Indian Maoist guerillas into good bad guys, it would create an ocean of pain for India.
Geopolitics: Last week VP Joe Biden and Israeli PM Netanyahu were getting ready for a state dinner in Israel when both men learned that Israeli Interior Minister Eli Yishai had (from out of the blue) approved 1600 new settler housing units in E. Jerusalem. Netanyahu was as shocked as Biden and the unprecedented action by the notoriously ultra-hawkish Interior Minister amounted to a palace coup. Biden reacted poorly to this hand grenade by cravenly begging the Palestinians to not cancel the opening of peace talks. Biden should have stormed angrily out of Israel and threatened to cut off military aid. The next day Hillary salvaged the situation somewhat by using the strongest anti-Israeli language ever recorded by an American diplomat. The above incident supports my theory that the CIA has been stepping on Mossad over the last couple years. Palestinian/Israeli peace talks are sure to be scuttled, a victory for Israeli hardliners. On the other hand, Mossad and the other hardliners are playing a dangerous game and putting a lot of faith in pro-Israeli lobbyists in America.
Russia and India had their big powwow and the Russians left the meeting wondering if India had gone insane. India says it will buy $15 billion worth of Russian warplanes and 19 Russian nuclear reactors (worth maybe $60 billion). Then India proposed an anti-Taliban/anti-Pakistan/anti-American military alliance consisting of Uzbekistan, Tajikistan, Russia, and India. In panicky and hysterical tones India explained that America was about to realign the Taliban with Pakistan, pull all its troops out of Afghanistan, and turn the whole region over to Osama bin Laden (!). Russia wants to take as much money from India as possible but wants nothing to do with this bizarre idea of a new anti-American military alliance. A couple days after the Russian/Indian meeting Russia and America made big strides in perfecting the START anti-nuclear missile treaty, a move toward cementing the fledgling Russo-American alliance and probably Russia’s way of subtly sidelining India.
Like Israel, India is playing with fire and here’s why: The biggest single insurgency in the world is India’s huge Maoist separatist movement, which is gobbling up territory in the Asian giant’s interior. India’s Maoist guerilla movement is bigger than any one Islamic separatist movement, but it is mostly contained to India, and definitely not linked to the global Islamic revolution. Obama’s CIA is as ruthless as Eisenhower’s CIA of the 1950s. If the ruthless spooks from Langley were to turn Indian Maoist guerillas into good bad guys, it would create an ocean of pain for India.
Friday, March 12, 2010
India Should Buy MIG Fighter
Charts: Today’s newsletter goes out before the bell, so let’s dive into geopolitics.
Geopolitics: The experts are convinced that Mullah Omar has moved out of Pakistan’s tribal lands and is now somewhere inside the city of Karachi, hidden among the teeming slums of 16 million people. Other Taliban and Al-Qaeda leaders are probably also hidden in the giant city, including Osama bin Laden. CIA drones have forced bad guy leaders to give up their de facto nation states on the Afpak border. But lower level Taliban leaders and fighters are still in the tribal lands and are still fighting. History shows that without the leavening hand of the top leaders the lower level bad guys will become increasingly brutal to the local populations, alienating local tribal leaders and making it easier to build good bad guy Islamic militias.
Hunting down bad guy leaders in Karachi and building g/b/g Islamic militias will require even greater cooperation between the CIA and the ISI/Pak Army. This means the US needs to step harder on India. Right now Russian leaders are meeting with Indian leaders, trying to sell them the next generation MIG fighter. As perverse as this may sound, it is better that India buy weapons from Russia than the US.
Along these lines, Afghan Pres. Karzai is refusing a Pak Army offer to train Afghan troops. Karzai does not want Pakistan dominating Afghanistan once US troops start withdrawing. Karzai is reaching out to India to prevent this. But the US wants Pakistan to dominate Afghanistan. At the same time, the US cannot step on Karzai. Sift through all this and one point stands out: if Russia and the US were de facto allies and India turned to Russia because of deteriorating Indo-American relations, it would be a good thing.
Geopolitics: The experts are convinced that Mullah Omar has moved out of Pakistan’s tribal lands and is now somewhere inside the city of Karachi, hidden among the teeming slums of 16 million people. Other Taliban and Al-Qaeda leaders are probably also hidden in the giant city, including Osama bin Laden. CIA drones have forced bad guy leaders to give up their de facto nation states on the Afpak border. But lower level Taliban leaders and fighters are still in the tribal lands and are still fighting. History shows that without the leavening hand of the top leaders the lower level bad guys will become increasingly brutal to the local populations, alienating local tribal leaders and making it easier to build good bad guy Islamic militias.
Hunting down bad guy leaders in Karachi and building g/b/g Islamic militias will require even greater cooperation between the CIA and the ISI/Pak Army. This means the US needs to step harder on India. Right now Russian leaders are meeting with Indian leaders, trying to sell them the next generation MIG fighter. As perverse as this may sound, it is better that India buy weapons from Russia than the US.
