The Taliban hit Bagram Air Base in Afghanistan for the second time in a week. This time 12 Taliban fighters were killed and no good guys. Then the Taliban attacked Kandahar Air Base with mortars, rockets, and a sizeable force. At least 10 Taliban fighters were killed and no good guys. NATO helicopter gunships spent hours chewing up nearby fields so there was probably another dozen or so bad guys killed in the after action.
The Taliban has been conducting a surge into Kandahar and Marja. Combat is heating up in both these areas and in other parts of the country. US Special Forces have executed over 100 hundred raids in Kandahar over the past few weeks, aimed at killing or capturing Taliban leaders. It is safe to say that the Battle of Kandahar has started.
Kandahar is a city of 1 million people. Half of its districts are firmly under Taliban control; the bad guys are effectively running governments in these districts. Part of the Taliban surge is a campaign to win the hearts and minds of the Afghan people. Mullah Omar has ordered his people to stop beheading criminals. Now they use firing squads.
It is disappointing that the Battle of Marja is still ongoing. The Marines are slowly expanding the parts of Marja that they control by giving fertilizer, seed, and agricultural equipment to farmers. The Marines then protect these famers from the bad guys. Every week a smaller percentage of farmers accepting this stuff are killed. The battle will be over when zero farmers are killed. The Marines also control everything leaving the farms through elaborate checkpoints. Marja produces more opium than any other part of Afghanistan and the Marines are finding success in choking off drug money to the bad guys. It is incredibly slow going.
Now that he has sewn up his domestic agenda with healthcare and financial reform, President Obama is getting ready to give a major speech on foreign policy. There will be a lot of fluff in the speech but he will make two main points: The US will rely on native troops to do most of the Long War fighting, and there is something called the Long War going on. He won’t use the phrase “Long War” of course but he will start preparing the American public for the fact that while there might be a troop reduction in Afghanistan next year, it will be modest and American forces will be there for a very long time. And he might say something like, “I cannot rule out the deployment of US troops to other troubled regions of the world besides Afghanistan.”
Sunday, May 23, 2010
Friday, May 21, 2010
Watch Car Dealers
Charts: The S&P 500 had a strong day, up 1.5% to close at 1088. The correction is at an inflection point. Lows for the year are 1057. These levels have been probed a couple times now. If the index breaks through these lows it could spell the start of a bear market. If support holds, as it did today, the charts are saying we are only in a correction.
Fundamentals: Germany passed the trillion dollar bailout package for Euro-periphery debt last night. Germany’s bizarre restriction on shorting Euro-debt was a Hail Mary to try and avoid funding the bailout. The Hail Mary didn’t work but the bailout won’t work without Germany’s head in the game. The US Senate passed its financial reform bill. Now the House and Senate will merge their respective bills. The House version exempts car dealers from financial restrictions and the final bill may keep this exemption. If this were to happen it would be a sign that the government’s attack on the private sector is losing steam.
Fundamentals: Germany passed the trillion dollar bailout package for Euro-periphery debt last night. Germany’s bizarre restriction on shorting Euro-debt was a Hail Mary to try and avoid funding the bailout. The Hail Mary didn’t work but the bailout won’t work without Germany’s head in the game. The US Senate passed its financial reform bill. Now the House and Senate will merge their respective bills. The House version exempts car dealers from financial restrictions and the final bill may keep this exemption. If this were to happen it would be a sign that the government’s attack on the private sector is losing steam.
Thursday, May 20, 2010
America's Responsibilities
Charts: The scariest chart by far is first time jobless claims. Through most of 2009 it plunged sharply, reflecting good employment trends. But at the start of 2010 it hit a floor and traded sideways in a well defined channel, which spoke to an anemic L-shaped recovery in hiring. Today jobless claims jumped sharply out of that channel, suggesting a double-dip recession. Today’s bloodbath on Wall Street is because of the jobless claims jumping.
Geopolitics: The Pak Taliban launched a big conventional style assault on the Pak Army and got chewed up with dozens of bad guys killed. The Afghan Taliban launched a similar assault on NATO’s Bagram Air Base in Afghanistan. And the Afghan Taliban was slaughtered as well, with the good guys barely scratched. The Afghan Taliban says that it is starting its spring offensive against NATO. The bad guys have a tremendous capacity to absorb casualties and probably don’t consider these two big assaults failures.
In Kyrgyzstan, violence against the government is steadily increasing with sporadic blow-ups here and there. The beginning of an Islamic insurgency is evolving and the highly stretched CIA must find some way of dealing with this new threat.
In Thailand, a full-blown civil war is underway. The Redshirt rebels trying to topple the government are not Islamic radicals but Thailand does have an Islamic insurgency that is helped by the chaos engulfing the Southeast Asian country.
South Korea has formally charged North Korea with torpedoing one its cruisers last month and tensions are rife on the Korean peninsula.
All three of these problems are America’s responsibility. The structure we have foisted on the world of an ever expanding US deficit funded by austerity measures everywhere else will only work if America truly solves all geopolitical problems across the globe. This includes Al-Qaeda’s advance in West and North Africa, the Islamic insurgency in Russia’s Caucus Mountain region, Somalia, Yemen, and everywhere else.
Geopolitics: The Pak Taliban launched a big conventional style assault on the Pak Army and got chewed up with dozens of bad guys killed. The Afghan Taliban launched a similar assault on NATO’s Bagram Air Base in Afghanistan. And the Afghan Taliban was slaughtered as well, with the good guys barely scratched. The Afghan Taliban says that it is starting its spring offensive against NATO. The bad guys have a tremendous capacity to absorb casualties and probably don’t consider these two big assaults failures.
In Kyrgyzstan, violence against the government is steadily increasing with sporadic blow-ups here and there. The beginning of an Islamic insurgency is evolving and the highly stretched CIA must find some way of dealing with this new threat.
In Thailand, a full-blown civil war is underway. The Redshirt rebels trying to topple the government are not Islamic radicals but Thailand does have an Islamic insurgency that is helped by the chaos engulfing the Southeast Asian country.
South Korea has formally charged North Korea with torpedoing one its cruisers last month and tensions are rife on the Korean peninsula.
