Long War: A couple days ago the Kabul Attack Network (KAN) launched a terror strike on a prominent hotel in downtown Kabul, killing foreign businessmen and stabbing a dagger into the heart of the war effort. Today a NATO air strike killed the Haqqani Network chieftain who organized the terror strike. KAN is an elite group of jihadist fighters handpicked from the Pakistan Taliban, Haqqani Network, and other terror groups. It is essentially run by the Haqqani Network and is a tool not only for launching sophisticated terror strikes but also to establish the Haqqani Network as dominant over its fellow jihadist organizations in the Af/Pak theater. What then is the Haqqani Network and what are the implications of today's successful blow against it?
We must go all the way back to the mujaheddin war against the Soviet occupation of Afghanistan to answer the first question. The Haqqani Network was associated more closely with the CIA and ISI during the anti-Soviet war than any other mujaheddin group. The Haqqanis were in fact created by the CIA and ISI and as a consequence they were (and are) the best of the best. Osama Bin Laden rose to prominence after the Soviets left Afghanistan because his group of mujaheddin never accepted money or training from the CIA, totally the opposite of the Haqqanis.
But as years of Afghan fighting wore on after 9/11 it became less and less important who was associated with the CIA back in the old days and more important who was skilled and effective in the here and now. Also, as a creature of the ISI, the Haqqanis had lots of useful contacts within the Pak government. In fact the Haqqanis and the dirty part of the ISI are like a hand and glove.
Finding and killing the leader of the Kabul hotel terror strike so quickly means that the CIA has infiltrated the ISI or the Haqqani Network or KAN or all three.
Now let's take a step back and examine the relationship between the CIA and ISI. It is best explained with an analogy. The relationship is like a dysfunctional marriage where the husband (CIA) routinely beats the wife (ISI). And as is so often the case in a relationship like that, the wife often leaves the husband only to come crawling back, weeping and groveling. Also, there is always the chance that the wife will try to stab the husband while he sleeps but the husband wakes up just in time and then gives the wife a sound thrashing.
So with all this in mind I have one other news item for you: The Pak government (probably at the behest of the ISI) has closed down a key CIA drone base inside Pakistan. If we put our analogy in play it works like this: The CIA has killed an asset of the ISID (ISI Dirt), this is like the husband beating the wife. In retaliation, the ISI has closed down a CIA drone base, the wife tries to stab the husband in his sleep. But the husband and wife still love each other despite the dysfunction and the marriage lives on.
Thursday, June 30, 2011
Wednesday, June 29, 2011
Senators Lick Their Wounds
Charts: The S&P 500 closed above 1300, which is the 50% retracement of the recent correction. Stock prices say we are now in a technical rally but volume patterns say we are not. The entire bull market over the past couple years has shown strong price action and weak volume.
Fundamentals: Jobless claims came in weaker than expected. Oil popped up so overall fundamentals continue to suck. The market of course is fixated on Greece, and nothing else. The Greek Parliament voted for the austerity bill with a wide enough margin to assure Tomorrow's vote on specific spending cuts will go through. Investors are apparently hoping that Greece will be permanently bailed out by Germany and the troika in the same way that Fannie Mae and Freddie Mac are being permanently bailed out by the US Treasury. For this to happen Greece will have to actually implement all aspects of the austerity package. Remember, there was an earlier austerity package a year ago and Greece did not implement it. Perhaps with the Germans breathing down Greece's neck it will do a better job this time. Since the austerity package is flawed, Greece will continue to flounder in a horrible recession, living through a sort of economic purgatory. Other peripheral Euro-zone countries will see this and perhaps make free market reforms to avoid Greece's fate.
Long War: General Petraeus has hung up his uniform and quit the Army. Soon he will take over the CIA. He was considered the most politically astute general of our times and the most media savvy. In Iraq he was able to muzzle the media by (in essence) threatening to not protect embedded reports as they went on combat patrols with US troops. What the CIA needs to do in Afghanistan is not a mystery to Petraeus or the existing CIA leadership. The trick is to get Congress and the media out of the loop so they will be able act freely. Can he do it?
Petraeus' confirmation hearing in the Senate was encouraging. The Senators latched onto the fact that the general disagreed with Obama's sharp troop reduction call in Afghanistan. They tried to get Petraeus to say he would resign from the Army over this disagreement if he weren't going to the CIA. The general was prepared for this nonsense and made a stirring speech about how the privates in the line of fire can't resign, commanders also should never resign, and even suggesting it was unpatriotic to bring the subject up. The speech wound up in the media and made the Senators look bad. They were licking their wounds after the hearing and are probably eager to avoid confronting the new head spook again. A good start.
Fundamentals: Jobless claims came in weaker than expected. Oil popped up so overall fundamentals continue to suck. The market of course is fixated on Greece, and nothing else. The Greek Parliament voted for the austerity bill with a wide enough margin to assure Tomorrow's vote on specific spending cuts will go through. Investors are apparently hoping that Greece will be permanently bailed out by Germany and the troika in the same way that Fannie Mae and Freddie Mac are being permanently bailed out by the US Treasury. For this to happen Greece will have to actually implement all aspects of the austerity package. Remember, there was an earlier austerity package a year ago and Greece did not implement it. Perhaps with the Germans breathing down Greece's neck it will do a better job this time. Since the austerity package is flawed, Greece will continue to flounder in a horrible recession, living through a sort of economic purgatory. Other peripheral Euro-zone countries will see this and perhaps make free market reforms to avoid Greece's fate.
Long War: General Petraeus has hung up his uniform and quit the Army. Soon he will take over the CIA. He was considered the most politically astute general of our times and the most media savvy. In Iraq he was able to muzzle the media by (in essence) threatening to not protect embedded reports as they went on combat patrols with US troops. What the CIA needs to do in Afghanistan is not a mystery to Petraeus or the existing CIA leadership. The trick is to get Congress and the media out of the loop so they will be able act freely. Can he do it?
Petraeus' confirmation hearing in the Senate was encouraging. The Senators latched onto the fact that the general disagreed with Obama's sharp troop reduction call in Afghanistan. They tried to get Petraeus to say he would resign from the Army over this disagreement if he weren't going to the CIA. The general was prepared for this nonsense and made a stirring speech about how the privates in the line of fire can't resign, commanders also should never resign, and even suggesting it was unpatriotic to bring the subject up. The speech wound up in the media and made the Senators look bad. They were licking their wounds after the hearing and are probably eager to avoid confronting the new head spook again. A good start.
Tuesday, June 28, 2011
Pangalos Threatens Military Take-over
Charts: The market is in a rally attempt, the 8th one within the ongoing correction. We are seeing big gains that are magnified by weak volume. Leadership is much improved in this rally attempt. Today Caterpillar is up about 3%. The S&P 500 is something like 30 points above its 200-day moving average, taking it well away from the danger zone. Still, truly leaving the danger zone depends on the Greek vote.
Fundamentals: In the last few weeks Greek banks have lost about 8% of their depositor base, pushing them close to total collapse. Greek Deputy PM Pangalos says that if the two austerity bills are not voted through Parliament, he will call out tanks and the army to blockade Greek banks to prevent further runs on deposits. The threat of a quasi-military take-over has seemingly pushed wavering PMs into supporting the austerity bills, so passage now appears likely. And we are seeing a global relief rally in response. Lost in all this is a host of weak economic data such as horrible consumer spending in the US, zero wage growth and bad consumer confidence. If the Greek debacle is solved or at least kicked down the road at least a year, maybe all this weak data will turn around. When Lehman Brothers folded, consumers immediately stopped spending. This surprised economists who thought consumers world-wide were too stupid to understand the implications of the credit crisis. Even humble street vendors in New Delhi stopped spending, humble but not stupid.
It is still likely that the Greek government will not implement the austerity measures once the white hot spotlight of world attention is turned away. We should look at the bigger picture of sovereign debt, and not focus solely on Greece. This week the US government is selling $99 billion worth of debt. Forgiving one week's worth of US debt would almost make Greece whole. The problem of global sovereign debt will only be solved if the ongoing talks between Obama and the Republicans produce a big cut in spending. Turing America's debt problem around would take pressure off Greece, Portugal, and everybody. And it would make for a long lasting bull market.
Long War: The armies of Mauritania and Mali joined together last week to attack what was probably the largest Al-Qaeda camp in North Africa. A sizable battle ensued featuring air strikes from the good guys and apparently artillery and other heavy weapons from the bad guys. Almost certainly US satellite data and other intelligence assets were involved in this operation. A similar strike involving a US attack helicopter was launched against Al-Shabab at about the same time in Somalia. And finally, a Yemeni security patrol caught a large number of Al-Qaeda bombers entering the country from the sea. All of these incidents involve the CIA and show us the way forward into the 21st century.
There is no way US Marines can land in Mali or put boots on the ground in Somalia. As I've repeatedly said, there is only one answer, CIA. That's why the defeat in the House (two weeks ago) of a bill to curb Agency activity in Libya was so welcome. We need Congress to get its beak 100% out of Company business, bring home the US Army and USMC, and turn running the world over to the spooks in Langley.
Fundamentals: In the last few weeks Greek banks have lost about 8% of their depositor base, pushing them close to total collapse. Greek Deputy PM Pangalos says that if the two austerity bills are not voted through Parliament, he will call out tanks and the army to blockade Greek banks to prevent further runs on deposits. The threat of a quasi-military take-over has seemingly pushed wavering PMs into supporting the austerity bills, so passage now appears likely. And we are seeing a global relief rally in response. Lost in all this is a host of weak economic data such as horrible consumer spending in the US, zero wage growth and bad consumer confidence. If the Greek debacle is solved or at least kicked down the road at least a year, maybe all this weak data will turn around. When Lehman Brothers folded, consumers immediately stopped spending. This surprised economists who thought consumers world-wide were too stupid to understand the implications of the credit crisis. Even humble street vendors in New Delhi stopped spending, humble but not stupid.