Along these lines, Afghan Pres. Karzai is refusing a Pak Army offer to train Afghan troops. Karzai does not want Pakistan dominating Afghanistan once US troops start withdrawing. Karzai is reaching out to India to prevent this. But the US wants Pakistan to dominate Afghanistan. At the same time, the US cannot step on Karzai. Sift through all this and one point stands out: if Russia and the US were de facto allies and India turned to Russia because of deteriorating Indo-American relations, it would be a good thing.
Thursday, March 11, 2010
Dali Lama Is a Bad Good Guy
Charts: The S&P 500 closed at 1150, up .4%. The broad index is exactly at a major resistance level.
Fundamentals: Consumer inflation data from China came in hotter than expected (scary). Chinese real estate prices are still soaring but the sales pace is slowing. So Chinese tightening measures are starting to bite. China is acting like the planet’s central bank, dictating the pace of global recovery and global inflation. This tightrope balancing act will probably work so long as oil prices don’t break above the technically significant level of $83 a barrel.
Sen. Leader Reid says reconciliation will be used to pass Obama-Care. So the Demos are growing for broke. If they try and fail it will be fantastic. If they succeed it will be very bad.
Geopolitics: America has 17 different intelligence agencies. The 17th agency (DNI) was created by Congress after 911 to stitch the other 16 together, a bad idea then and a worse idea now. A better idea would be to cut the CIA loose from bungling Congressional watchdog committees as well as DNI and then keep DNI busy by letting it screw with the 15 intelligence agencies that are not the CIA. This is exactly what Pres. Obama has done, proof he is brilliant in national defense.
The Dali Lama says he now supports China’s Islamic bad guys, the Uighurs, and hints that he will coordinate insurgent activities with them. The very first Gitmo detainees were Uighurs, very nasty folks indeed. The short guy in the orange robe is a genius at public relations in the West, but he is not a man of peace. Like many of today’s bad guys he is a Frankenstein-like creation of the CIA during the Cold War and his soldiers were used back then against Maoist China. So China will need help from the CIA.
Indonesian counterterrorist forces have killed the Islamic bad guy who masterminded the Bali bombings. All the recent progress we’ve seen against bad guys in SE Asia lately is starting to bolster Malaysia’s stock market (EWM). Malaysia is the most capitalistic Muslim nation and a leader in Islamic finance.
Specific Stocks: Nissan (NSANY) is the only Japanese auto maker with a brake override feature, which prevent the supposed surging problems plaguing Toyota. Nissan will benefit from Toyota’s woes and these woes will be long lasting. Nissan is introducing the only electric car in the US in a few months, it will do better than analysts forecast, and NSANY is cornering lithium ion battery supplies. Nissan is introducing a line of light commercial trucks that will do better than expected. The Japanese Central Bank says it is going to depreciate the Yen, which will help Japanese manufacturers. I like NSANY’s chart.
A.O. Smith (AOS) is the largest water heater maker in North America. It makes water heaters and electric motors in China (growing fast). Its stock is undervalued because the market thinks it is levered to residential housing. But most of its N. American revenue is levered to replacement water heaters, not new construction. The charts show AOS is starting to break out.
Fundamentals: Consumer inflation data from China came in hotter than expected (scary). Chinese real estate prices are still soaring but the sales pace is slowing. So Chinese tightening measures are starting to bite. China is acting like the planet’s central bank, dictating the pace of global recovery and global inflation. This tightrope balancing act will probably work so long as oil prices don’t break above the technically significant level of $83 a barrel.
Sen. Leader Reid says reconciliation will be used to pass Obama-Care. So the Demos are growing for broke. If they try and fail it will be fantastic. If they succeed it will be very bad.
Geopolitics: America has 17 different intelligence agencies. The 17th agency (DNI) was created by Congress after 911 to stitch the other 16 together, a bad idea then and a worse idea now. A better idea would be to cut the CIA loose from bungling Congressional watchdog committees as well as DNI and then keep DNI busy by letting it screw with the 15 intelligence agencies that are not the CIA. This is exactly what Pres. Obama has done, proof he is brilliant in national defense.
The Dali Lama says he now supports China’s Islamic bad guys, the Uighurs, and hints that he will coordinate insurgent activities with them. The very first Gitmo detainees were Uighurs, very nasty folks indeed. The short guy in the orange robe is a genius at public relations in the West, but he is not a man of peace. Like many of today’s bad guys he is a Frankenstein-like creation of the CIA during the Cold War and his soldiers were used back then against Maoist China. So China will need help from the CIA.
Indonesian counterterrorist forces have killed the Islamic bad guy who masterminded the Bali bombings. All the recent progress we’ve seen against bad guys in SE Asia lately is starting to bolster Malaysia’s stock market (EWM). Malaysia is the most capitalistic Muslim nation and a leader in Islamic finance.
Specific Stocks: Nissan (NSANY) is the only Japanese auto maker with a brake override feature, which prevent the supposed surging problems plaguing Toyota. Nissan will benefit from Toyota’s woes and these woes will be long lasting. Nissan is introducing the only electric car in the US in a few months, it will do better than analysts forecast, and NSANY is cornering lithium ion battery supplies. Nissan is introducing a line of light commercial trucks that will do better than expected. The Japanese Central Bank says it is going to depreciate the Yen, which will help Japanese manufacturers. I like NSANY’s chart.