All three of these problems are America’s responsibility. The structure we have foisted on the world of an ever expanding US deficit funded by austerity measures everywhere else will only work if America truly solves all geopolitical problems across the globe. This includes Al-Qaeda’s advance in West and North Africa, the Islamic insurgency in Russia’s Caucus Mountain region, Somalia, Yemen, and everywhere else.
Wednesday, May 19, 2010
Euro's Direction Controls World Markets
Charts: The Euro was up today, probably because Germany is forbidding German hedge funds from certain types of shorts on Euro-debt. Short covering caused the Euro's pop. The S&P 500 was only down .5%, closing at 1115, exactly break even for the year and sitting dangerously on an important support level. In early going the index cratered and briefly plunged under the 200-day moving average but then climbed steadily to register a mild loss. The reversal was no doubt due to the Euro’s gain. So the market was buoyed by technical factors, not fundamentals. The market is still in a correction.
Fundamentals: China’s tightening policy is working. Chinese real estate prices are declining, averting a real estate bubble similar to what Japan and America have gone through. In the long run this is good news. For now it is threatening China’s construction boom which is hammering the price of iron ore, copper, and other commodities. This slow down coupled with the Euro-zone debt crisis is putting tremendous pressure on the recovery.
Geopolitics: Yemeni and Saudi commandoes raided an Al-Qaeda in the Arabian Peninsula (AQAP) camp and rescued two German hostages that AQAP was holding for ransom. It is heartening to see our allies giving AQAP a black eye.
Fundamentals: China’s tightening policy is working. Chinese real estate prices are declining, averting a real estate bubble similar to what Japan and America have gone through. In the long run this is good news. For now it is threatening China’s construction boom which is hammering the price of iron ore, copper, and other commodities. This slow down coupled with the Euro-zone debt crisis is putting tremendous pressure on the recovery.
Geopolitics: Yemeni and Saudi commandoes raided an Al-Qaeda in the Arabian Peninsula (AQAP) camp and rescued two German hostages that AQAP was holding for ransom. It is heartening to see our allies giving AQAP a black eye.
Tuesday, May 18, 2010
Special Forces In W. Africa
Charts: Investors are fanatically watching the Euro. There is an 85% correlation between the direction of the Euro and the S&P 500. Virtually every hedge fund on Earth is short the Euro. This means a short covering rally in the Euro will lift the stock market. A stock market rally based on Euro short covering is obviously suspect. The positive reversal on Monday was just such a rally.
Geopolitics: On Tuesday the Pak Army killed 28 Taliban fighters and lost one soldier. The US Army lost 5 soldiers as the Afghan Taliban launched a suicide bomber into a NATO convoy. As the Long War grinds on in Afpak the Pentagon is preparing for the inevitable whack-a-mole effect that will scatter the bad guys to peripheral battle zones in a few years. The biggest chunk of bad guys will wind up working for Al-Qaeda in the Islamic Maghreb (AQIM). Maghreb means the “Sahara Desert.” AQIM is the most economically viable and self-sustaining of all Al Qaeda franchisees. It smuggles cocaine, cigarettes, and illegal alien workers into Europe from Africa, netting millions. Plus it makes millions more with a lucrative kidnapping operation. AQIM has a lock on organized crime in North and West Africa and pays its fighters very good salaries. Roaming the wide open expanses of the great desert, nobody knows how big AQIM is but we do know it is growing larger and more powerful because the national armies of Mali, Mauritania, and other Saharan countries are increasingly clashing with AQIM. A new front is opening in the Long War.
US Special Forces have unleashed Operation Flintlock against AQIM. Flintlock seeks to train local allied armies as well as strengthening local judicial systems to enforce the rule of law; in other words nation building. As the Pentagon turns its attention to these peripheral battle zones it not only relies on Special Forces but independent contractors, US defense companies. And it is relying on independent contractors in Afpak as well. The Pentagon’s “rogue” assassination/spy ring we talked about yesterday is administered by Lockheed Martin.
Geopolitics: On Tuesday the Pak Army killed 28 Taliban fighters and lost one soldier. The US Army lost 5 soldiers as the Afghan Taliban launched a suicide bomber into a NATO convoy. As the Long War grinds on in Afpak the Pentagon is preparing for the inevitable whack-a-mole effect that will scatter the bad guys to peripheral battle zones in a few years. The biggest chunk of bad guys will wind up working for Al-Qaeda in the Islamic Maghreb (AQIM). Maghreb means the “Sahara Desert.” AQIM is the most economically viable and self-sustaining of all Al Qaeda franchisees. It smuggles cocaine, cigarettes, and illegal alien workers into Europe from Africa, netting millions. Plus it makes millions more with a lucrative kidnapping operation. AQIM has a lock on organized crime in North and West Africa and pays its fighters very good salaries. Roaming the wide open expanses of the great desert, nobody knows how big AQIM is but we do know it is growing larger and more powerful because the national armies of Mali, Mauritania, and other Saharan countries are increasingly clashing with AQIM. A new front is opening in the Long War.
US Special Forces have unleashed Operation Flintlock against AQIM. Flintlock seeks to train local allied armies as well as strengthening local judicial systems to enforce the rule of law; in other words nation building. As the Pentagon turns its attention to these peripheral battle zones it not only relies on Special Forces but independent contractors, US defense companies. And it is relying on independent contractors in Afpak as well. The Pentagon’s “rogue” assassination/spy ring we talked about yesterday is administered by Lockheed Martin.
Monday, May 17, 2010
How Long?
Geopolitics: How long will the Long War last? US Army doctrine calls for clear, hold, and build in regards to taking territory away from the Taliban. The clear stage for the Battle of Marja took two weeks. But Marja is still mired in the hold stage as Taliban fighters keep infiltrating the region and killing Afghanis who cooperate with NATO. Building projects have moved forward at 1/10 the pace originally envisioned and are now coming to a virtual halt. The Taliban’s kill ratio of Afghan citizens participating in NATO building projects is very high but its kill ratio of NATO soldiers is tiny. Taliban intelligence is good; it only kills citizens that play ball with the good guys. NATO intelligence is iffy.