It is still likely that the Greek government will not implement the austerity measures once the white hot spotlight of world attention is turned away. We should look at the bigger picture of sovereign debt, and not focus solely on Greece. This week the US government is selling $99 billion worth of debt. Forgiving one week's worth of US debt would almost make Greece whole. The problem of global sovereign debt will only be solved if the ongoing talks between Obama and the Republicans produce a big cut in spending. Turing America's debt problem around would take pressure off Greece, Portugal, and everybody. And it would make for a long lasting bull market.
Long War: The armies of Mauritania and Mali joined together last week to attack what was probably the largest Al-Qaeda camp in North Africa. A sizable battle ensued featuring air strikes from the good guys and apparently artillery and other heavy weapons from the bad guys. Almost certainly US satellite data and other intelligence assets were involved in this operation. A similar strike involving a US attack helicopter was launched against Al-Shabab at about the same time in Somalia. And finally, a Yemeni security patrol caught a large number of Al-Qaeda bombers entering the country from the sea. All of these incidents involve the CIA and show us the way forward into the 21st century.
There is no way US Marines can land in Mali or put boots on the ground in Somalia. As I've repeatedly said, there is only one answer, CIA. That's why the defeat in the House (two weeks ago) of a bill to curb Agency activity in Libya was so welcome. We need Congress to get its beak 100% out of Company business, bring home the US Army and USMC, and turn running the world over to the spooks in Langley.
Sunday, June 26, 2011
The Taliban is Like Japan
Charts: We've seen the 200-day moving average of the S&P 500 repeatedly tested in recent days. Each time it has been tested, it has found support, which is good. Here's the rub, the index is finding support exactly at the 200-day line. The precision is too great for it to be simple technical support. This means there are computerized trading programs moving the market. They will likely dump stocks if the 200-day line does not hold up. And programs like this can be very dangerous: computerized stop losses caused the flash crash 14 months ago that sent the Dow index down nearly 1000 points in a few hours. The flash crash stop losses were put in place because of the Greek debt crisis and we are still grappling with this issue.
Fundamentals: On Wednesday the Greek Parliament will vote on a broad austerity program and on Thursday it will vote on specific legislation to enact the broad program. Greek Deputy PM Pangalos says the Wednesday vote is pretty much a cinch but the Thursday vote is still up in the air. This is because specific cuts will hurt specific Members of Parliament (MPs) while the broad program does not directly do this. If either vote fails, Armageddon will descend upon our portfolios like the wrath of an avenging God (scary). The stock market thinks everything will turn up roses because nobody could be so stupid as to invite the wrath of an avenging God. Who could be that dumb? Keep reading...
The Greek Socialist party is sponsoring the legislation and holds the key for victory. It controls 155 seats out of 300. One Socialist MP has defected and two are on the fence. So right now there is a cushion of only two votes. Last Thursday the EU/IMF/ECB (the so-called Troika) toughened the austerity package. One of the things the Troika did was increase taxes on Greek minimum wage workers. This was incredibly stupid because it won't generate much revenue but it enraged Greek voters.
The Trokia's austerity package is in fact very poorly designed, heavy on job killing taxes and light on privatization. The Greek government owns over $300 billion in hard assets and has only $400 billion in outstanding debt. So massive privatization combined with a lower-tax, business-friendly environment could easily solve the problem. But that is not on the table.
What is on the table will bankrupt Greece and force a default at some time in the future. The term "kick the can down the road" has appeared hundreds of times in financial periodicals to describe this approach. Everybody knows Greece will default, it's only a question of when. The stock market wants the vote to succeed, have the can kicked down the road a couple years, and then rally in relief.
If the vote succeeds, there probably will be a global relief rally. But the market is wrong if it thinks the can will be kicked down the road for years. It might be only months or weeks or even days. Here's why...
The first Greek bail out package over a year ago was also accompanied by an austerity program. The first program did not get off the ground very far. For instance, Greek tax collection is based on Medieval customs where tax collectors are given a territory and tacitly allowed to pocket bribes as they shake down tax payers. This was supposed to have been reformed by the first program but wasn't.
If the vote does succeed, the bond and credit default swap markets will be watching to see if the second austerity program is actually being implemented. Probably it won't be implemented because of the stupid taxes on low income Greeks and all the other garbage put in place by the Troika. If the credit markets start to panic, the equity markets will eventually follow suit.
Long War: There are more American combat deaths in Iraq right now than there are in Afghanistan. American combat deaths in Iraq are at a three year high and as the US troop draw down goes into high gear things are looking dicey. Long War hot spots run by the Pentagon (Iraq and Afghanistan) aren't doing very well. The hot spots run by the CIA (everywhere else) are doing much better. This brings us to Joe Biden's vision.
After the surge troops are withdrawn from Afghanistan there will be 70,000 US soldiers left in country. Biden wants them to stop engaging in "nation building" and instead deploy around huge military compounds that will be home to a fleet of CIA drones. Without nation building, civilian foreign aid will be stopped, saving billions. When the CIA is in charge there is never very much civilian foreign aid.
The CIA knows there is an inverse relationship between GDP growth in developing countries and foreign aid. The more aid, the less growth. Take the Marshal Plan after WW II. Ten times more aid went to Britain than Germany. But Germany's economy grew three times faster than Britain's. Then there's Somaliland, an independent (but unrecognized) country in Africa that receives zero foreign aid. It grows faster than similar countries that get foreign aid. One of the reason why the Libyan rebels are doing better than our Afghan allies is that the Libyan good guys aren't getting any real foreign aid.
Biden says that this CIA-centric structure will be permanent. A low level guerrilla war will be fought in Af/Pak for decades. He is very wise to admit this up front. All in all, Biden's vision is excellent. Here's the problem, Obama doesn't want a permanent war. And this is why we are hearing so much about America's not-so-secret peace talks with the Taliban. Apparently Obama thinks that the Taliban can be talked into peace and the whole problem will just go away. Here is another inverse relationship for you: The greater the number of combat deaths an army is willing to absorb, the less chance there is for a given war to be settled through negotiation.
In WW II, the Italian Army was quick to surrender on the battlefield, unwilling to absorb combat losses, and it was also amicable to peace talks. But the Japanese Army was willing to absorb huge combat losses. Japan had to have not one, but two, Atomic bombs dropped on it, plus face a post nuclear occupation from the Soviet Union, before it was willing to engage in peace talks. The Taliban is like Japan, not Italy.
Fundamentals: On Wednesday the Greek Parliament will vote on a broad austerity program and on Thursday it will vote on specific legislation to enact the broad program. Greek Deputy PM Pangalos says the Wednesday vote is pretty much a cinch but the Thursday vote is still up in the air. This is because specific cuts will hurt specific Members of Parliament (MPs) while the broad program does not directly do this. If either vote fails, Armageddon will descend upon our portfolios like the wrath of an avenging God (scary). The stock market thinks everything will turn up roses because nobody could be so stupid as to invite the wrath of an avenging God. Who could be that dumb? Keep reading...
The Greek Socialist party is sponsoring the legislation and holds the key for victory. It controls 155 seats out of 300. One Socialist MP has defected and two are on the fence. So right now there is a cushion of only two votes. Last Thursday the EU/IMF/ECB (the so-called Troika) toughened the austerity package. One of the things the Troika did was increase taxes on Greek minimum wage workers. This was incredibly stupid because it won't generate much revenue but it enraged Greek voters.
The Trokia's austerity package is in fact very poorly designed, heavy on job killing taxes and light on privatization. The Greek government owns over $300 billion in hard assets and has only $400 billion in outstanding debt. So massive privatization combined with a lower-tax, business-friendly environment could easily solve the problem. But that is not on the table.
What is on the table will bankrupt Greece and force a default at some time in the future. The term "kick the can down the road" has appeared hundreds of times in financial periodicals to describe this approach. Everybody knows Greece will default, it's only a question of when. The stock market wants the vote to succeed, have the can kicked down the road a couple years, and then rally in relief.
If the vote succeeds, there probably will be a global relief rally. But the market is wrong if it thinks the can will be kicked down the road for years. It might be only months or weeks or even days. Here's why...
The first Greek bail out package over a year ago was also accompanied by an austerity program. The first program did not get off the ground very far. For instance, Greek tax collection is based on Medieval customs where tax collectors are given a territory and tacitly allowed to pocket bribes as they shake down tax payers. This was supposed to have been reformed by the first program but wasn't.
If the vote does succeed, the bond and credit default swap markets will be watching to see if the second austerity program is actually being implemented. Probably it won't be implemented because of the stupid taxes on low income Greeks and all the other garbage put in place by the Troika. If the credit markets start to panic, the equity markets will eventually follow suit.
Long War: There are more American combat deaths in Iraq right now than there are in Afghanistan. American combat deaths in Iraq are at a three year high and as the US troop draw down goes into high gear things are looking dicey. Long War hot spots run by the Pentagon (Iraq and Afghanistan) aren't doing very well. The hot spots run by the CIA (everywhere else) are doing much better. This brings us to Joe Biden's vision.
After the surge troops are withdrawn from Afghanistan there will be 70,000 US soldiers left in country. Biden wants them to stop engaging in "nation building" and instead deploy around huge military compounds that will be home to a fleet of CIA drones. Without nation building, civilian foreign aid will be stopped, saving billions. When the CIA is in charge there is never very much civilian foreign aid.
The CIA knows there is an inverse relationship between GDP growth in developing countries and foreign aid. The more aid, the less growth. Take the Marshal Plan after WW II. Ten times more aid went to Britain than Germany. But Germany's economy grew three times faster than Britain's. Then there's Somaliland, an independent (but unrecognized) country in Africa that receives zero foreign aid. It grows faster than similar countries that get foreign aid. One of the reason why the Libyan rebels are doing better than our Afghan allies is that the Libyan good guys aren't getting any real foreign aid.