A.O. Smith (AOS) is the largest water heater maker in North America. It makes water heaters and electric motors in China (growing fast). Its stock is undervalued because the market thinks it is levered to residential housing. But most of its N. American revenue is levered to replacement water heaters, not new construction. The charts show AOS is starting to break out.
Wednesday, March 10, 2010
Boeing Tanker Ready For Iranian Missiles
Charts: The S&P 500 closed at 1146, up .45%. The market bumped repeatedly against stiff resistance at 1150, was knocked down, but held its own, hovering angrily just under that level, which is the bull market high. Support is at 1125 and under that 1120 is significant support.
Fundamentals: Trade data out of China came in stronger than expected. The Chinese government has been hinting that it is going to let its currency appreciate to slow down growth and today’s data made that seem more likely. This originally hurt material stocks. Then the US government said its February deficit was a record $221 billion, which hurt the dollar and sent materials gyrating. US sales and inventory data was better than expected. All this led to a wild ride on Wall Street.
Geopolitics: There have been several reports of CIA surveillance drones flying over the Somali capital city Mogadishu. The Somali Army and AU have been sporadically fighting Al-Shabab for a few weeks, making probing attacks here and there, seemingly avoiding an all out push in order to gather better intelligence. On Wednesday fighting in the big city flared up with 8 dead and scores wounded. The only reliable news source out of Mogadishu is a radio/TV station. Al Shabab has started beheading the reporters from the station so info is hard to come by. This does speak to Al-Shabab not doing that well in the fighting.
In Afghanistan, the US Fifth Stryker Brigade is beginning to secure the roads leading to Kandahar. Gen. McChrystal says that the Kandahar campaign will be different from Marja. In Kandahar the good guys will slowly build a noose around the city and even more slowly tighten it. Just because McChrystal was honest when he gave details of his Marja battle plan to the Taliban doesn’t mean he is being honest now when he says the attack will be in late summer. It isn’t his job to be honest. His job is to deceive.
Specific Stocks: Boeing has designed a refueling air tanker that is loaded with electronic countermeasures. The competing Airbus/Northrop design isn’t even in the running. It carries more fuel but has weak countermeasures. A few years ago the Airbus design was deemed better but since then Iran has developed a much stronger arsenal of missiles so Boeing is the winner. Over the next few decades the contract will be worth $100 billion.
Fundamentals: Trade data out of China came in stronger than expected. The Chinese government has been hinting that it is going to let its currency appreciate to slow down growth and today’s data made that seem more likely. This originally hurt material stocks. Then the US government said its February deficit was a record $221 billion, which hurt the dollar and sent materials gyrating. US sales and inventory data was better than expected. All this led to a wild ride on Wall Street.
Geopolitics: There have been several reports of CIA surveillance drones flying over the Somali capital city Mogadishu. The Somali Army and AU have been sporadically fighting Al-Shabab for a few weeks, making probing attacks here and there, seemingly avoiding an all out push in order to gather better intelligence. On Wednesday fighting in the big city flared up with 8 dead and scores wounded. The only reliable news source out of Mogadishu is a radio/TV station. Al Shabab has started beheading the reporters from the station so info is hard to come by. This does speak to Al-Shabab not doing that well in the fighting.
In Afghanistan, the US Fifth Stryker Brigade is beginning to secure the roads leading to Kandahar. Gen. McChrystal says that the Kandahar campaign will be different from Marja. In Kandahar the good guys will slowly build a noose around the city and even more slowly tighten it. Just because McChrystal was honest when he gave details of his Marja battle plan to the Taliban doesn’t mean he is being honest now when he says the attack will be in late summer. It isn’t his job to be honest. His job is to deceive.
Specific Stocks: Boeing has designed a refueling air tanker that is loaded with electronic countermeasures. The competing Airbus/Northrop design isn’t even in the running. It carries more fuel but has weak countermeasures. A few years ago the Airbus design was deemed better but since then Iran has developed a much stronger arsenal of missiles so Boeing is the winner. Over the next few decades the contract will be worth $100 billion.
Tuesday, March 9, 2010
Whack-A-Mole!
Charts: The S&P 500 closed at 1140, up .17%. Volume patterns within this rally are okay but the total amount of volume has been freakishly low. The vast majority of investors are sitting on the sidelines, probably spooked by the chance that Obama-Care might pass and the reemergence of sovereign debt fears.
Fundamentals: Germany, Canada, and China are cutting government spending and all three will soon be running surpluses again. Big country spending cuts exert enormous pressure on small countries to follow suit. Of the Euro-zone peripheral countries Greece, Ireland, and Spain have slashed spending but rating agencies are saying Portugal hasn’t cut enough. So the sovereign debt crisis is now pivoting on Portugal. Obama-Care must fail before America can focus on freezing spending. Since America’s debt is so vast progress here would help everywhere.
Geopolitics: Russia’s KGB is now called the FSB; it killed 8 Islamic bad guy leaders and arrested 10 more a few days ago. The main leader of the Caucus Islamic separatist movement was killed. This is very good news. The FSB is hinting of new advanced technology, maybe a sign of CIA help.