We can tell how weak intelligence gathering is from the following. The New York Times has dug deeper into what was originally reported to be a rogue CIA spy/assassination ring a couple months ago. The Times is now saying that the ring is not connected to the CIA even though it is run by ex-CIA officers. The US Army is outsourcing Afghan intelligence/assassination to a private sector entity because the CIA is stretched so thin it can’t help the Army in Afghanistan. The CIA has its hands full. It is running an entire war in Somalia, which is now locked in huge battles and saw the Somali parliament overrun by Al Shabab fighters over the weekend. And the Agency is running its own air war in Pakistan, stepping it up in Yemen, probably Thailand, probably Kyrgyzstan, you get the picture.
And while there is plenty of good news (like the Pak Army slaughtering another 5 dozen bad guys over the weekend) it is an inescapable conclusion that the Long War is going to last much longer than the American public even dimly appreciates. How does this affect the stock market? I will cautiously draw one conclusion: At a minimum we aren’t at a 1982 moment when investors could see that a US victory in the Cold War was inevitable. Yes, the good guys are winning but here is the broader question: What does it mean for stocks if the US is in a more or less constant state of forward progress in a war that will last for centuries?
We can tell how weak intelligence gathering is from the following. The New York Times has dug deeper into what was originally reported to be a rogue CIA spy/assassination ring a couple months ago. The Times is now saying that the ring is not connected to the CIA even though it is run by ex-CIA officers. The US Army is outsourcing Afghan intelligence/assassination to a private sector entity because the CIA is stretched so thin it can’t help the Army in Afghanistan. The CIA has its hands full. It is running an entire war in Somalia, which is now locked in huge battles and saw the Somali parliament overrun by Al Shabab fighters over the weekend. And the Agency is running its own air war in Pakistan, stepping it up in Yemen, probably Thailand, probably Kyrgyzstan, you get the picture.
And while there is plenty of good news (like the Pak Army slaughtering another 5 dozen bad guys over the weekend) it is an inescapable conclusion that the Long War is going to last much longer than the American public even dimly appreciates. How does this affect the stock market? I will cautiously draw one conclusion: At a minimum we aren’t at a 1982 moment when investors could see that a US victory in the Cold War was inevitable. Yes, the good guys are winning but here is the broader question: What does it mean for stocks if the US is in a more or less constant state of forward progress in a war that will last for centuries?
Friday, May 14, 2010
Greek Marxist Terror Bombing
Charts: The S&P 500 was down 1.9%, closing at 1136. The market is in a correction. It will be very bad if these support levels are violated: 1120 - the pivotal Fibonacci #. 1115 - breakeven for the year. 1110 - the 200-day moving average.
Fundamentals: US economic data came in strong today. However, a host of concerns overrode this good news: sovereign debt in Europe, weak growth outside Asia, the US Congress attacking financials, and electronic gremlins hidden in trading platforms. The specific trigger for the latest leg in the correction is the bombing of a Greek prison and courthouse by the Greek Marxist group “Revolutionary Struggle.” The CIA will have to help the Greek government clobber these communist bad guys so austerity measures can proceed smoothly. It is a sign of great stress when the CIA is mentioned in the fundamental section of the newsletter but also a sign of hope.
Geopolitics: The FBI has uncovered a Pak Taliban ring within the US that was part of the NY car bomb attempt. The Justice department has gone from crowing about catching these bad guys to trying to calm public anxiety. Pak Taliban presence within the US is alarming investors.
Quasi-Islamic rebels in Kyrgyzstan captured several government buildings on Thursday. By Friday the government recaptured these buildings with dozens killed on both sides. An Islamic insurgency could be arising in Kyrgyz, only a few miles from Afghanistan. The CIA and Russia’s FSB are probably working together to stamp it out.
In heavy fighting, NATO and the Afghan Army have killed dozens of bad guys this week in northern Afghanistan. Recent battles have been almost exclusively in the north, centered on protecting supply convoys for the Battle of Kandahar, which will start in June. If fighting is this heavy just to secure supply lines, imagine how nasty the actual battle will be. America’s collective consciousness is slowly and painfully shifting toward acceptance of a multi-decade (if not multi-century) war, causing volatility in the stock market.
Fundamentals: US economic data came in strong today. However, a host of concerns overrode this good news: sovereign debt in Europe, weak growth outside Asia, the US Congress attacking financials, and electronic gremlins hidden in trading platforms. The specific trigger for the latest leg in the correction is the bombing of a Greek prison and courthouse by the Greek Marxist group “Revolutionary Struggle.” The CIA will have to help the Greek government clobber these communist bad guys so austerity measures can proceed smoothly. It is a sign of great stress when the CIA is mentioned in the fundamental section of the newsletter but also a sign of hope.
Geopolitics: The FBI has uncovered a Pak Taliban ring within the US that was part of the NY car bomb attempt. The Justice department has gone from crowing about catching these bad guys to trying to calm public anxiety. Pak Taliban presence within the US is alarming investors.
Quasi-Islamic rebels in Kyrgyzstan captured several government buildings on Thursday. By Friday the government recaptured these buildings with dozens killed on both sides. An Islamic insurgency could be arising in Kyrgyz, only a few miles from Afghanistan. The CIA and Russia’s FSB are probably working together to stamp it out.
In heavy fighting, NATO and the Afghan Army have killed dozens of bad guys this week in northern Afghanistan. Recent battles have been almost exclusively in the north, centered on protecting supply convoys for the Battle of Kandahar, which will start in June. If fighting is this heavy just to secure supply lines, imagine how nasty the actual battle will be. America’s collective consciousness is slowly and painfully shifting toward acceptance of a multi-decade (if not multi-century) war, causing volatility in the stock market.
Wednesday, May 12, 2010
Permanent Drone Blitz
Charts: The S&P 500 rose 1.4% and closed at 1172. Graphic chart patterns are saying that the rally attempt has given way to an outright rally after resistance at 1170 was breached. Volume sucks, but it has sucked throughout the bull market; nevertheless volume patterns are saying we are still in a rally attempt. All technical indicators are good other than volume and the fact that China is in a bear market.