Biden says that this CIA-centric structure will be permanent. A low level guerrilla war will be fought in Af/Pak for decades. He is very wise to admit this up front. All in all, Biden's vision is excellent. Here's the problem, Obama doesn't want a permanent war. And this is why we are hearing so much about America's not-so-secret peace talks with the Taliban. Apparently Obama thinks that the Taliban can be talked into peace and the whole problem will just go away. Here is another inverse relationship for you: The greater the number of combat deaths an army is willing to absorb, the less chance there is for a given war to be settled through negotiation.
In WW II, the Italian Army was quick to surrender on the battlefield, unwilling to absorb combat losses, and it was also amicable to peace talks. But the Japanese Army was willing to absorb huge combat losses. Japan had to have not one, but two, Atomic bombs dropped on it, plus face a post nuclear occupation from the Soviet Union, before it was willing to engage in peace talks. The Taliban is like Japan, not Italy.
Friday, June 24, 2011
A Long and Bumpy Road
Charts: Today's action crushed the market's most recent rally attempt and we are back to being mired in a correction. For the past week or so the S&P 500 has three times plunged toward its 200-day moving average while the Vix (fear gauge) spiked. In every case the index bounced off the 200-day line and the Vix calmed down. Today the market is sitting right on top the 200-day line with the Vix elevated. The market is waiting for the Greek Parliament to vote Tuesday. It is likley that if the vote goes the wrong way, then the index will pierce the 200-day line with the fear gauge screaming upward. If it does this and trades below the 200-day line, the charts will be saying we are entering a bear market.
Fundamentals: Yesterday the market executed a big upside reversal when word leaked out the Greek Finance Minister had agreed to an even tougher austerity package to present to the Greek Parliament, because his fingers were held to the flame by Germany. The market got it wrong, a tougher austerity package is bad news in the short and medium turn because obviously it will be harder to sell. And indeed, today one Greek MP switched sides and said he will vote no. The Socialist Party (good guys) have only a razor thin majority so any defections are very bad.
European banks are exposed to Greek debt and several Italian banks cratered today because of the dicey situation concerning the Greek vote. This is why the market tanked today.
In the long run Greece defaulting will be a good thing, but that is the very long run, after another recession and bear market, years in the future. If Greece is bailed out, a host of new problems arise. One is that bond vigilantes will probably go after Ireland next and there is no appetite for an Irish bail out. Even if other Euro-periphery countries do get bailed out, we are then consigning the world economy to decades of Japanese style tupor because the system will be loaded with bad debt, not flushed out and started anew. That's okay from an investment perspective, because stability will give us a way to go.
Long War: The Syrian Army is conducting massive maneuvers against rage rebels near the Turkish border. Turkey is warning Syria to back off, or else. The Turkish Army could crush Syria, but only after a horrendous war that would set the Mideast afire. Congress is asking Obama for a better reason as to why America is at war in Libya. The potential Turkish-Syria dust up illustrates why. America needs to gain control over the rage rebellion by defeating Gaddafi and reasserting its traditional role of hegemon in the Mideast. In the early stages of the Cold War an honest answer like this could be provided to Congress and the voters. But today such honesty is impossible because America is tired of war. Unfortunately war is not tired of America.
Obama is pulling 33,000 troops out of Afghanistan over the next year and a half. As it is there are only enough troops to tackle the Taliban in one third of the country at a time, allowing the bad guys to gain strength elsewhere. The surge strategy is to gain control of the south, around Kandahar, hand over control to the Afghan Army, and then mount an offensive in the east near the Pak border, hand over control to the Afghan Army, and so forth. Now that strategy is defunct. Instead the CIA will have to mount a gigantic drone campaign over the entire country. This next step isn't even in the planning stage. General Petraeus is just now being grilled by the Senate in confirmation hearings to take over the CIA. A long and bumpy road lay ahead.
Fundamentals: Yesterday the market executed a big upside reversal when word leaked out the Greek Finance Minister had agreed to an even tougher austerity package to present to the Greek Parliament, because his fingers were held to the flame by Germany. The market got it wrong, a tougher austerity package is bad news in the short and medium turn because obviously it will be harder to sell. And indeed, today one Greek MP switched sides and said he will vote no. The Socialist Party (good guys) have only a razor thin majority so any defections are very bad.
European banks are exposed to Greek debt and several Italian banks cratered today because of the dicey situation concerning the Greek vote. This is why the market tanked today.
In the long run Greece defaulting will be a good thing, but that is the very long run, after another recession and bear market, years in the future. If Greece is bailed out, a host of new problems arise. One is that bond vigilantes will probably go after Ireland next and there is no appetite for an Irish bail out. Even if other Euro-periphery countries do get bailed out, we are then consigning the world economy to decades of Japanese style tupor because the system will be loaded with bad debt, not flushed out and started anew. That's okay from an investment perspective, because stability will give us a way to go.
Long War: The Syrian Army is conducting massive maneuvers against rage rebels near the Turkish border. Turkey is warning Syria to back off, or else. The Turkish Army could crush Syria, but only after a horrendous war that would set the Mideast afire. Congress is asking Obama for a better reason as to why America is at war in Libya. The potential Turkish-Syria dust up illustrates why. America needs to gain control over the rage rebellion by defeating Gaddafi and reasserting its traditional role of hegemon in the Mideast. In the early stages of the Cold War an honest answer like this could be provided to Congress and the voters. But today such honesty is impossible because America is tired of war. Unfortunately war is not tired of America.
Obama is pulling 33,000 troops out of Afghanistan over the next year and a half. As it is there are only enough troops to tackle the Taliban in one third of the country at a time, allowing the bad guys to gain strength elsewhere. The surge strategy is to gain control of the south, around Kandahar, hand over control to the Afghan Army, and then mount an offensive in the east near the Pak border, hand over control to the Afghan Army, and so forth. Now that strategy is defunct. Instead the CIA will have to mount a gigantic drone campaign over the entire country. This next step isn't even in the planning stage. General Petraeus is just now being grilled by the Senate in confirmation hearings to take over the CIA. A long and bumpy road lay ahead.
Wednesday, June 22, 2011
Victory for AQAP
Charts: Yesterday's big gain in the S&P 500 came in weak volume. The Nasdaq also had a big gain which came in good volume. It is not clear whether the big up day was a follow through day because of this mixed message. For the S&P 500, 1300 is the 50% retracement of the correction. Because of the mixed message of the maybe follow through day we need to see 1300 conquered to be sure a technical rally is underway.
Fundamentals: The markets are still scared of Greece. The Greek Parliament votes on an austerity budget on Tuesday. If this vote doesn't have a favorable outcome global financial markets will tank.
Long War: On Thursday the House votes on two bills concerning the Libya war. One bill gives the green light to continued military action. The other will end drone missile strikes and other military activity, but allows refueling of NATO fighters. This second bill is toxic since it has Congress sticking its beak in Company business (telling CIA what to do). Furthermore, anything that hurts the war effort in Libya is bad because North Sudan is in a shooting war with tribal militias allied to South Sudan. In other words, North and South Sudan are a heartbeat away from full scale war. So the Libya war is already spilling outward and could enflame the entire region.
Saudi Arabia is trying to cobble together a government in Yemen. There is a shooting war between the Yemeni Army and AQAP. The good guys are being led by deposed Yemeni dictator Saleh's sons. So the media has it wrong, Saleh's government is the only thing holding Al-Qaeda at bay. The Saudis are wisely trying to meld the existing government with strong tribal factions. AQAP had been losing the war but yesterday it broke a hundred or so AQAP fighters out of prison and is rejuvenated. Forget democracy and the Arab Spring, there are two possibilities in Yemen, either it becomes a sort of vassal to Saudi Arabia or it becomes Al-Qaeda central.
Fundamentals: The markets are still scared of Greece. The Greek Parliament votes on an austerity budget on Tuesday. If this vote doesn't have a favorable outcome global financial markets will tank.
Long War: On Thursday the House votes on two bills concerning the Libya war. One bill gives the green light to continued military action. The other will end drone missile strikes and other military activity, but allows refueling of NATO fighters. This second bill is toxic since it has Congress sticking its beak in Company business (telling CIA what to do). Furthermore, anything that hurts the war effort in Libya is bad because North Sudan is in a shooting war with tribal militias allied to South Sudan. In other words, North and South Sudan are a heartbeat away from full scale war. So the Libya war is already spilling outward and could enflame the entire region.
Saudi Arabia is trying to cobble together a government in Yemen. There is a shooting war between the Yemeni Army and AQAP. The good guys are being led by deposed Yemeni dictator Saleh's sons. So the media has it wrong, Saleh's government is the only thing holding Al-Qaeda at bay. The Saudis are wisely trying to meld the existing government with strong tribal factions. AQAP had been losing the war but yesterday it broke a hundred or so AQAP fighters out of prison and is rejuvenated. Forget democracy and the Arab Spring, there are two possibilities in Yemen, either it becomes a sort of vassal to Saudi Arabia or it becomes Al-Qaeda central.
Tuesday, June 21, 2011
Let Slip the Dogs of War
Charts: Technicians say various chart patterns indicate there is a 90% chance the Greek Parliament will vote in favor of the new austerity government put in place last week.
Fundamentals: After the market closes the Greek parliament holds its vote. If the vote doesn't go as expected bad things will happen to financial markets. Most analysts say it will be about as bad as the collapse of Lehman Brothers. We'll soon know one way or the other.
Long War: The Pak Army arrested a dirty general, i.e. one loyal to Islamic bad guys. Immediately after the CIA killed OBL (and Obama took his foolish bow) the Pak Army and ISI started rolling up the CIA network inside Pakistan. For the moment at least the tide has turned, bad guys are getting rolled up and reportedly some CIA informants have been quietly released. Also, a half dozen jihadist villages along the border with Afghanistan are being shelled by the Pak Army, perhaps the start of a new offensive. So the good guys are apparently back in the saddle.