Singapore’s spy agency warned of Islamic attacks on Southeast Asian shipping a couple weeks ago. Obviously acting on a Singaporean tip, Philippine Marines raided an Abu Sayyaf camp and demolished it, killing scores of bad guys. Russia and SE Asia are possible whack-a-mole destinations. The good guys in these areas are working to staunch a possible bad guy in-flow as the USMC advances across Afghanistan.
In Afghanistan, the Afghan Taliban attacked a smaller rival Taliban and has taken over a big chunk of its territory in northern Afghanistan, far away from Kandahar and Marja. This territory produces revenue for the bad guys in the form of religious taxes. The Afghan Taliban is getting ready for a short whack-a-mole move away from the coming onslaught against Kandahar.
In Nigeria, Muslim and Christian mobs battled each other, resulting in about 200 dead. This is not organized Long War fighting such as the Marines vs. the Taliban but something worse. Spontaneous fighting between Muslims and Christians in Africa taps into the deep historical roots of the LW, akin to the nearly century-long Sudanese Civil War. Africa is the ultimate destination for the bad guys once the Afghan war winds down and a truly gigantic whack-a-mole effect kicks in.
Specific Stocks: Korea Electric Power (KEP) is an integrated utility in S. Korea. It also leads a consortium of companies and builds nuclear power plants in emerging markets. Its power plant design cannot withstand the impact of a fully laden 747 power-diving into the reactor core. Western designed power plants are strong enough to withstand this sort of terror attack and consequently they are twice as expensive as KEP plants but not better in any other way. Emerging market countries don’t want to pay for all the extra steel and concrete to ward off an attack that is unlikely to ever occur. Here we have silly Western Long War phobia helping an Eastern company.
Fundamentals: Germany, Canada, and China are cutting government spending and all three will soon be running surpluses again. Big country spending cuts exert enormous pressure on small countries to follow suit. Of the Euro-zone peripheral countries Greece, Ireland, and Spain have slashed spending but rating agencies are saying Portugal hasn’t cut enough. So the sovereign debt crisis is now pivoting on Portugal. Obama-Care must fail before America can focus on freezing spending. Since America’s debt is so vast progress here would help everywhere.
Geopolitics: Russia’s KGB is now called the FSB; it killed 8 Islamic bad guy leaders and arrested 10 more a few days ago. The main leader of the Caucus Islamic separatist movement was killed. This is very good news. The FSB is hinting of new advanced technology, maybe a sign of CIA help.
Singapore’s spy agency warned of Islamic attacks on Southeast Asian shipping a couple weeks ago. Obviously acting on a Singaporean tip, Philippine Marines raided an Abu Sayyaf camp and demolished it, killing scores of bad guys. Russia and SE Asia are possible whack-a-mole destinations. The good guys in these areas are working to staunch a possible bad guy in-flow as the USMC advances across Afghanistan.
In Afghanistan, the Afghan Taliban attacked a smaller rival Taliban and has taken over a big chunk of its territory in northern Afghanistan, far away from Kandahar and Marja. This territory produces revenue for the bad guys in the form of religious taxes. The Afghan Taliban is getting ready for a short whack-a-mole move away from the coming onslaught against Kandahar.
In Nigeria, Muslim and Christian mobs battled each other, resulting in about 200 dead. This is not organized Long War fighting such as the Marines vs. the Taliban but something worse. Spontaneous fighting between Muslims and Christians in Africa taps into the deep historical roots of the LW, akin to the nearly century-long Sudanese Civil War. Africa is the ultimate destination for the bad guys once the Afghan war winds down and a truly gigantic whack-a-mole effect kicks in.
Specific Stocks: Korea Electric Power (KEP) is an integrated utility in S. Korea. It also leads a consortium of companies and builds nuclear power plants in emerging markets. Its power plant design cannot withstand the impact of a fully laden 747 power-diving into the reactor core. Western designed power plants are strong enough to withstand this sort of terror attack and consequently they are twice as expensive as KEP plants but not better in any other way. Emerging market countries don’t want to pay for all the extra steel and concrete to ward off an attack that is unlikely to ever occur. Here we have silly Western Long War phobia helping an Eastern company.
Sunday, March 7, 2010
United States Of Rome
Geopolitics: The rise of the American superpower and the rise of ancient Rome are an example of history repeating itself and comparing the two can help us become better investors.
Stretching back to the dawn of Western civilization the center of military power was the old world of North Africa and the Mideast. In 264 BC Rome defeated the strongest old world power (Carthage) and the world’s military center began shifting to the new world of Europe. Over the next 91 years Rome fought two more wars against Carthage. Once the third and final war was over Europe had become the world’s military center and Rome the world’s sole superpower. For the next 2135 years the world’s military power was concentrated in Europe. It became the old world. Of the 3 big wars that Rome fought against Carthage the biggest by far was the second, where Hannibal’s columns of armored war elephants came pouring into Europe. To this day Hannibal remains a mythic figure of terror and dread.