Fundamentals: Yesterday world stock markets were shaky because a trillion dollars is being thrown at indebted Euro-periphery countries but only Greece and Ireland have launched honest austerity programs. Today Spain announced it will slash government spending, making the rescue plan more credible. The US Treasury said that its April deficit hit an all-time record, about 60% higher than expected. Every country on Earth is exerting fiscal discipline except America. The only way the superpower can get away with this is by winning the Long War, dealing with North Korea, brokering peace between Israel and the PLO, and—well—running the world effectively.
Geopolitics: Word has leaked out that the Obama Administration has given the CIA new orders concerning drone strikes. The Agency had been using drones only to attack Taliban or Al-Qaeda leaders and great care was exercised to mitigate civilian casualties. The new policy is apparently to attack any jihadist fighter anywhere, no matter how lowly, and accept higher civilian casualties. CIA drones are now operating in giant wolf-packs of 9 drones and attacking makeshift tent camps on hillsides, motor vehicles, and other targets previously avoided. Missile salvos are much larger than before with drones coming back to base empty of ordnance, similar to WW II bombing missions. And the drones are hitting targets every day; perhaps the beginning of a permanent drone blitz. Anti-American editorials are gushing from the Pak media.
How important is pro-American sentiment? When Britain and Rome ran the world they were reviled and hated. This was especially true when they were at their military peaks and their world empires were running smoothly. The old saying, “The sun never set and the blood never dried on the British Empire,” provides reasonable guidance.
As far as North Korea sinking the South Korean frigate, there is no way for us to know whether the US 7th Fleet is moving into Koreans waters and dealing with this problem. My guess, however, is that this is in fact happening. The North Korean submarine fleet is a joke and it is well within the 7th Fleet’s capability to make sure no more torpedoes hit our ally.
Fundamentals: Yesterday world stock markets were shaky because a trillion dollars is being thrown at indebted Euro-periphery countries but only Greece and Ireland have launched honest austerity programs. Today Spain announced it will slash government spending, making the rescue plan more credible. The US Treasury said that its April deficit hit an all-time record, about 60% higher than expected. Every country on Earth is exerting fiscal discipline except America. The only way the superpower can get away with this is by winning the Long War, dealing with North Korea, brokering peace between Israel and the PLO, and—well—running the world effectively.
Geopolitics: Word has leaked out that the Obama Administration has given the CIA new orders concerning drone strikes. The Agency had been using drones only to attack Taliban or Al-Qaeda leaders and great care was exercised to mitigate civilian casualties. The new policy is apparently to attack any jihadist fighter anywhere, no matter how lowly, and accept higher civilian casualties. CIA drones are now operating in giant wolf-packs of 9 drones and attacking makeshift tent camps on hillsides, motor vehicles, and other targets previously avoided. Missile salvos are much larger than before with drones coming back to base empty of ordnance, similar to WW II bombing missions. And the drones are hitting targets every day; perhaps the beginning of a permanent drone blitz. Anti-American editorials are gushing from the Pak media.
How important is pro-American sentiment? When Britain and Rome ran the world they were reviled and hated. This was especially true when they were at their military peaks and their world empires were running smoothly. The old saying, “The sun never set and the blood never dried on the British Empire,” provides reasonable guidance.
As far as North Korea sinking the South Korean frigate, there is no way for us to know whether the US 7th Fleet is moving into Koreans waters and dealing with this problem. My guess, however, is that this is in fact happening. The North Korean submarine fleet is a joke and it is well within the 7th Fleet’s capability to make sure no more torpedoes hit our ally.
Tuesday, May 11, 2010
Hellfire Missiles Send Jihadists To Hell
Charts: The stock market is in a shaky rally attempt within an ongoing correction. Monday’s big 4.4% gain was in weak volume. Today’s .3% loss was disappointing because the index needed to see consolidation. Yesterday support at 1150 was tested 7 times and held. The S&P 500 finished today at 1156, so support is holding. 1150 is where the first correction of 2010 started and is therefore a key level. The most important technical indicator right now is the Euro vs. the dollar. The stronger the Euro the better. The Euro is still very weak. Overall then, the charts are not great.
Fundamentals: A trillion dollar life preserver is being thrown to the Euro-periphery as it drowns in debt. This buys time for the whole Euro-zone. Now it needs to start growing by implementing free market policies, which will take a long time. Chinese inflation is coming in hotter than expected so we can expect more tightening from Beijing. Stocks levered to China are getting hammered. This leaves America as the only short term source of global growth (scary).
Geopolitics: The Justice Department is breathlessly telling the world that Shahzad (the NY car bomber) was working directly for the Pak Taliban. The Pentagon and CIA are yawning over this revelation and moving on to other problems. On Sunday a CIA drone wolf-pack attacked the N. Waziristan Taliban’s home village and blew away 10 bad guys. Karzai is in America right now rubbing elbows with liberal Congressmen who want him to negotiate peace with the N. Waziristan Taliban. This is the CIA’s way of saying, “Don’t do it, Karzai.” Stepping up the pace, on Monday and Tuesday a fleet of CIA drones hit two other N. Waziristan villages, a training camp right on the Afpak border, and at least one vehicle. Hellfire missiles sent dozens of bad guys to Hell (ironic).
After getting blasted by the US Congress, the Pak Army is telling us they are fighting the Pak Taliban in their current offensive. So far this week 73 bad guys have been killed and 9 good guys. On Monday the Pak Taliban tried to overrun a Pak Army outpost with platoon-sized units, this is where the good guy casualties came from.
It is also heating up in Afghanistan with US Marines and the Afghan Army killing 10 bad guys over the weekend.
Finally, the South Korean military says a North Korean torpedo sunk one of their warships a few weeks ago. Like all geopolitical issues across the globe, this is an American problem and it is up to America to make sure it doesn’t happen again; which means working through China to threaten an aid cut-off to North Korea. Korean stocks got shredded.
Fundamentals: A trillion dollar life preserver is being thrown to the Euro-periphery as it drowns in debt. This buys time for the whole Euro-zone. Now it needs to start growing by implementing free market policies, which will take a long time. Chinese inflation is coming in hotter than expected so we can expect more tightening from Beijing. Stocks levered to China are getting hammered. This leaves America as the only short term source of global growth (scary).
