Charts: The Fibonacci number sequence describes an outwardly expanding spiral. Divide two Fibonacci numbers and you are describing a retracement along part of that spiral. Both the sequence itself and retracement numbers are found throughout nature because this is how natural systems grow, in a cyclical or circular manner. The stock market is a natural system just like a spiral galaxy. Since we are so close to the next Fibonacci number, 1227, it makes sense to wait and see if the index can conquer this level before making new stock purchases. 1227 has been tested once and the index retreated in big volume.
Fundamentals: The market is reacting badly to Cisco's forecast. But all the technology majors are playing in each others' backyards now. They are all into hardware and software. Oracle and Hewlett Packard are starting to eat Cisco's lunch. There are bigger problems out there than Cisco. The last jobs report showed the payroll survey gaining 150,000 jobs but the household survey showed 300,000 jobs destroyed. Irish and Greek debt yields are soaring because Germany has suddenly become brain dead. If Ireland has to tap the special Euro-debt bail out fund it will be very bad. The big picture is that the global recovery is uneven. Emerging Asia is growing at almost 9%, America at 2%, Europe at 1.7%.
Geopolitics: Obama gave a speech in India where he essentially said that his July timeline for pulling out of Afghanistan was window dressing and America is in there to stay. Since he is likely to win a second term the jihadis will be driven out of Af/Pak in time. This will mark the beginning of a gigantic global strategic retreat. The two longest strategic retreats ever were Mao's Long March in the 1930s Chinese civil war and Nazi General Erwin Rommel's great retreat in the N. Africa campaign of WW II. After losing the Battle of El Alamein Rommel's mechanized army was reduced to almost a guerrilla army with trucks and guns but almost no tanks and planes. The retreating German Army was equipped like and acted just like a modern Taliban fighting unit, relying on booby traps and subterfuge rather than frontal assaults. The British chased the Germans across 5 North African countries before the bad guys holed up in Tunisia for a last stand. British fighters and bombers played the same role that drones play today. By studying past strategic retreats we can predict the outcome of the impending Great Jihadist Retreat (GJR). One thing is clear, with much of North Africa, Mideast, and South-central Asia as a theater vastly improved surveillance will be a necessity. Live feed from reconnaissance drones and satellites will have to be stitched together into one picture with communication links and software. Also, computers will have to filter out useless data so that humans can concentrate on relevant data or the system will be overwhelmed by white noise. The current defense majors are too lumbering and old school to build this network. It will get built by a more agile company, like Harris Corporation.
Thursday, November 11, 2010
Tuesday, November 9, 2010
Germany Bad At Socialism After All
Charts: The S&P 500 rose this morning to 1227, the next Fibonacci number, and turned tail, plummeting downward in big volume. This is a failure of a key technical level. Not good.
Fundamentals: Recently Germany has cooked up a scheme that would give bond holders of Euro-periphery debt a haircut in the event of default. This has clobbered Euro-periphery debt. Which in turn hurts German banks, many of them state owned and it might even threaten the global recovery. Here we have proof that Germany really isn't that good at socialism after all.
Geopolitics: India has a military strategy called "Cold Start." Dedicated division sized strike forces are supposed to drive into Pakistan within a couple days of mobilization if a second Mumbai-style terror event occurs anywhere inside India. Pakistan says that it would devote a much bigger part of its military to fighting the Taliban if India would dismantle Cold Start. The Pak Army thinks that the existance of Cold Start gives the Taliban a way to start a war between India and Pakistan. The assumption built into Cold Start is that the Pak Army has total control over all the jihadis operating in the tribal lands (not true). Obama is telling India that he will work toward giving it a permanent seat on the UN Security Council, sell billions of dollars worth of new weapons, and other goodies if it does away with Cold Start. For now India is publically saying: "Cold Start, what's that? We've never heard of Cold Start." It might be saying something else behind the scene.
Fundamentals: Recently Germany has cooked up a scheme that would give bond holders of Euro-periphery debt a haircut in the event of default. This has clobbered Euro-periphery debt. Which in turn hurts German banks, many of them state owned and it might even threaten the global recovery. Here we have proof that Germany really isn't that good at socialism after all.
Geopolitics: India has a military strategy called "Cold Start." Dedicated division sized strike forces are supposed to drive into Pakistan within a couple days of mobilization if a second Mumbai-style terror event occurs anywhere inside India. Pakistan says that it would devote a much bigger part of its military to fighting the Taliban if India would dismantle Cold Start. The Pak Army thinks that the existance of Cold Start gives the Taliban a way to start a war between India and Pakistan. The assumption built into Cold Start is that the Pak Army has total control over all the jihadis operating in the tribal lands (not true). Obama is telling India that he will work toward giving it a permanent seat on the UN Security Council, sell billions of dollars worth of new weapons, and other goodies if it does away with Cold Start. For now India is publically saying: "Cold Start, what's that? We've never heard of Cold Start." It might be saying something else behind the scene.
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