In 1918 America was instrumental in defeating the strongest old war power (Germany) and the world’s military center began shifting from the old world (Europe) to the new world (North America). Over the next 71 years America fought two more wars against the strongest old world powers (Germany and then Russia) and once the third and final war (the Cold War) was over the world’s military power became concentrated in the new world. And once again the world had a single superpower. The second of the 3 European wars was by far the biggest, where Hitler’s mechanized armored columns nearly conquered the world. Hitler remains a mythic figure of terror and dread.
Around the time that Carthage fell Rome began to conquer, one by one, almost every country in the known world. Rome built roads in the provinces that it conquered. These roads linked the markets of individual towns together and formed larger markets. The outer provinces were literally emerging markets. A socialist rot infected the core of the empire as Roman citizens demanded government supplied bread and circuses. But the dynamic emerging markets countered the rot in the core and the imperial economy flourished. At about the time of Christ, Rome stopped conquering other countries and there was world peace for two centuries. During this period of peace the countries not conquered by Rome became stronger and stronger while the socialist rot in the heart of the empire got worse and worse. Rome engaged in what we call Quantitative Easing (printing money out of thin air) by debasing its currency. When the barbarians began pouring into Rome its financial system was so screwed up it couldn’t afford to raise big enough armies and the empire collapsed in 476 AD after centuries of bloody conflict.
America is today where Rome was in 190 BC, when it conquered Syria and began its domination of the Western world’s small powers. It is no small coincidence that America’s recent conquest of Iraq is right next to Syria. What roads were to Rome, stock markets and free trade accords are to America. So the American global empire can flourish for centuries even with a socialist rot at its core as long as it keeps fighting and winning the Long War, plus stock markets and free trade accords follow in the wake of its military victories. So far this is happening. The Pentagon dismantled Iraq’s trade barriers and turned it into a free trade zone. If we were ancient Roman investors we would want to focus on emerging markets and so it is today.
Stretching back to the dawn of Western civilization the center of military power was the old world of North Africa and the Mideast. In 264 BC Rome defeated the strongest old world power (Carthage) and the world’s military center began shifting to the new world of Europe. Over the next 91 years Rome fought two more wars against Carthage. Once the third and final war was over Europe had become the world’s military center and Rome the world’s sole superpower. For the next 2135 years the world’s military power was concentrated in Europe. It became the old world. Of the 3 big wars that Rome fought against Carthage the biggest by far was the second, where Hannibal’s columns of armored war elephants came pouring into Europe. To this day Hannibal remains a mythic figure of terror and dread.
In 1918 America was instrumental in defeating the strongest old war power (Germany) and the world’s military center began shifting from the old world (Europe) to the new world (North America). Over the next 71 years America fought two more wars against the strongest old world powers (Germany and then Russia) and once the third and final war (the Cold War) was over the world’s military power became concentrated in the new world. And once again the world had a single superpower. The second of the 3 European wars was by far the biggest, where Hitler’s mechanized armored columns nearly conquered the world. Hitler remains a mythic figure of terror and dread.
Around the time that Carthage fell Rome began to conquer, one by one, almost every country in the known world. Rome built roads in the provinces that it conquered. These roads linked the markets of individual towns together and formed larger markets. The outer provinces were literally emerging markets. A socialist rot infected the core of the empire as Roman citizens demanded government supplied bread and circuses. But the dynamic emerging markets countered the rot in the core and the imperial economy flourished. At about the time of Christ, Rome stopped conquering other countries and there was world peace for two centuries. During this period of peace the countries not conquered by Rome became stronger and stronger while the socialist rot in the heart of the empire got worse and worse. Rome engaged in what we call Quantitative Easing (printing money out of thin air) by debasing its currency. When the barbarians began pouring into Rome its financial system was so screwed up it couldn’t afford to raise big enough armies and the empire collapsed in 476 AD after centuries of bloody conflict.
America is today where Rome was in 190 BC, when it conquered Syria and began its domination of the Western world’s small powers. It is no small coincidence that America’s recent conquest of Iraq is right next to Syria. What roads were to Rome, stock markets and free trade accords are to America. So the American global empire can flourish for centuries even with a socialist rot at its core as long as it keeps fighting and winning the Long War, plus stock markets and free trade accords follow in the wake of its military victories. So far this is happening. The Pentagon dismantled Iraq’s trade barriers and turned it into a free trade zone. If we were ancient Roman investors we would want to focus on emerging markets and so it is today.
Friday, March 5, 2010
How Do You Spell Armenia?
Charts: The S&P 500 closed at 1139, up 1.4%. The index is comfortably above the super important Fibonacci support level of 1120. Almost every technical indicator has turned positive. Only one is bearish: investor sentiment, which is signaling complacency. The shaky rally has morphed into a sturdy rally.
Fundamentals: Greece crushed its government unions, announced gigantic spending cuts, and successfully floated a much anticipated bond issue. Portugal is just beginning this process and off to a great start. A good domino effect is rippling through highly indebted Euro-zone peripheral countries.
The big US jobs report came in much better than expected today and the Fed reported that consumer credit increased last month. This is the reason for the rally.