The CIA had been sending drones exclusively to North Waziristan. Yesterday it executed drone strikes into other Pak tribal lands. This implies the ISI and Pak Army have given Langley permission to expand the drone program.
Tomorrow Obama will announce his troop draw down decision in Afghanistan. Probably it will be worse than we would like. He will only get away with this if he unleashes the CIA. This means getting rid of Congressional oversight. The best strategic move Obama has made so far in his presidency was the emasculation of the Director of National Intelligence (a CIA watchdog set up after 9/11). The second best move was when CIA Director Leon Panetta clipped Nancy Pelosi's wings and clipped them hard. The old school CIA would strike back at Congress and even the FBI by threatening to expose personal secrets, such as the fact that J. Edgar Hoover was gay. Hopefully when Patraeus becomes the top spook this old school mindset will solidify and grow.
Fundamentals: After the market closes the Greek parliament holds its vote. If the vote doesn't go as expected bad things will happen to financial markets. Most analysts say it will be about as bad as the collapse of Lehman Brothers. We'll soon know one way or the other.
Long War: The Pak Army arrested a dirty general, i.e. one loyal to Islamic bad guys. Immediately after the CIA killed OBL (and Obama took his foolish bow) the Pak Army and ISI started rolling up the CIA network inside Pakistan. For the moment at least the tide has turned, bad guys are getting rolled up and reportedly some CIA informants have been quietly released. Also, a half dozen jihadist villages along the border with Afghanistan are being shelled by the Pak Army, perhaps the start of a new offensive. So the good guys are apparently back in the saddle.
The CIA had been sending drones exclusively to North Waziristan. Yesterday it executed drone strikes into other Pak tribal lands. This implies the ISI and Pak Army have given Langley permission to expand the drone program.
Tomorrow Obama will announce his troop draw down decision in Afghanistan. Probably it will be worse than we would like. He will only get away with this if he unleashes the CIA. This means getting rid of Congressional oversight. The best strategic move Obama has made so far in his presidency was the emasculation of the Director of National Intelligence (a CIA watchdog set up after 9/11). The second best move was when CIA Director Leon Panetta clipped Nancy Pelosi's wings and clipped them hard. The old school CIA would strike back at Congress and even the FBI by threatening to expose personal secrets, such as the fact that J. Edgar Hoover was gay. Hopefully when Patraeus becomes the top spook this old school mindset will solidify and grow.
Monday, June 20, 2011
Just Leave CIA Alone
Charts: Last week the S&P 500 bounced up off its 200-day moving average and since then the VIX or fear gauge has fallen sharply. On Friday the broad index was up but the Nasdaq was down, making it unclear if a rally attempt was underway. Today all major indexes are up and the fear gauge keeps going down, so a rally attempt is underway. It may or may not turn into a technical rally.
Fundamentals: On Tuesday the Greek parliament will execute a vote of confidence in the PM's new cabinet. If that goes well, then there will be a vote for a second austerity package. If that goes well, then the Greek crisis will be put on the back burner for the rest of the year and the market will turn its attention back to the global slow down. Economists are debating whether the slow down is just a soft patch or the start of a double dip recession.
Long War: The New York Times claims Obama is going to cut troop levels in Afghanistan quicker and more deeply than expected. That sounds bad but there is a silver lining. The White House has done an analysis that shows the CIA has been more effective than the US Army and USMC in defeating the bad guys. The plan supposedly is for Langley to take over the entire Af/Pak theater eventually.
Assuming the Times is correct, all the CIA needs to win this war and all the other LW wars is to be left alone by Congress, but really left alone, with no Congressional watch dog committees, no oversight at all. It doesn't even need to have its budget increased because if it is truly left alone, the CIA becomes self-funding.
In the first half of the Cold War the CIA ran dozens of profitable companies and used the proceeds to fund operations. That's how it earned the nickname "the Company." If it were really left alone in Afghanistan, it would act like a successful American street gang and take over the heroin trade from the Taliban, which would generate hundreds of millions of dollars for itself and take hundreds of millions away from the bad guys. We know this is true because it is already happening on a small scale in Kandahar with Karzai's brother, who runs a small intelligence network with drug money.
Every Long War hot spot that is run exclusively by the CIA does better than the ones it does not run. Just today the Yemeni Army reported that it is on the verge of taking back a key city that had been overrun by AQAP. It appears that AQAP has bitten off more than it can chew in Yemen. And there are no US Marines or soldiers there, just spooks from Langley.
Not only must Congress leave the CIA alone, the White House also needs to back off. When Obama announced that the CIA had killed OBL, he was interfering. Never before has a CIA assassination been made public. The greatest CIA assassination ever was when Salvadore Allende was killed in Chile during the Cold War. That act may have won the Cold War. As I write the family of Allende is digging up the old Marxist blow-hard and exhuming his body, an attempt to prove he was not assassinated by the CIA but died of natural causes. So even after all these years the CIA's smoke screen around that event is still intact. It is shameful that Obama stuck his nose in Company business.
Fundamentals: On Tuesday the Greek parliament will execute a vote of confidence in the PM's new cabinet. If that goes well, then there will be a vote for a second austerity package. If that goes well, then the Greek crisis will be put on the back burner for the rest of the year and the market will turn its attention back to the global slow down. Economists are debating whether the slow down is just a soft patch or the start of a double dip recession.
Long War: The New York Times claims Obama is going to cut troop levels in Afghanistan quicker and more deeply than expected. That sounds bad but there is a silver lining. The White House has done an analysis that shows the CIA has been more effective than the US Army and USMC in defeating the bad guys. The plan supposedly is for Langley to take over the entire Af/Pak theater eventually.
Assuming the Times is correct, all the CIA needs to win this war and all the other LW wars is to be left alone by Congress, but really left alone, with no Congressional watch dog committees, no oversight at all. It doesn't even need to have its budget increased because if it is truly left alone, the CIA becomes self-funding.
In the first half of the Cold War the CIA ran dozens of profitable companies and used the proceeds to fund operations. That's how it earned the nickname "the Company." If it were really left alone in Afghanistan, it would act like a successful American street gang and take over the heroin trade from the Taliban, which would generate hundreds of millions of dollars for itself and take hundreds of millions away from the bad guys. We know this is true because it is already happening on a small scale in Kandahar with Karzai's brother, who runs a small intelligence network with drug money.
Every Long War hot spot that is run exclusively by the CIA does better than the ones it does not run. Just today the Yemeni Army reported that it is on the verge of taking back a key city that had been overrun by AQAP. It appears that AQAP has bitten off more than it can chew in Yemen. And there are no US Marines or soldiers there, just spooks from Langley.
Not only must Congress leave the CIA alone, the White House also needs to back off. When Obama announced that the CIA had killed OBL, he was interfering. Never before has a CIA assassination been made public. The greatest CIA assassination ever was when Salvadore Allende was killed in Chile during the Cold War. That act may have won the Cold War. As I write the family of Allende is digging up the old Marxist blow-hard and exhuming his body, an attempt to prove he was not assassinated by the CIA but died of natural causes. So even after all these years the CIA's smoke screen around that event is still intact. It is shameful that Obama stuck his nose in Company business.
Thursday, June 16, 2011
Obama's Huge Mistake Hands Al-Qaeda a Victory and Defeat for CIA
Charts: The S&P 500's 200-day moving average is 1257. In volatile trading today the index rose in the morning then crashed to hit the 200-day line, found support, and bounced up for a tiny gain. It is positive that the 200-day line held. If it doesn't hold over the next few days while the VIXX (fear gauge) spikes, then more big losses are in store. The VIXX has been spiking lately, which is a new and unwelcome development in the correction. Up until now the VIXX had been tame.
Earlier in the week another rally attempt was brutally crushed. Over one month ago the correction started by forming a gently down sloping trading channel. Then we had a brief waterfall pattern, which means the market drops without slowing down when it hits support levels. Now it appears the waterfall period is over and we have entered another downward sloping trading channel where support levels check downdrafts (good). Throughout all this growth stocks have been really clobbered. Leadership is very bad. For instance, the Shanghai B index is down about 28%, entering bear market territory. But defensive stocks like Coke are holding up. This means the mild 7-8% drop in American stocks understates the technical damage done so far in the current correction. Coke cannot lead the market up to new highs. That is a job for Apple and Caterpillar.
Fundamentals: The market is fixated on the Greek debt problem. The EU, ECB, and IMF can't figure out how to put together a new bailout package without triggering a Greek default. The bailout package on the table calls for massive free market restructuring of the Greek economy combined with some sort of default. Any default will tear apart global financials markets. And Greece is proving unable or unwilling to accept this package and restructure. The possibility arises that the existing proposal will be shelved and a small aid package with no strings attached will be delivered to Greece to kick the can a few months down the road. Probably there will be a stock market relief rally if this happens. Kicking the can down the road makes a long term solution more difficult. If it is only kicked down the road a couple months, then it is likely any relief rally will get crushed without a real solution in place.
Long War: The CIA has infiltrated the Pak spy agency (ISI) and the Pak Army, with a small network. Al-Qaeda has infiltrated ISI and the Pak Army with a large network. The ISI has recently arrested the CIA operatives within its own ranks who helped kill OBL. So the CIA network that exists within the ISI is being dismantled and the Al-Qaeda network is growing. Put another way, at the moment Al-Qaeda is beating the CIA in Pakistan.
The pro-American leaders of the ISI and the Pak Army are on the verge of losing their jobs. They are both a heartbeat away from being overthrown by mid-level officers who are now rabidly anti-American because of the way Obama handled the killing of OBL. The Pak Army could easily experience a so-called "Colonel's Coup."
CIA drone bases within Pakistan are no longer receiving food, water, and other supplies. Probably new drone bases are being built in Afghanistan. In a hundred little ways the Pak Army and ISI are reducing cooperation with the Pentagon and the CIA. Any hope for the Pak Army to invade North Waziristan is long gone. A friend is slowly becoming an enemy.