Geopolitics: The Justice Department is breathlessly telling the world that Shahzad (the NY car bomber) was working directly for the Pak Taliban. The Pentagon and CIA are yawning over this revelation and moving on to other problems. On Sunday a CIA drone wolf-pack attacked the N. Waziristan Taliban’s home village and blew away 10 bad guys. Karzai is in America right now rubbing elbows with liberal Congressmen who want him to negotiate peace with the N. Waziristan Taliban. This is the CIA’s way of saying, “Don’t do it, Karzai.” Stepping up the pace, on Monday and Tuesday a fleet of CIA drones hit two other N. Waziristan villages, a training camp right on the Afpak border, and at least one vehicle. Hellfire missiles sent dozens of bad guys to Hell (ironic).
After getting blasted by the US Congress, the Pak Army is telling us they are fighting the Pak Taliban in their current offensive. So far this week 73 bad guys have been killed and 9 good guys. On Monday the Pak Taliban tried to overrun a Pak Army outpost with platoon-sized units, this is where the good guy casualties came from.
It is also heating up in Afghanistan with US Marines and the Afghan Army killing 10 bad guys over the weekend.
Finally, the South Korean military says a North Korean torpedo sunk one of their warships a few weeks ago. Like all geopolitical issues across the globe, this is an American problem and it is up to America to make sure it doesn’t happen again; which means working through China to threaten an aid cut-off to North Korea. Korean stocks got shredded.
Sunday, May 9, 2010
Hillary Wants To Invade Pakistan
Charts: The S&P 500 has experienced its worst start to May ever by a huge margin. The second worst May start was 1930. It is not good when today’s charts resemble those from the 30s. The broad index is experiencing a historically severe waterfall pattern. This is the most damaging pattern possible. All indications are that the correction has further to go, although we have a headline driven market so a fundamental improvement in the Euro-periphery debt crisis could turn around equity and credit markets.
Fundamentals: The market is demanding that the ECB buy Greek sovereign debt or the EU extend its bailout to Portugal and Spain, putting a floor under the price of Euro-periphery bonds. If this doesn’t happen, then a second credit crunch will rock the globe and plunge the world back into recession. As of Sunday the ECB and EU are huddling, deciding what to do. The markets also want the US Fed to flood Europe with dollars. A small credit crunch is already underway as European banks refuse to lend to each other, causing a shortage of dollars. Trade finance will freeze if the Fed doesn’t step up to the plate.
Geopolitics: Because of the failed NY car bomb attempt the State Department is putting enormous pressure on Pakistan to launch an offensive in N. Waziristan, going as far as hinting that the US will send troops into Pakistan or radically beef up Special Forces already there unless the Pak Army gets into gear. Shahzad, the failed car bomber, trained with one or more Talibans in N. Waziristan. The Pak Taliban initially took credit for the car bomb attempt but has since fearfully recanted after the State Department started talking about invading N. Waziristan.
The Defense Department isn’t beating its chest nearly as hard as State. Sec. Gates points out that the Pak Army is currently halfway through an offensive grinding through a tribal land near N. Waziristan and is realistically doing everything possible. On Saturday the Pak Army killed another 15 bad guys. It’s easy for civilians to demand action; on the other hand it can't be denied that Hillary has big balls and I think the bad guys are terrified of her (as are the good guys).
America’s planned offensive in Kandahar isn’t exactly moving forward at warp speed. The US Army is bogged down designing a new system for road checkpoints that will kill fewer civilians. The new system will feature different types of checkpoints in different neighborhoods and elaborate checkpoints-in-depth. One study shows that Taliban checkpoints in areas that it controls kill fewer civilians than NATO checkpoints. As the Kandahar offensive gets underway NATO will take territory away from the Taliban and then set up checkpoints to help control the new turf. Obviously NATO checkpoints have to be superior to Taliban checkpoints. In fact the offensive can’t begin otherwise
Fundamentals: The market is demanding that the ECB buy Greek sovereign debt or the EU extend its bailout to Portugal and Spain, putting a floor under the price of Euro-periphery bonds. If this doesn’t happen, then a second credit crunch will rock the globe and plunge the world back into recession. As of Sunday the ECB and EU are huddling, deciding what to do. The markets also want the US Fed to flood Europe with dollars. A small credit crunch is already underway as European banks refuse to lend to each other, causing a shortage of dollars. Trade finance will freeze if the Fed doesn’t step up to the plate.
Geopolitics: Because of the failed NY car bomb attempt the State Department is putting enormous pressure on Pakistan to launch an offensive in N. Waziristan, going as far as hinting that the US will send troops into Pakistan or radically beef up Special Forces already there unless the Pak Army gets into gear. Shahzad, the failed car bomber, trained with one or more Talibans in N. Waziristan. The Pak Taliban initially took credit for the car bomb attempt but has since fearfully recanted after the State Department started talking about invading N. Waziristan.
The Defense Department isn’t beating its chest nearly as hard as State. Sec. Gates points out that the Pak Army is currently halfway through an offensive grinding through a tribal land near N. Waziristan and is realistically doing everything possible. On Saturday the Pak Army killed another 15 bad guys. It’s easy for civilians to demand action; on the other hand it can't be denied that Hillary has big balls and I think the bad guys are terrified of her (as are the good guys).
America’s planned offensive in Kandahar isn’t exactly moving forward at warp speed. The US Army is bogged down designing a new system for road checkpoints that will kill fewer civilians. The new system will feature different types of checkpoints in different neighborhoods and elaborate checkpoints-in-depth. One study shows that Taliban checkpoints in areas that it controls kill fewer civilians than NATO checkpoints. As the Kandahar offensive gets underway NATO will take territory away from the Taliban and then set up checkpoints to help control the new turf. Obviously NATO checkpoints have to be superior to Taliban checkpoints. In fact the offensive can’t begin otherwise
Friday, May 7, 2010
Pak Tribesmen Achieve Infinite Kill Ratio
Charts: Yesterday’s chart action resembled capitulation, but it was a mirage. Bizarre electronic trading anomalies caused the illusion. The market is in a correction. The S&P 500 closed down 1.5% at 1110. Next support is 1100.