The Premiere of China made a speech implying that instead of further monetary tightening the Asian colossus will curb real estate investment and leave the rest of the economy alone. Consumer inflation is tame in China but a real estate bubble is forming. China has been using a sledgehammer to swat a fly. Now it will use a flyswatter. Stocks highly levered to growth in China had been suffering lately but today came roaring back.
Geopolitics: Iraq’s national election is underway. We want the incumbent, Maliki, to lose and the challenger, Allawi, to win. Through debaathification Prime Minister Maliki has been persecuting the minority Sunnis, playing into Al-Qaeda in Iraq’s hands (AQI is Sunni, the Baath party was Sunni). The biggest mistake that Bush made in Iraq was the so called debaathification campaign where every member of Saddam Hussein’s Baath party was fired or worse. A secular minded Shiite, Maliki has continued this pigheaded campaign. Allawi is a Shiite as well but he will put a stop to the mindless persecution, destroying AQI’s major recruiting tool. Furthermore, Allawi has very old and strong ties to the CIA. When the US Army leaves Iraq the CIA must move in to fill the void. Allawi will make sure that happens.
General McChrystal is telling us that the Battle of Marja is a dress rehearsal for the much bigger Battle of Kandahar coming in late summer. He is creating an entirely new command structure just for the Battle of Kandahar, reconfiguring almost all his resources around this goal. If Kandahar will be that much bigger than Marja won’t it be the pivotal battle that decides the fate of the Afghan war? No, pivotal battles aren’t necessarily the biggest ones. The pivotal Battle of Stalingrad was smaller than the Battle of Berlin in WW II. Therefore Marja is everything. How is it going? Fighting has died down since Monday. NATO is busy clearing every land mine, IED, and booby trap in houses, streets, and fields over a 155 square mile area, a huge task; and the bad guys are probably playing possum out there. During the searches, the good guys are not confiscating or removing bags of dried poppy seeds or raw heroin. In a policy shift, NATO is now fighting a war, not acting like the DEA. Stupidly, there are DEA agents in Marja, but these bad good guys are being sidelined.
A Congressional committee passed a resolution condemning Turkey for its WW I massacre of Armenians, enraging every Turk on the planet. With all the trouble we’re having keeping Turkey as an ally this is incredibly stupid. Turkey recalled its US ambassador. But Hillary is doing a fantastic job soothing Turkish feelings, explaining how brain-dead Congressmen are and how the average American can’t even spell the word Armenia.
Fundamentals: Greece crushed its government unions, announced gigantic spending cuts, and successfully floated a much anticipated bond issue. Portugal is just beginning this process and off to a great start. A good domino effect is rippling through highly indebted Euro-zone peripheral countries.
The big US jobs report came in much better than expected today and the Fed reported that consumer credit increased last month. This is the reason for the rally.
The Premiere of China made a speech implying that instead of further monetary tightening the Asian colossus will curb real estate investment and leave the rest of the economy alone. Consumer inflation is tame in China but a real estate bubble is forming. China has been using a sledgehammer to swat a fly. Now it will use a flyswatter. Stocks highly levered to growth in China had been suffering lately but today came roaring back.
Geopolitics: Iraq’s national election is underway. We want the incumbent, Maliki, to lose and the challenger, Allawi, to win. Through debaathification Prime Minister Maliki has been persecuting the minority Sunnis, playing into Al-Qaeda in Iraq’s hands (AQI is Sunni, the Baath party was Sunni). The biggest mistake that Bush made in Iraq was the so called debaathification campaign where every member of Saddam Hussein’s Baath party was fired or worse. A secular minded Shiite, Maliki has continued this pigheaded campaign. Allawi is a Shiite as well but he will put a stop to the mindless persecution, destroying AQI’s major recruiting tool. Furthermore, Allawi has very old and strong ties to the CIA. When the US Army leaves Iraq the CIA must move in to fill the void. Allawi will make sure that happens.
General McChrystal is telling us that the Battle of Marja is a dress rehearsal for the much bigger Battle of Kandahar coming in late summer. He is creating an entirely new command structure just for the Battle of Kandahar, reconfiguring almost all his resources around this goal. If Kandahar will be that much bigger than Marja won’t it be the pivotal battle that decides the fate of the Afghan war? No, pivotal battles aren’t necessarily the biggest ones. The pivotal Battle of Stalingrad was smaller than the Battle of Berlin in WW II. Therefore Marja is everything. How is it going? Fighting has died down since Monday. NATO is busy clearing every land mine, IED, and booby trap in houses, streets, and fields over a 155 square mile area, a huge task; and the bad guys are probably playing possum out there. During the searches, the good guys are not confiscating or removing bags of dried poppy seeds or raw heroin. In a policy shift, NATO is now fighting a war, not acting like the DEA. Stupidly, there are DEA agents in Marja, but these bad good guys are being sidelined.
A Congressional committee passed a resolution condemning Turkey for its WW I massacre of Armenians, enraging every Turk on the planet. With all the trouble we’re having keeping Turkey as an ally this is incredibly stupid. Turkey recalled its US ambassador. But Hillary is doing a fantastic job soothing Turkish feelings, explaining how brain-dead Congressmen are and how the average American can’t even spell the word Armenia.