When Obama made his speech about killing OBL he literally took a bow, nodding and bending to the camera with a smug look on his face. He did this to get a bounce in the polls. But he destroyed America's most importance alliance. The Pak Army has 130,000 soldiers currently engaged in combat with the Taliban. If they stopped fighting in the near future the result would be nightmarish.
There is no point in being Chicken Little and saying the sky is falling. However, I remind you that Britain's empire fell because it went to war with its strongest allies, the Boer Republics in South Africa. At the time the British Parliament was saying all the same things about the Boers that our Congress is saying about Pakistan.
Earlier in the week another rally attempt was brutally crushed. Over one month ago the correction started by forming a gently down sloping trading channel. Then we had a brief waterfall pattern, which means the market drops without slowing down when it hits support levels. Now it appears the waterfall period is over and we have entered another downward sloping trading channel where support levels check downdrafts (good). Throughout all this growth stocks have been really clobbered. Leadership is very bad. For instance, the Shanghai B index is down about 28%, entering bear market territory. But defensive stocks like Coke are holding up. This means the mild 7-8% drop in American stocks understates the technical damage done so far in the current correction. Coke cannot lead the market up to new highs. That is a job for Apple and Caterpillar.
Fundamentals: The market is fixated on the Greek debt problem. The EU, ECB, and IMF can't figure out how to put together a new bailout package without triggering a Greek default. The bailout package on the table calls for massive free market restructuring of the Greek economy combined with some sort of default. Any default will tear apart global financials markets. And Greece is proving unable or unwilling to accept this package and restructure. The possibility arises that the existing proposal will be shelved and a small aid package with no strings attached will be delivered to Greece to kick the can a few months down the road. Probably there will be a stock market relief rally if this happens. Kicking the can down the road makes a long term solution more difficult. If it is only kicked down the road a couple months, then it is likely any relief rally will get crushed without a real solution in place.
Long War: The CIA has infiltrated the Pak spy agency (ISI) and the Pak Army, with a small network. Al-Qaeda has infiltrated ISI and the Pak Army with a large network. The ISI has recently arrested the CIA operatives within its own ranks who helped kill OBL. So the CIA network that exists within the ISI is being dismantled and the Al-Qaeda network is growing. Put another way, at the moment Al-Qaeda is beating the CIA in Pakistan.
The pro-American leaders of the ISI and the Pak Army are on the verge of losing their jobs. They are both a heartbeat away from being overthrown by mid-level officers who are now rabidly anti-American because of the way Obama handled the killing of OBL. The Pak Army could easily experience a so-called "Colonel's Coup."
CIA drone bases within Pakistan are no longer receiving food, water, and other supplies. Probably new drone bases are being built in Afghanistan. In a hundred little ways the Pak Army and ISI are reducing cooperation with the Pentagon and the CIA. Any hope for the Pak Army to invade North Waziristan is long gone. A friend is slowly becoming an enemy.
When Obama made his speech about killing OBL he literally took a bow, nodding and bending to the camera with a smug look on his face. He did this to get a bounce in the polls. But he destroyed America's most importance alliance. The Pak Army has 130,000 soldiers currently engaged in combat with the Taliban. If they stopped fighting in the near future the result would be nightmarish.
There is no point in being Chicken Little and saying the sky is falling. However, I remind you that Britain's empire fell because it went to war with its strongest allies, the Boer Republics in South Africa. At the time the British Parliament was saying all the same things about the Boers that our Congress is saying about Pakistan.
Tuesday, June 14, 2011
The Guy with the Bad Hair
Charts: Today the S&P 500 launched its fifth rally attempt in the current correction, obviously the other four failed. The broad index closed above 1285 and the Dow above 12000, technical levels indicating we have at least started a rally attempt. In the days ahead we need to see a follow through day, an up day in bigger volume, for a true technical rally to begin.
Fundamentals: China is the source of growth for the world economy. Today Chinese inflation came in hotter than expected but the Great Dragon is still growing at a stout pace. There had been fears of Chinese stagflation and the squelching of these fears is the reason for today's rally attempt. Still, oil has to come down or there will be stagflation in China. In that case Beijing will keep tightening until inflation comes down, even if it means recession. Inflation in China causes huge riots and threatens the existence of the government; therefore, government officials will do anything to crush inflation.
Joe Biden's Congressional deficit reduction panel claims it is near a breakthrough and will recommend huge spending cuts without tax increases. It seems too good to be true. If these claims are accurate, then Biden's recommendations will be on the table right as the August 2 deadline for US government default hits. This means that liberals will have almost no choice but to go along with the cuts.
Long War: The CIA ran an experiment to see how deeply the ISID is woven into the fabric of the ISI. (ISID = Pak intelligence officers loyal to Al-Qaeda). Langley gave the ISI the location of two Al-Qaeda bomb factories and asked them to make a raid. By the time the raid was launched, the bad guys had been tipped off. So the ISID is a huge parallel organization tightly woven into the ISI and will take years to unwind. The CIA will have to infiltrate the ISID and chop it up from the inside. Real progress in the Pak tribal lands will have to wait until all this happens. It is called the Long War for a reason.
Obama is hinting that he will request a troop draw down of 30,000 in Afghanistan but give the Pentagon 18 months to start shipping soldiers home. That is a big lead time so the whole scheme will probably work if the CIA is beefed up in the meantime and has enough firepower to take over from the USMC and US Army.
In Yemen, the King of Saudi Arabia brokered a truce between the sitting government and the disjointed rebel movement. That truce is mostly holding and the fighting going on is between the Yemeni Army and Al-Qaeda. This is the first time that AQAP has been in a fight for its life in Yemen. So even though a new war has started it is a good thing because before the bad guys were not getting shot at.
In Libya, NATO attack helicopters are finally integrated into the war effort and the rebels are pushing on all fronts. In Brega, the push stalled once but is back on track. In Misrata, fighting is fierce once again, both sides are taking big casualties and it is hard to say who is winning. In the western mountains, the rebels are pushing hard and NATO officials claim the good guys are taking ground away from the bad guys. The western mountain rebels are drawing fire from Gaddafi's army into Tunisia. The goal apparently is to get the Tunisian Army to attack Gaddafi. This would be very positive if it happened. In fact the Tunisian Air Force scrambled one fighter jet and one attack helicopter in response to a Gaddafi artillery barrage that placed shells on Tunisian soil. So keep your fingers crossed, maybe Tunisia will clobber the guy with the bad hair (the rebel nickname for Gaddafi).
Fundamentals: China is the source of growth for the world economy. Today Chinese inflation came in hotter than expected but the Great Dragon is still growing at a stout pace. There had been fears of Chinese stagflation and the squelching of these fears is the reason for today's rally attempt. Still, oil has to come down or there will be stagflation in China. In that case Beijing will keep tightening until inflation comes down, even if it means recession. Inflation in China causes huge riots and threatens the existence of the government; therefore, government officials will do anything to crush inflation.
Joe Biden's Congressional deficit reduction panel claims it is near a breakthrough and will recommend huge spending cuts without tax increases. It seems too good to be true. If these claims are accurate, then Biden's recommendations will be on the table right as the August 2 deadline for US government default hits. This means that liberals will have almost no choice but to go along with the cuts.
Long War: The CIA ran an experiment to see how deeply the ISID is woven into the fabric of the ISI. (ISID = Pak intelligence officers loyal to Al-Qaeda). Langley gave the ISI the location of two Al-Qaeda bomb factories and asked them to make a raid. By the time the raid was launched, the bad guys had been tipped off. So the ISID is a huge parallel organization tightly woven into the ISI and will take years to unwind. The CIA will have to infiltrate the ISID and chop it up from the inside. Real progress in the Pak tribal lands will have to wait until all this happens. It is called the Long War for a reason.
Obama is hinting that he will request a troop draw down of 30,000 in Afghanistan but give the Pentagon 18 months to start shipping soldiers home. That is a big lead time so the whole scheme will probably work if the CIA is beefed up in the meantime and has enough firepower to take over from the USMC and US Army.
In Yemen, the King of Saudi Arabia brokered a truce between the sitting government and the disjointed rebel movement. That truce is mostly holding and the fighting going on is between the Yemeni Army and Al-Qaeda. This is the first time that AQAP has been in a fight for its life in Yemen. So even though a new war has started it is a good thing because before the bad guys were not getting shot at.
In Libya, NATO attack helicopters are finally integrated into the war effort and the rebels are pushing on all fronts. In Brega, the push stalled once but is back on track. In Misrata, fighting is fierce once again, both sides are taking big casualties and it is hard to say who is winning. In the western mountains, the rebels are pushing hard and NATO officials claim the good guys are taking ground away from the bad guys. The western mountain rebels are drawing fire from Gaddafi's army into Tunisia. The goal apparently is to get the Tunisian Army to attack Gaddafi. This would be very positive if it happened. In fact the Tunisian Air Force scrambled one fighter jet and one attack helicopter in response to a Gaddafi artillery barrage that placed shells on Tunisian soil. So keep your fingers crossed, maybe Tunisia will clobber the guy with the bad hair (the rebel nickname for Gaddafi).
Friday, June 10, 2011
Britain and France Screw-up
Long War: Two days ago the Free Libya Army in Misrata said that Gaddafi had launched a powerful offensive into the coastal city. The FLA also said they needed British and French attack helicopters to stem the tide of bad guys. NATO replied that Gaddafi's offensive was not serious. The attack helicopters remained in Brega, a secondary battlefield.
Today we learn that Gaddafi's offensive in Misrata is indeed powerful including tanks and other heavy equipment. The FLA is losing dozens of soldiers as the fighting rages. But NATO is nowhere to be seen, sticking to its original assertion that Gaddafi's offensive is unimportant.
Before the choppers arrived last week, the FLA had pulled back from front line positions around Misrata and Al Jezeera reporters claimed this pullback was led by British commandos. The FLA pullback was obviously in preparation for an attack by the helicopters. The FLA dug-in and built makeshift air bases for the choppers, eagerly awaiting their arrival. Then the FLA sat in place and patiently took withering fire from Gaddafi, still waiting for the British and French aerial assault.