Fundamentals: The government’s monthly jobs report came in much better than expected, suggesting that the US recovery is still on track. Here’s why it might not matter: The most significant event yesterday occurred when a Senate page interrupted the financial reform hearings with the breathless news that the Dow had dropped 1000 points. The Senators angrily responded by saying they needed to hurry up and slap even stiffer regulations on those volatile Wall Street scoundrels, trying to put out fire with gasoline.
Geopolitics: On Thursday, up and down the Pak tribal lands there were clashes with government forces and Pak tribesmen on one side and the Taliban on the other. 41 bad guys were killed and 1 good guy was killed. The Pak Army killed 26 bad guys and the tribesmen killed 15. The 1 dead good guy was a Pak soldier, so the tribesmen had an infinite kill ratio. It is impossible to win a guerilla war with the local population hunting you down and killing you. Furthermore, the Pak tribesmen are being superbly trained, armed, and lead; acting like a professional army.
Fundamentals: The government’s monthly jobs report came in much better than expected, suggesting that the US recovery is still on track. Here’s why it might not matter: The most significant event yesterday occurred when a Senate page interrupted the financial reform hearings with the breathless news that the Dow had dropped 1000 points. The Senators angrily responded by saying they needed to hurry up and slap even stiffer regulations on those volatile Wall Street scoundrels, trying to put out fire with gasoline.
Geopolitics: On Thursday, up and down the Pak tribal lands there were clashes with government forces and Pak tribesmen on one side and the Taliban on the other. 41 bad guys were killed and 1 good guy was killed. The Pak Army killed 26 bad guys and the tribesmen killed 15. The 1 dead good guy was a Pak soldier, so the tribesmen had an infinite kill ratio. It is impossible to win a guerilla war with the local population hunting you down and killing you. Furthermore, the Pak tribesmen are being superbly trained, armed, and lead; acting like a professional army.
Thursday, May 6, 2010
101st Airborne Division Combat Team Lands In Kandahar
Charts: At one point today the Dow was down almost 1000 points, with midday volume 2000% above average, all stuff for the history books. The Dow then climbed 646 points off its low, chart action that looks like capitulation, a pattern often marking a correction’s low. At the close the broad index was down 3.3%, at 1128. If today’s horrific losses do not mark capitulation, then we may be looking at something worse than a garden variety correction. This means that tomorrow’s chart action must show some strength or we’re all up the creek without a paddle.
Fundamentals: The correction is being fueled by the Greek debt crisis. The big loss Tuesday did have a geopolitical component, but that is now a distant memory. The Greek bailout must still be approved by the German Parliament. The bailout is immensely unpopular in Germany and there is a real chance it could get derailed. German and French banks hold over $100 billion in Greek government debt. A Greek default would tear down these European banks. American banks hold about $1 trillion worth of European debt of various kinds; this is the contagion mechanism for Euro-zone turmoil to hop the Atlantic. Any substantial failure of European and American banks would require huge new government bailouts. Not only might politicians not do this, with government debt loads at all-time highs, they might not be able to. As I’ve said before, a Greek default will make the collapse of Lehman Brothers look like a Sunday picnic.
Geopolitics: 1st Battalion of the 101st Airborne Division’s 2nd Brigade Combat Team is en route to Kandahar. 3000 soldiers from the rest of the 2nd Brigade are gearing up to join them. This is the brigade that will lead the Battle of Kandahar. The 101st lead the Normandy invasion on D-day and is probably the most decorated unit in the American Army. The battle will start in June. It will be the biggest battle of the Afghan war. Almost every US soldier in 2nd Brigade is a hardened combat veteran, many served in Iraq and Afghanistan. Never before has an army gone into battle with rules of engagement that virtually forbid civilian deaths. As a consequence American casualties will be very high. Nevertheless, morale is terrific among the troops. Simply put, these are the greatest soldiers to have ever existed.
Fundamentals: The correction is being fueled by the Greek debt crisis. The big loss Tuesday did have a geopolitical component, but that is now a distant memory. The Greek bailout must still be approved by the German Parliament. The bailout is immensely unpopular in Germany and there is a real chance it could get derailed. German and French banks hold over $100 billion in Greek government debt. A Greek default would tear down these European banks. American banks hold about $1 trillion worth of European debt of various kinds; this is the contagion mechanism for Euro-zone turmoil to hop the Atlantic. Any substantial failure of European and American banks would require huge new government bailouts. Not only might politicians not do this, with government debt loads at all-time highs, they might not be able to. As I’ve said before, a Greek default will make the collapse of Lehman Brothers look like a Sunday picnic.
Geopolitics: 1st Battalion of the 101st Airborne Division’s 2nd Brigade Combat Team is en route to Kandahar. 3000 soldiers from the rest of the 2nd Brigade are gearing up to join them. This is the brigade that will lead the Battle of Kandahar. The 101st lead the Normandy invasion on D-day and is probably the most decorated unit in the American Army. The battle will start in June. It will be the biggest battle of the Afghan war. Almost every US soldier in 2nd Brigade is a hardened combat veteran, many served in Iraq and Afghanistan. Never before has an army gone into battle with rules of engagement that virtually forbid civilian deaths. As a consequence American casualties will be very high. Nevertheless, morale is terrific among the troops. Simply put, these are the greatest soldiers to have ever existed.
Wednesday, May 5, 2010
Hitler Wept That Day
Charts: At midday, 1168, the 50-day moving average is holding. All financial media outlets agree that yesterday’s massive selloff was caused by fear of Greece defaulting, not geopolitics. If I’m right, that it was geopolitics, then the correction will be mild. If I’m wrong and Greece is really that bad, then it will be horrific. This is why the geopolitical situation is actually pretty good…
Geopolitics: In Pakistan, the ISI is springing into action over the failed New York car bomb. Bad guys are being arrested and one small terror network is being rolled up. Recently Taliban video footage has been released proving that H. Mehsud, the leader of the Pak Taliban, is still alive. However, the Pak Army is hinting that the New York terror attempt originated with a smaller, lesser known Taliban, and this seems to be the group that is being rolled up.