Thursday, March 4, 2010
A Ticking Time Bomb
Charts: The S&P 500 closed at 1123, up .4%. Above 1120 is good. Everyone is on pins and needles about Friday’s big jobs report.
Fundamentals: A raft of data came out today that was generally good. Except for the housing data. This brings up the big picture of proposed financial reforms. Whenever American real estate prices take a sharp dip homeowners bailout of mortgages and the financial system suffers a severe crisis. This doesn’t happen in any other advanced country. Take Hong Kong as one example. Real estate prices there can fall by 50% in a given year, a much steeper drop than anything ever experienced in the US. But even with a fall that great Hong Kong homeowners by and large don’t default, the city-state’s financial system is barely ruffled, and real estate prices always bounce back without government intervention. Real estate loans are recourse in Hong Kong (and everywhere else except America) plus there are steep minimum down payment requirements. In other words, in Hong Kong financial instruments don’t have built in consumer protection but corporate protection. What this all boils down to is that the Demos proposed consumer protection agency that is supposed to rework every financial instrument to afford greater consumer protection is a ticking time bomb. That is if it passes.
Fundamentals: A raft of data came out today that was generally good. Except for the housing data. This brings up the big picture of proposed financial reforms. Whenever American real estate prices take a sharp dip homeowners bailout of mortgages and the financial system suffers a severe crisis. This doesn’t happen in any other advanced country. Take Hong Kong as one example. Real estate prices there can fall by 50% in a given year, a much steeper drop than anything ever experienced in the US. But even with a fall that great Hong Kong homeowners by and large don’t default, the city-state’s financial system is barely ruffled, and real estate prices always bounce back without government intervention. Real estate loans are recourse in Hong Kong (and everywhere else except America) plus there are steep minimum down payment requirements. In other words, in Hong Kong financial instruments don’t have built in consumer protection but corporate protection. What this all boils down to is that the Demos proposed consumer protection agency that is supposed to rework every financial instrument to afford greater consumer protection is a ticking time bomb. That is if it passes.
Wednesday, March 3, 2010
Superpower Now Hates India
Charts: The S&P 500 closed at 1119, up a fraction. The index is facing stiff resistance at 1120, the 50% retracement level and a very significant Fibonacci number. Most likely Friday’s big jobs report will push it above or below 1120. Below is not good.
Fundamentals: Congressional Demos are figuring out parliamentary tactics to get around Republican gridlock. So the once gridlocked unemployment extension is going through after all and the toxic healthcare attempt is gathering steam. If a healthcare bill does not pass by March 26, it is dead for good because of Congress’ Easter vacation. Financial reform is also gathering steam. Demos and some turncoat Republicans seek to create a “consumer advocate” agency that will rewrite regulations for all financial instruments to favor consumers over corporations; very bad indeed.
Today’s service sector PMI survey came in much stronger than expected. Since the service sector is 70% of the economy this is very good news. The market is struggling with good news from the private sector being balanced by bad news from the socialist public sector.
Geopolitics: The Pak Army and ISI are cooperating with the US to an amazing degree and their reward is on the way: A fleet of 12 surveillance drones, plus the most advanced F16 fighter-bombers equipped with high tech smart bombs. This means the ISI is not going to get Reaper strike drones. The F-16s and Pak foot soldiers will do the striking and the surveillance drones will act as spotters. This package is going to require a lot of other US gear not mentioned in press releases and we can deduce what this stuff will be. Feed from the drones will have to be linked to Pak air bases and infantry units. This means much of the ancillary gear will be supplied by Harris Corporation (HRS). This is a surprise to defense analysts and HRS popped up today. We all thought the ISI was going to get Reaper drones because giving the Pak Army advanced F-16s and smart bombs is a terrible blow to India.
The Pak Army might be getting ready to launch its offensive into N. Waziristan much sooner than expected. There are reports of Pak Army movements along the Waziristan border. Curfews in this region are being imposed. Leaflets are being dropped from airplanes. If the timetable for the N. Waziristan invasion is being radically advanced we must ask why. The Pak Army could put several hundred thousand troops in the tribal regions tomorrow if it had no fear of India. If your superpower buddy is coming out strongly against India, then obviously your fear of the Asian giant is diminished.
Fundamentals: Congressional Demos are figuring out parliamentary tactics to get around Republican gridlock. So the once gridlocked unemployment extension is going through after all and the toxic healthcare attempt is gathering steam. If a healthcare bill does not pass by March 26, it is dead for good because of Congress’ Easter vacation. Financial reform is also gathering steam. Demos and some turncoat Republicans seek to create a “consumer advocate” agency that will rewrite regulations for all financial instruments to favor consumers over corporations; very bad indeed.
Today’s service sector PMI survey came in much stronger than expected. Since the service sector is 70% of the economy this is very good news. The market is struggling with good news from the private sector being balanced by bad news from the socialist public sector.