But instead the British and French attacked around the oil city of Brega. Recently we heard a vast chorus of talk from the Western allies, including the US, that Gaddafi was almost defeated and it was time to start planning for a post-Gaddafi Libya. Civilian aid packages were put together at international conferences. The rebels were scolded for not having elections scheduled. The West started counting its chickens before they were hatched.
It's hard to understand what has been going on with Britain and France. Maybe civilian leadership has taken over the military campaign. Maybe plain and simple incompetence is at work. Brega is key to opening up oil exports from the part of Libya that the FLA controls. Maybe NATO wanted to get the oil flowing and had plans to deal with Misrata later. If this was the case, then those plans should have been shared with the FLA units around Brega and there shouldn't have been a pull back.
The British government did make some statements about the commandos (stationed around Misrata) to the effect that these guys were retired from the SAS and not actually working for Britain. That could mean their employer was and is the CIA. If that is true, then we have an example of one hand not knowing what the other is doing.
This episode is one gigantic screw up.
Today we learn that Gaddafi's offensive in Misrata is indeed powerful including tanks and other heavy equipment. The FLA is losing dozens of soldiers as the fighting rages. But NATO is nowhere to be seen, sticking to its original assertion that Gaddafi's offensive is unimportant.
Before the choppers arrived last week, the FLA had pulled back from front line positions around Misrata and Al Jezeera reporters claimed this pullback was led by British commandos. The FLA pullback was obviously in preparation for an attack by the helicopters. The FLA dug-in and built makeshift air bases for the choppers, eagerly awaiting their arrival. Then the FLA sat in place and patiently took withering fire from Gaddafi, still waiting for the British and French aerial assault.
But instead the British and French attacked around the oil city of Brega. Recently we heard a vast chorus of talk from the Western allies, including the US, that Gaddafi was almost defeated and it was time to start planning for a post-Gaddafi Libya. Civilian aid packages were put together at international conferences. The rebels were scolded for not having elections scheduled. The West started counting its chickens before they were hatched.
It's hard to understand what has been going on with Britain and France. Maybe civilian leadership has taken over the military campaign. Maybe plain and simple incompetence is at work. Brega is key to opening up oil exports from the part of Libya that the FLA controls. Maybe NATO wanted to get the oil flowing and had plans to deal with Misrata later. If this was the case, then those plans should have been shared with the FLA units around Brega and there shouldn't have been a pull back.
The British government did make some statements about the commandos (stationed around Misrata) to the effect that these guys were retired from the SAS and not actually working for Britain. That could mean their employer was and is the CIA. If that is true, then we have an example of one hand not knowing what the other is doing.
This episode is one gigantic screw up.
Thursday, June 9, 2011
Getting Hotter
Charts: The market was up modestly in weak volume today because US exports came in much stronger than expected. Today's action marks the beginning of the fourth rally attempt within an ongoing correction. The rally attempt needs consolidation and a follow through day to become a technical rally.
Fundamentals: The most recent GDP figures show the US economy growing at a 1.8% annualized rate. Two thirds of that growth came from a build in inventories. Real Final Sales (no inventory distortion) shows growth of only .7%, which speaks to a double-dip recession looming. However, GNP (Gross National Product) grew at about 3%. GNP (as opposed to GDP) captures growth of American companies abroad, the money stays abroad because of the bizarre US tax code, good for shareholders but not Joe Sixpack. Today's export data and the GNP/GDP data tell us the US economy is super weak, but emerging markets are relatively strong. Neither can take oil prices at current levels for an extended period. Which, as always, takes us to the Long War.
Long War: The New York Times says there is a massive and secret US bombing campaign against Al-Qaeda in Yemen. The campaign involves drones and fighter jets. The Times says there is a huge CIA presence in Yemen. This helps explain the ongoing and savage ground combat against the Yemeni towns that Al-Qaeda has taken over. Also, there is hard evidence that the NATO campaign in Libya is more reliant on the US than the Obama administration is admitting, which is pissing off the wackos in Congress. So the picture Obama has been painting of a total tail tuck in the Long War is misleading. The President is trying to buffalo his liberal base. This is reassuring on one level but it also sends the wrong message to the bad guys. The big issue is the Afghan troop draw down in July. 5000 troops or less removed is bullish. More than that will be bearish. If Obama is that scared of his liberal base, then we have grounds for concern.
Nevertheless, the Long War is burning red hot. NATO fuel tankers are routinely getting torched in Pakistan. This is so bad NATO is ready to open supply routes through Russia. Experts now say the Al-Qaeda mastermind, Kashmiri, who was supposed to have been killed by CIA drones is alive and well. This means the ISID (ISI Dirt) is still running amok.
Look at the periphery of the Long War: In Nigeria Islamic terror strikes are back in vogue. Russia says that Al-Qaeda has established a big presence in Chechnya. And finally, Iran is sailing attack submarines into the Red Sea to harass Israel. Put on your Kevlar vest because its getting hot out there.
Fundamentals: The most recent GDP figures show the US economy growing at a 1.8% annualized rate. Two thirds of that growth came from a build in inventories. Real Final Sales (no inventory distortion) shows growth of only .7%, which speaks to a double-dip recession looming. However, GNP (Gross National Product) grew at about 3%. GNP (as opposed to GDP) captures growth of American companies abroad, the money stays abroad because of the bizarre US tax code, good for shareholders but not Joe Sixpack. Today's export data and the GNP/GDP data tell us the US economy is super weak, but emerging markets are relatively strong. Neither can take oil prices at current levels for an extended period. Which, as always, takes us to the Long War.
Long War: The New York Times says there is a massive and secret US bombing campaign against Al-Qaeda in Yemen. The campaign involves drones and fighter jets. The Times says there is a huge CIA presence in Yemen. This helps explain the ongoing and savage ground combat against the Yemeni towns that Al-Qaeda has taken over. Also, there is hard evidence that the NATO campaign in Libya is more reliant on the US than the Obama administration is admitting, which is pissing off the wackos in Congress. So the picture Obama has been painting of a total tail tuck in the Long War is misleading. The President is trying to buffalo his liberal base. This is reassuring on one level but it also sends the wrong message to the bad guys. The big issue is the Afghan troop draw down in July. 5000 troops or less removed is bullish. More than that will be bearish. If Obama is that scared of his liberal base, then we have grounds for concern.
Nevertheless, the Long War is burning red hot. NATO fuel tankers are routinely getting torched in Pakistan. This is so bad NATO is ready to open supply routes through Russia. Experts now say the Al-Qaeda mastermind, Kashmiri, who was supposed to have been killed by CIA drones is alive and well. This means the ISID (ISI Dirt) is still running amok.
Look at the periphery of the Long War: In Nigeria Islamic terror strikes are back in vogue. Russia says that Al-Qaeda has established a big presence in Chechnya. And finally, Iran is sailing attack submarines into the Red Sea to harass Israel. Put on your Kevlar vest because its getting hot out there.
Tuesday, June 7, 2011
The Faint Growl of a Bear Grows Slightly Louder
Charts: During the sharp, short March correction the S&P 500 hit its 100-day moving average, found support and rebounded. In early June the index hit its 100-day moving average (1313) and the correction got much worse. This means 1313 is the breakdown point for the current correction and this level provides an important resistance level. If 1313 cannot be defeated, it will be bad. Also, even though the March correction was deeper and harder, the fact that the 100-day moving average provided support means this correction is technically worse.
1300 is the 50-day moving average and the lower end of the gently downward sloping trading channel that the index had been in for about a month until it started breaking down. 1300 also needs to be defeated in good volume before an assault can convincingly be made on 1313.
1295-1294 was the April low. The index hit this level today and met resistance, turning down in the final hour of trading as if it had been scalded. This is not good because hedge funds trade in the final hour and they are considered smart money.
1257-1259 is the March low, if this level is breached it will be not good.
During this correction volume patterns have been bearish. Stocks hitting new highs vs. new lows have been okay. Emerging markets have been okay, not great. When virtually every technical indicator turns bearish it can often mean that a correction has run its course. Or it can mean another huge bear market is forming. This is why fundamentals and geopolitics are more important than charts. In any case, not every technical indicator is negative yet. But they all seem to be slowly turning sour as the correction progresses.
This correction up till now has been a "frog-in-slowly-heating-water" type correction. A frog will sit in water that is slowly getting warmer until the water boils and he is dead. The downturn has still been mild, the water isn't that hot yet, the frogs are hanging in there bravely. Value investors are saying they will start buying when and if the correction produces a 10% loss. Growth investors are saying they won't buy until some of the key technical levels mentioned above are overcome. So right now we have nobody buying.
1300 is the 50-day moving average and the lower end of the gently downward sloping trading channel that the index had been in for about a month until it started breaking down. 1300 also needs to be defeated in good volume before an assault can convincingly be made on 1313.
1295-1294 was the April low. The index hit this level today and met resistance, turning down in the final hour of trading as if it had been scalded. This is not good because hedge funds trade in the final hour and they are considered smart money.
1257-1259 is the March low, if this level is breached it will be not good.
During this correction volume patterns have been bearish. Stocks hitting new highs vs. new lows have been okay. Emerging markets have been okay, not great. When virtually every technical indicator turns bearish it can often mean that a correction has run its course. Or it can mean another huge bear market is forming. This is why fundamentals and geopolitics are more important than charts. In any case, not every technical indicator is negative yet. But they all seem to be slowly turning sour as the correction progresses.
This correction up till now has been a "frog-in-slowly-heating-water" type correction. A frog will sit in water that is slowly getting warmer until the water boils and he is dead. The downturn has still been mild, the water isn't that hot yet, the frogs are hanging in there bravely. Value investors are saying they will start buying when and if the correction produces a 10% loss. Growth investors are saying they won't buy until some of the key technical levels mentioned above are overcome. So right now we have nobody buying.