The whole incident will have one beneficial effect: American peace protests over the coming summer offensive in Kandahar will be nonexistent. Today a NATO spokesman is using this shift in public mood to highlight the probable severity in good guy casualties as the Marines start pushing into Kandahar in the next couple months. NATO says the Taliban is loaded for bear. If not for the New York car bomb attempt large numbers of dead good guys would have been met with howls of peacenik protest. So the NY car bomb was a stupid move and thus it is believable that one of the big (strategically smart) Talibans is not behind the attempt.
And we must not lose sight of the fact that General McChrystal is one of the greatest military geniuses in history. McChrystal and Afghan Pres. Karzai are embarking on a tour of Washington DC. McChrystal is introducing Karzai to Senators and Congressmen. Karzai’s leadership will be solidified like super-strength concrete and he will be able to rig all the elections he wants. McChrystal is ensuring that someday Afghanistan will become a real democracy. All the mistakes America made in Iraq revolved around the concept of winning quickly. There is no winning quickly and building a real democracy will take a very long time. Now let’s look at the really big picture…
The ancient Greeks created democracy to win wars, not because they thought individual liberty is noble and moral. A democracy with its citizenry united and committed to winning a war will always tear apart any dictatorship. And thus we begin to see what a horrible mistake it is for jihadists to attack inside the United States. Both Hitler and Admiral Hirohito wept the day Japan attacked Pearl Harbor.
Geopolitics: In Pakistan, the ISI is springing into action over the failed New York car bomb. Bad guys are being arrested and one small terror network is being rolled up. Recently Taliban video footage has been released proving that H. Mehsud, the leader of the Pak Taliban, is still alive. However, the Pak Army is hinting that the New York terror attempt originated with a smaller, lesser known Taliban, and this seems to be the group that is being rolled up.
The whole incident will have one beneficial effect: American peace protests over the coming summer offensive in Kandahar will be nonexistent. Today a NATO spokesman is using this shift in public mood to highlight the probable severity in good guy casualties as the Marines start pushing into Kandahar in the next couple months. NATO says the Taliban is loaded for bear. If not for the New York car bomb attempt large numbers of dead good guys would have been met with howls of peacenik protest. So the NY car bomb was a stupid move and thus it is believable that one of the big (strategically smart) Talibans is not behind the attempt.
And we must not lose sight of the fact that General McChrystal is one of the greatest military geniuses in history. McChrystal and Afghan Pres. Karzai are embarking on a tour of Washington DC. McChrystal is introducing Karzai to Senators and Congressmen. Karzai’s leadership will be solidified like super-strength concrete and he will be able to rig all the elections he wants. McChrystal is ensuring that someday Afghanistan will become a real democracy. All the mistakes America made in Iraq revolved around the concept of winning quickly. There is no winning quickly and building a real democracy will take a very long time. Now let’s look at the really big picture…
The ancient Greeks created democracy to win wars, not because they thought individual liberty is noble and moral. A democracy with its citizenry united and committed to winning a war will always tear apart any dictatorship. And thus we begin to see what a horrible mistake it is for jihadists to attack inside the United States. Both Hitler and Admiral Hirohito wept the day Japan attacked Pearl Harbor.
Tuesday, May 4, 2010
Taliban Terror Attempt In NY
Charts: The market is in a correction. The broad index closed at 1174, down 2.4%. The trading channel that the S&P 500 was churning in had a low point of 1182, which was violated. The March peak was 1180, a key support level also violated. 1168 is the 50-day moving average. The index hit 1168 twice and found support, the only ray of hope. If 1168 is violated it will be very bad.
Fundamentals: The financial press is saying today’s sharp sell-off was caused entirely by Euro-periphery bonds tanking on sudden fear of Greece defaulting (gosh there is a problem with Greek debt, who knew?). However, what actually happened is geopolitics caused a massive safe haven bid into US treasuries, which forced all risk assets to plunge, including Euro-periphery debt. Of course other factors also came into play: the SEC attack on Goldman, toxic financial reform coming up for a vote, and today the FTC launched an attack on Apple (unbelievable). But consider: the biggest sector loss today was airline stocks even though oil was way down. Airline stocks are the most sensitive to terrorism.
Geopolitics: It looks as though the New York car bomb attempt over the weekend did originate with the one of the Pak Talibans. Pak authorities have arrested several people related to the would-be bomber in Karachi and there are reports he spent time in the Pak city of Peshawar, which is Taliban central. There will be more terror attempts like this in the months and years ahead. Some of these attempts will succeed. The American public has been told by the White House that the war will be over in about a year, rather than three or four centuries. Today we can see Obama’s biggest foreign policy screw-up has been lying about the war’s duration. Will it really last for centuries?
The Sudan truce is unraveling and the nearly century-old Sudanese civil war may flare up again. So far this year the Lord’s Resistance Army (LRA) has massacred about 400 civilians in Congo and Uganda. These two news items are related. The LRA is an ultra-violent central African Christian militia. The Sudanese civil war is a central African conflict between Christians and Muslims. The Long War originated in central Africa as a Christian vs. Muslim dustup in the 1920s with roots snaking back to the Crusades. The Long War heating up in central Africa, its birthplace, is a sign that it’s going to last a long time.
Fundamentals: The financial press is saying today’s sharp sell-off was caused entirely by Euro-periphery bonds tanking on sudden fear of Greece defaulting (gosh there is a problem with Greek debt, who knew?). However, what actually happened is geopolitics caused a massive safe haven bid into US treasuries, which forced all risk assets to plunge, including Euro-periphery debt. Of course other factors also came into play: the SEC attack on Goldman, toxic financial reform coming up for a vote, and today the FTC launched an attack on Apple (unbelievable). But consider: the biggest sector loss today was airline stocks even though oil was way down. Airline stocks are the most sensitive to terrorism.
Geopolitics: It looks as though the New York car bomb attempt over the weekend did originate with the one of the Pak Talibans. Pak authorities have arrested several people related to the would-be bomber in Karachi and there are reports he spent time in the Pak city of Peshawar, which is Taliban central. There will be more terror attempts like this in the months and years ahead. Some of these attempts will succeed. The American public has been told by the White House that the war will be over in about a year, rather than three or four centuries. Today we can see Obama’s biggest foreign policy screw-up has been lying about the war’s duration. Will it really last for centuries?