Geopolitics: The Pak Army and ISI are cooperating with the US to an amazing degree and their reward is on the way: A fleet of 12 surveillance drones, plus the most advanced F16 fighter-bombers equipped with high tech smart bombs. This means the ISI is not going to get Reaper strike drones. The F-16s and Pak foot soldiers will do the striking and the surveillance drones will act as spotters. This package is going to require a lot of other US gear not mentioned in press releases and we can deduce what this stuff will be. Feed from the drones will have to be linked to Pak air bases and infantry units. This means much of the ancillary gear will be supplied by Harris Corporation (HRS). This is a surprise to defense analysts and HRS popped up today. We all thought the ISI was going to get Reaper drones because giving the Pak Army advanced F-16s and smart bombs is a terrible blow to India.
The Pak Army might be getting ready to launch its offensive into N. Waziristan much sooner than expected. There are reports of Pak Army movements along the Waziristan border. Curfews in this region are being imposed. Leaflets are being dropped from airplanes. If the timetable for the N. Waziristan invasion is being radically advanced we must ask why. The Pak Army could put several hundred thousand troops in the tribal regions tomorrow if it had no fear of India. If your superpower buddy is coming out strongly against India, then obviously your fear of the Asian giant is diminished.
Tuesday, March 2, 2010
Saudi Spies Perform Miracles
Charts: The S&P 500 closed at 1118, up .2% on the day and 1.2% for the week. Major indexes are above 50-day and 100-day lines. Volume patterns have improved slightly so most chartists are saying we are in a shaky rally not a counter-cyclical bounce. 1115 is the breakeven point for the year, so overcoming this resistance is significant. 1120 is the 50% bear market retracement and a huge Fibonacci number, so it should provide big resistance. Healthy consolidation would see a trading range between 1150 and 1120.
Fundamentals: Gridlock has derailed the most recent extension of unemployment benefits. In most recoveries hiring returns only after benefits run out and workers start taking any job they can, so this helps both the budget deficit and the macroeconomic picture. Gridlock has also (for now) forced a cut to Medicare funding. Laws on the books automatically force spending cuts to Medicare unless Congress proactively unwinds these cuts every year. If gridlock became entrenched, Medicare cuts would automatically make the program solvent in time. Friday is the big jobs report, a source of potential volatility.
Geopolitics: Saudi’s spy agency is called GIP. Loose-lipped Pak diplomats are saying GIP and CIA have established a much closer working relationship. It seems GIP is the driving force behind ISI’s recent aggressive moves to roll up Al-Qaeda and Taliban leaders inside Pakistan. Only today, ISI arrested 7 more senior Taliban leaders. Also, Lebanon and Dubai’s intelligence services have recently been clobbering Israel’s Mossad with super advanced technology. Probably this technology has come from GIP acting as a proxy for CIA. The broad pattern then is CIA reaching out to its sister services within allied Muslim nations and at the same time stepping on Israel. In return, Muslim intelligence agencies are hammering the bad guys.
A few weeks ago a CIA drone strike wiped out an Al-Qaeda camp in N. Waziristan that was devoted to exporting jihad to China. Perhaps this is why US carrier battle groups are now welcome in Hong Kong harbor. CIA drones are still very active over the tribal regions in Pakistan and are racking up steady kills. Ground fighting in Marja Afghanistan and Pakistan’s tribal lands continues at a slow grinding pace.
Germany has responded to the Dutch Army pulling out of Afghanistan by increasing troop levels by about 800. This heroic action should put a stop to any further exodus from Afghanistan by NATO allies.
Fundamentals: Gridlock has derailed the most recent extension of unemployment benefits. In most recoveries hiring returns only after benefits run out and workers start taking any job they can, so this helps both the budget deficit and the macroeconomic picture. Gridlock has also (for now) forced a cut to Medicare funding. Laws on the books automatically force spending cuts to Medicare unless Congress proactively unwinds these cuts every year. If gridlock became entrenched, Medicare cuts would automatically make the program solvent in time. Friday is the big jobs report, a source of potential volatility.
Geopolitics: Saudi’s spy agency is called GIP. Loose-lipped Pak diplomats are saying GIP and CIA have established a much closer working relationship. It seems GIP is the driving force behind ISI’s recent aggressive moves to roll up Al-Qaeda and Taliban leaders inside Pakistan. Only today, ISI arrested 7 more senior Taliban leaders. Also, Lebanon and Dubai’s intelligence services have recently been clobbering Israel’s Mossad with super advanced technology. Probably this technology has come from GIP acting as a proxy for CIA. The broad pattern then is CIA reaching out to its sister services within allied Muslim nations and at the same time stepping on Israel. In return, Muslim intelligence agencies are hammering the bad guys.
A few weeks ago a CIA drone strike wiped out an Al-Qaeda camp in N. Waziristan that was devoted to exporting jihad to China. Perhaps this is why US carrier battle groups are now welcome in Hong Kong harbor. CIA drones are still very active over the tribal regions in Pakistan and are racking up steady kills. Ground fighting in Marja Afghanistan and Pakistan’s tribal lands continues at a slow grinding pace.
Germany has responded to the Dutch Army pulling out of Afghanistan by increasing troop levels by about 800. This heroic action should put a stop to any further exodus from Afghanistan by NATO allies.
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