Monday, June 6, 2011
Obama Loses Nerve, Making Long War Worse
Long War: The Obama administration was given two choices when it comes to the conflict between North Sudan and South Sudan: it could support Ethiopia's plan to send thousands of troops to the border region and thus push North Sudan back or it could advise South Sudan to adopt a policy of appeasement.
Obama has chosen the second option, appeasement. North Sudan has already taken some territory from South Sudan and it is continuing a military build up in contested regions not yet seized. On US advice, the South is giving way to the aggressor, slowly retreating. As with any appeasement policy, the aggressor nation only gets hungrier when it is given new territory.
South Sudan is an embryonic democracy. By displaying a week-kneed posture, Obama is potentially snuffing out an ally and a new democratic state. And Obama is sidelining another ally, Ethiopia, by telling it not to interfere in the gathering conflict in Sudan.
Now consider the conflict in Yemen, it is entirely up to Saudi Arabia to prevent Al-Qaeda from taking over that country. The US is a total no-show in this conflict. We know that the CIA has drone capability in Yemen, this is a fact. Yet there have been no drone strikes in the towns Al-Qaeda has overrun. There is no drone activity even though Al-Qaeda is actually creating its own country in Yemen.
And what is Saudi Arabia doing? It looks as if Pres. Saleh is being sent back to Yemen after convalescing in Riyadh and the civil war will resume. The Saudis understand that any other path will hand Yemen directly to Al-Qaeda. Newsflash: The Saudis are not stupid. The US is advising Saudi Arabia not to return Saleh to Yemen as if by doing this wonderful peace-loving pro-democracy students will magically take over. By giving this advise the US is turning a blind eye to the very real problems brewing in Yemen, a short-sighted sop to voters here in America, a pathetic cry of: "Please, just make these problems go away."
Not only is every established hot spot in the Long War exploding, new ones are opening up. Israel just killed twenty unarmed Syrian protesters who were crossing into the Golan. Rage rebellion protesters moving into Israel is a new development. As this new problem grows the Arab world will be treated to the steady sight of unarmed Muslim protesters getting mowed down by the Israeli Army. This will bring the Arab world to an even higher boiling point. It is probably the reason why US soldiers are facing combat again in Iraq, something we haven't seen in a long time.
Obama is responding to the huge generalized Long War flare-up with an overarching appeasement policy. When he faces new problems or finds old ones getting worse, he pulls back, retreats. And when he pulls back the bad guys advance. This back stepping began when Obama ordered A-10 warthogs and AC-130 gunships out of Libya after two days of highly successful attack missions. If they had been allowed to keep fighting for another week, Gaddafi's army would have been shattered.
Obama has lost his nerve and regained it before. That needs to happen again. We will know one way or the other with the Afghan troop draw-down decision due in early July. If he allows a draw-down of only 5000 troops, then he is regaining his nerve.
Obama has chosen the second option, appeasement. North Sudan has already taken some territory from South Sudan and it is continuing a military build up in contested regions not yet seized. On US advice, the South is giving way to the aggressor, slowly retreating. As with any appeasement policy, the aggressor nation only gets hungrier when it is given new territory.
South Sudan is an embryonic democracy. By displaying a week-kneed posture, Obama is potentially snuffing out an ally and a new democratic state. And Obama is sidelining another ally, Ethiopia, by telling it not to interfere in the gathering conflict in Sudan.
Now consider the conflict in Yemen, it is entirely up to Saudi Arabia to prevent Al-Qaeda from taking over that country. The US is a total no-show in this conflict. We know that the CIA has drone capability in Yemen, this is a fact. Yet there have been no drone strikes in the towns Al-Qaeda has overrun. There is no drone activity even though Al-Qaeda is actually creating its own country in Yemen.
And what is Saudi Arabia doing? It looks as if Pres. Saleh is being sent back to Yemen after convalescing in Riyadh and the civil war will resume. The Saudis understand that any other path will hand Yemen directly to Al-Qaeda. Newsflash: The Saudis are not stupid. The US is advising Saudi Arabia not to return Saleh to Yemen as if by doing this wonderful peace-loving pro-democracy students will magically take over. By giving this advise the US is turning a blind eye to the very real problems brewing in Yemen, a short-sighted sop to voters here in America, a pathetic cry of: "Please, just make these problems go away."
Not only is every established hot spot in the Long War exploding, new ones are opening up. Israel just killed twenty unarmed Syrian protesters who were crossing into the Golan. Rage rebellion protesters moving into Israel is a new development. As this new problem grows the Arab world will be treated to the steady sight of unarmed Muslim protesters getting mowed down by the Israeli Army. This will bring the Arab world to an even higher boiling point. It is probably the reason why US soldiers are facing combat again in Iraq, something we haven't seen in a long time.
Obama is responding to the huge generalized Long War flare-up with an overarching appeasement policy. When he faces new problems or finds old ones getting worse, he pulls back, retreats. And when he pulls back the bad guys advance. This back stepping began when Obama ordered A-10 warthogs and AC-130 gunships out of Libya after two days of highly successful attack missions. If they had been allowed to keep fighting for another week, Gaddafi's army would have been shattered.
Obama has lost his nerve and regained it before. That needs to happen again. We will know one way or the other with the Afghan troop draw-down decision due in early July. If he allows a draw-down of only 5000 troops, then he is regaining his nerve.
Sunday, June 5, 2011
Long War Comes To A Boil
Charts: The market's ongoing correction has produced only mild pressure on stock prices so far, although this is the first time the Dow has been down five weeks in a row since 2004. There have been three rally attempts in this correction, but the S&P 500 has not yet had one technical rally. A technical rally differs from a rally attempt in this key respect: a technical rally will have a follow through day. This is what all the rally attempts have been missing.
Step back and look at the entire market cycle for the past decade and we see something else has been missing. The two great bear markets over that time period never produced an apathy period, a sideways drift for a couple years where nobody cares about stocks except professional traders. Previous big bears have always gone through apathy periods. Instead our market has either been smashing up or screeching down. From a technical standpoint we need an apathy period.
Fundamentals: QE II ends in a couple weeks. This will have less effect on bond prices than a lot of people think. The Fed has bought trillions of dollars worth of federal debt and mortgage backed securities since the Credit Crisis began. The Fed will reinvest the trillion of dollars of maturing securities that it holds on its books in new Federal debt as the old debt matures. With all this old debt rolling over into new debt, QE II isn't really ending. Meanwhile, the vast short positions that traders have laid down on US treasuries in anticipation of QE II ending is beginning to cause short squeezes as the market wakes up to the facts that I have just presented. This is why US treasury prices have been going up lately. For me this means buying emerging market debt on dips.
Libya War: British and French attack helicopter pilots have just finished their second night of tearing Gaddafi's army to shreds around the oil city of Brega. At the start of the Libya war I said that the US had to employ Warthogs to show it is serious in taking out Gaddafi. That didn't really happen. The Anglo-French Apache and Tiger attack helicopters must employ their 30mm cannons, not just their Hellfire missiles, to show they are serious. This is because the 30mm cannons are short range weapons, up close and personal, a way to destroy troops on the ground. For the last two nights the Apaches and Tigers have come back to their helicopter carriers with their 30mm cannons red hot from usage. They are also coming back with every Hellfire missile expended, leaving behind a trail of twisted armor and dead bad guys. And they are taking fire themselves, although none of the pilots have yet been injured. NATO pilots taking fire is a first in the Libya War, a sign they mean business.
Over the past several days the Free Libya Army has torn 6 towns away from Gaddafi's army in the western mountains bordering Tunisia.
The Apaches and Tigers have not yet attacked the largest concentration of bad guys around Misrata. The FLA says that once this chopper attack starts it will begin to march on Tripoli. Gaddafi is losing.
Yemen War: There are three forces at war with President Saleh's government: 1) The Al-Ahmar Clan, a federation of anti-Saleh tribes. 2) Pro-Al-Qaeda elements of the Yemeni Army that have split away from the government. 3) Al-Qaeda itself. Youthful pro-democracy demonstrators exist in Yemen but are not a factor in the war.
Most of the fighting against Saleh has been done by the Al-Ahmar Clan. But the pro-Al-Qaeda elements of the Yemeni Army took out Saleh's Presidential Palace last week with a skillful missile barrage. Saleh is seriously injured and in Saudi Arabia. Saleh's sons are still in command of serious firepower and will probably fight on. If they lose, then the country could get handed over to Al-Qaeda unless the Saudis step in.
Saudi Arabia has for years paid the major Yemeni tribes tons of money every year as a way of controlling the country. These tribes depend on Saudi handouts to survive. The Saudis will withold this money if the Al-Ahmar Clan forms an alliance with Al-Qaeda. More than that, the Saudis will expect the Al-Ahmar Clan to fight Al-Qaeda if Saleh's government is gone. What all this means is that if the Yemen War truly calms down now that Saleh is gone it will be bad news in the long run but probably good news for the markets in the short run. The market can be foolish in the short run.
Af/Pak War: The ISI says that CIA drones last Friday killed Al-Qaeda mastermind and super-genius Ilyas Kashmiri. The CIA could only have killed Kashmiri with the help of dirty or formerly dirty ISI officers. Kashmiri was or is the most prized asset of ISI Dirt after Mullah Omar. Kashmiri was reported to be a contender for taking over Al-Qaeda in the wake of OBL's death. One of his many evil accomplishments was masterminding the Mumbai terror strike. Two weeks ago he executed the Al-Qaeda attack on the Pak Navy base that destroyed electronic surveillance aircraft vital to Pakistan for fighting India. This was a message from ISID (ISI Dirt) to the rest of the ISI that the bad guys were willing to go to any length to protect assets like OBL, Mullah Omar, and Kashmiri; even if it means helping India.
Supposedly the body of Kashmiri was spirited away from the carnage of the drone strike with blinding speed by bad guys. So there is no proof he was actually killed. It would be in the interest of ISID for America to believe that the Dirt is rolling over, transforming from bad guys to good. This makes you think Kashmiri is still alive.