The Sudan truce is unraveling and the nearly century-old Sudanese civil war may flare up again. So far this year the Lord’s Resistance Army (LRA) has massacred about 400 civilians in Congo and Uganda. These two news items are related. The LRA is an ultra-violent central African Christian militia. The Sudanese civil war is a central African conflict between Christians and Muslims. The Long War originated in central Africa as a Christian vs. Muslim dustup in the 1920s with roots snaking back to the Crusades. The Long War heating up in central Africa, its birthplace, is a sign that it’s going to last a long time.
Sunday, May 2, 2010
Blinded By Anger And Revulsion
Charts: On Friday I incorrectly said the market was in a correction. Blinded by anger and revulsion over the Goldman criminal charges, I made a prediction rather than calmly looking at the charts. Technical analysis is not a prediction of the market’s future direction, but a snap shot of its current technical state. Rally or a correction? Bull or bear market? As of 4/30/10 the S&P 500 is neither in a rally nor a correction; the rally has morphed into stalling action within a trading channel. This is not good chart action, but the index did not dip out of its channel as of Friday.
Fundamentals: Obama-Care received a boost in the polls shortly after it passed. A few weeks later the bill started plunging in popularity again. Now it is more unpopular than ever with 60% of voters in favor of repeal. Terrified, the Demos are trying to reposition themselves for the mid-term elections by scoring a victory with financial reform, using even more hardball tactics than they used with Obama-Care. Financial reform polls very strongly, about 60% approve. But a similar number of voters also say it won’t work. So support is a mile wide and an inch deep and Republicans would be safe filibustering if not for the hardball tactics. The basic Demo strategy is to get Goldman Sachs to settle out of court on the various trumped up charges it faces and then point to this admission of guilt as a reason to shove financial reform down America’s gullet. Goldman settling would be short term good and long term bad.
Geopolitics: The hottest theater in the Long War right now is Somalia. The Somali Army is in a pitched battle with Al-Shabab, probably being helped by Ahlu Sunnah. Hizbul Islam is in a separate battle with Al-Shabab. Ahlu Sunnah is in still another battle with Hizbul Islam. CIA Director Panetta publically admits that there is a “CIA surge” going on in Somalia and it is safe to say that the complex four-way conflict is being choreographed to some degree by the Agency.
It is a complicated war and it is unclear who are the good guys and bad guys. Al-Shabab is definitely bad, in fact super-bad. It controls almost half the country and is the most savage Taliban-style government in the world. Its leaders have Al-Qaeda on speed dial. Hizbul Islam controls a big chunk of Somalia, but not as big as Al-Shabab. It is unbelievably savage and amputates limbs for minor offenses, beheadings at the drop of a hat, etc… It had been partners with Al-Shabab but it is now taking territory away from the super-bad guys, blowing up Al-Shabab Mosques, and killing rival leaders. This makes you think Hizbul Islam is in the good bad guy camp, but it’s not that simple. The CIA probably has something to do with the war between Al-Shabab and Hizbul Islam, but maybe not since the genuine good bad guys (Ahlu Sunnah) is attacking Hizbul Islam. Al-Shabab spokesmen accuse the Somali government of helping Hizbul Islam, perhaps without CIA approval.
We probably should simply classify Ahlu Sunnah as straight good guys. The CIA apparently wants this Islamic militia to take over the Somali government. Ahlu Sunnah controls central Somalia and has defeated Al-Shabab in several battles. The Somali government is of indeterminate status. Its soldiers are as likely to sell their guns to the bad guys as fight. The long planned offensive seems to be occurring but it also seems to be heavily dependent on Ahlu Sunnah.
Fundamentals: Obama-Care received a boost in the polls shortly after it passed. A few weeks later the bill started plunging in popularity again. Now it is more unpopular than ever with 60% of voters in favor of repeal. Terrified, the Demos are trying to reposition themselves for the mid-term elections by scoring a victory with financial reform, using even more hardball tactics than they used with Obama-Care. Financial reform polls very strongly, about 60% approve. But a similar number of voters also say it won’t work. So support is a mile wide and an inch deep and Republicans would be safe filibustering if not for the hardball tactics. The basic Demo strategy is to get Goldman Sachs to settle out of court on the various trumped up charges it faces and then point to this admission of guilt as a reason to shove financial reform down America’s gullet. Goldman settling would be short term good and long term bad.
Geopolitics: The hottest theater in the Long War right now is Somalia. The Somali Army is in a pitched battle with Al-Shabab, probably being helped by Ahlu Sunnah. Hizbul Islam is in a separate battle with Al-Shabab. Ahlu Sunnah is in still another battle with Hizbul Islam. CIA Director Panetta publically admits that there is a “CIA surge” going on in Somalia and it is safe to say that the complex four-way conflict is being choreographed to some degree by the Agency.
It is a complicated war and it is unclear who are the good guys and bad guys. Al-Shabab is definitely bad, in fact super-bad. It controls almost half the country and is the most savage Taliban-style government in the world. Its leaders have Al-Qaeda on speed dial. Hizbul Islam controls a big chunk of Somalia, but not as big as Al-Shabab. It is unbelievably savage and amputates limbs for minor offenses, beheadings at the drop of a hat, etc… It had been partners with Al-Shabab but it is now taking territory away from the super-bad guys, blowing up Al-Shabab Mosques, and killing rival leaders. This makes you think Hizbul Islam is in the good bad guy camp, but it’s not that simple. The CIA probably has something to do with the war between Al-Shabab and Hizbul Islam, but maybe not since the genuine good bad guys (Ahlu Sunnah) is attacking Hizbul Islam. Al-Shabab spokesmen accuse the Somali government of helping Hizbul Islam, perhaps without CIA approval.
We probably should simply classify Ahlu Sunnah as straight good guys. The CIA apparently wants this Islamic militia to take over the Somali government. Ahlu Sunnah controls central Somalia and has defeated Al-Shabab in several battles. The Somali government is of indeterminate status. Its soldiers are as likely to sell their guns to the bad guys as fight. The long planned offensive seems to be occurring but it also seems to be heavily dependent on Ahlu Sunnah.
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