On the other hand, all hell is breaking loose in Pakistan right now as the Al-Qaeda faction Kashmiri controlled is lashing out in revenge with numerous terror strikes. This makes you think Kashmiri is dead.
Either way, the ISI as a whole is playing ball with the CIA in a big way right now, giving the spooks from Langley good intel and the tempo of drone strikes is ratcheting up dramatically. The Pak tribal lands are alive with the sounds of Hellfire missiles. And the Taliban's spring offensive in Afghanistan is also coming to a boil with huge spikes in combat deaths on both sides.
Step back and look at the entire market cycle for the past decade and we see something else has been missing. The two great bear markets over that time period never produced an apathy period, a sideways drift for a couple years where nobody cares about stocks except professional traders. Previous big bears have always gone through apathy periods. Instead our market has either been smashing up or screeching down. From a technical standpoint we need an apathy period.
Fundamentals: QE II ends in a couple weeks. This will have less effect on bond prices than a lot of people think. The Fed has bought trillions of dollars worth of federal debt and mortgage backed securities since the Credit Crisis began. The Fed will reinvest the trillion of dollars of maturing securities that it holds on its books in new Federal debt as the old debt matures. With all this old debt rolling over into new debt, QE II isn't really ending. Meanwhile, the vast short positions that traders have laid down on US treasuries in anticipation of QE II ending is beginning to cause short squeezes as the market wakes up to the facts that I have just presented. This is why US treasury prices have been going up lately. For me this means buying emerging market debt on dips.
Libya War: British and French attack helicopter pilots have just finished their second night of tearing Gaddafi's army to shreds around the oil city of Brega. At the start of the Libya war I said that the US had to employ Warthogs to show it is serious in taking out Gaddafi. That didn't really happen. The Anglo-French Apache and Tiger attack helicopters must employ their 30mm cannons, not just their Hellfire missiles, to show they are serious. This is because the 30mm cannons are short range weapons, up close and personal, a way to destroy troops on the ground. For the last two nights the Apaches and Tigers have come back to their helicopter carriers with their 30mm cannons red hot from usage. They are also coming back with every Hellfire missile expended, leaving behind a trail of twisted armor and dead bad guys. And they are taking fire themselves, although none of the pilots have yet been injured. NATO pilots taking fire is a first in the Libya War, a sign they mean business.
Over the past several days the Free Libya Army has torn 6 towns away from Gaddafi's army in the western mountains bordering Tunisia.
The Apaches and Tigers have not yet attacked the largest concentration of bad guys around Misrata. The FLA says that once this chopper attack starts it will begin to march on Tripoli. Gaddafi is losing.
Yemen War: There are three forces at war with President Saleh's government: 1) The Al-Ahmar Clan, a federation of anti-Saleh tribes. 2) Pro-Al-Qaeda elements of the Yemeni Army that have split away from the government. 3) Al-Qaeda itself. Youthful pro-democracy demonstrators exist in Yemen but are not a factor in the war.
Most of the fighting against Saleh has been done by the Al-Ahmar Clan. But the pro-Al-Qaeda elements of the Yemeni Army took out Saleh's Presidential Palace last week with a skillful missile barrage. Saleh is seriously injured and in Saudi Arabia. Saleh's sons are still in command of serious firepower and will probably fight on. If they lose, then the country could get handed over to Al-Qaeda unless the Saudis step in.
Saudi Arabia has for years paid the major Yemeni tribes tons of money every year as a way of controlling the country. These tribes depend on Saudi handouts to survive. The Saudis will withold this money if the Al-Ahmar Clan forms an alliance with Al-Qaeda. More than that, the Saudis will expect the Al-Ahmar Clan to fight Al-Qaeda if Saleh's government is gone. What all this means is that if the Yemen War truly calms down now that Saleh is gone it will be bad news in the long run but probably good news for the markets in the short run. The market can be foolish in the short run.
Af/Pak War: The ISI says that CIA drones last Friday killed Al-Qaeda mastermind and super-genius Ilyas Kashmiri. The CIA could only have killed Kashmiri with the help of dirty or formerly dirty ISI officers. Kashmiri was or is the most prized asset of ISI Dirt after Mullah Omar. Kashmiri was reported to be a contender for taking over Al-Qaeda in the wake of OBL's death. One of his many evil accomplishments was masterminding the Mumbai terror strike. Two weeks ago he executed the Al-Qaeda attack on the Pak Navy base that destroyed electronic surveillance aircraft vital to Pakistan for fighting India. This was a message from ISID (ISI Dirt) to the rest of the ISI that the bad guys were willing to go to any length to protect assets like OBL, Mullah Omar, and Kashmiri; even if it means helping India.
Supposedly the body of Kashmiri was spirited away from the carnage of the drone strike with blinding speed by bad guys. So there is no proof he was actually killed. It would be in the interest of ISID for America to believe that the Dirt is rolling over, transforming from bad guys to good. This makes you think Kashmiri is still alive.
On the other hand, all hell is breaking loose in Pakistan right now as the Al-Qaeda faction Kashmiri controlled is lashing out in revenge with numerous terror strikes. This makes you think Kashmiri is dead.
Either way, the ISI as a whole is playing ball with the CIA in a big way right now, giving the spooks from Langley good intel and the tempo of drone strikes is ratcheting up dramatically. The Pak tribal lands are alive with the sounds of Hellfire missiles. And the Taliban's spring offensive in Afghanistan is also coming to a boil with huge spikes in combat deaths on both sides.
Friday, June 3, 2011
Nero Fiddled While Rome Burned
Charts: For five weeks the S&P 500 has been correcting within a well-defined, downward sloping trading channel. A savage downdraft on Friday took it to the exact lower region of that channel. A break below this channel could lead to a waterfall pattern, the most damaging possible chart pattern. One year ago we experienced a waterfall pattern which took the Nasdaq down 18%, almost igniting a bear market. That downdraft one year ago was accompanied by a sharp fall in emerging market bonds. But in the current correction emerging market bonds are holding up, even gaining. Continued strength in emerging market debt is essential to avoid Armageddon.
Fundamentals: For about one month a host of forward looking economic indicators such as ISM surveys have plunged at a rate equivalent to the worst part of the Great Recession. The Japanese earthquake has played a part but the real culprit is high oil prices. Which takes us to the Long War.
Long War: Starting Wednesday hundreds of Afghan based Taliban fighters have fought the Pak Army in the upper Dir district of Pakistan in a coordinated and professional assault. The fighting seems to be dying down just about now and the good guys are beginning to secure this part of the Af/Pak border with wide ranging search and destroy missions. Stunned at the size and ferocity of the attack, the Pak Army was forced to call in massive reinforcements and helicopter gunships to stop the bad guys. Dozens have been killed on both sides and the kill ratio seems to be one for one. The Taliban's spring offensive is proving to be much more powerful than anticipated. Pakistan is begging the US for help.
Today CIA drones killed 5 Taliban fighters in South Waziristan. This is the ninth drone strike since OBL was killed. The other strikes were met with fury, anti-American threats and denouncement from the Pak Army. But after the huge and savage Taliban incursion in upper Dir, this strike is not garnering any complaints from Pakistan.
The British warship Ocean and the French warship Tonnerre are sitting off the Libyan coast. Apache and Tiger attack helicopters are idling on the decks of these two ships, ready to fly into battle, but harsh desert winds are keeping them grounded. Facing Gaddafi's army, The Free Libyan Army is bravely holding fast in dug-in positions south of Misrata, taking casualties from enemy missiles, praying for the winds to die down. Once the weather clears the helicopters will carve a swath through the bad guys and the FLA will surge forward, form pincers, surround and destroy the surviving bad guys. If all this happens, then the FLA must begin a long and grueling march to liberate Tripoli. Months of combat lay ahead. Then comes the guerrilla war.
The North Sudan Army (bad guys) is poised to attack the South Sudan Army (good guys). Ethiopia is willing to send thousands of troops to the Sudanese border region but this probably cannot happen without US involvement. If war flares up in Sudan it will be very bad.
Fighting rages on in Somalia where an overly stretched CIA seems to be missing in action.
The Long War has gone from simmer to boil with the death of OBL. The US needs to step up its game. But a cabal of brain dead Tea Party Republicans and moronic Left-wing Democrats almost passed a bill that would have attempted to take America out of the Libya war. House Speaker Boehner through clever political maneuvering successfully passed a separate bill that requires Pres. Obama to explain the reason for US involvement in Libya to Congress but requires no concrete action other than mere words. The words will be scrutinized and debated for a long time. Boehner's bill precludes any other Congressional efforts to tear America out of the fight. So you are not yet hearing the sound of Nero's fiddle playing while Rome burns. Instead, you are hearing the fiddle being removed from its carrying case; which is still a terrifying sound.
Fundamentals: For about one month a host of forward looking economic indicators such as ISM surveys have plunged at a rate equivalent to the worst part of the Great Recession. The Japanese earthquake has played a part but the real culprit is high oil prices. Which takes us to the Long War.
Long War: Starting Wednesday hundreds of Afghan based Taliban fighters have fought the Pak Army in the upper Dir district of Pakistan in a coordinated and professional assault. The fighting seems to be dying down just about now and the good guys are beginning to secure this part of the Af/Pak border with wide ranging search and destroy missions. Stunned at the size and ferocity of the attack, the Pak Army was forced to call in massive reinforcements and helicopter gunships to stop the bad guys. Dozens have been killed on both sides and the kill ratio seems to be one for one. The Taliban's spring offensive is proving to be much more powerful than anticipated. Pakistan is begging the US for help.
Today CIA drones killed 5 Taliban fighters in South Waziristan. This is the ninth drone strike since OBL was killed. The other strikes were met with fury, anti-American threats and denouncement from the Pak Army. But after the huge and savage Taliban incursion in upper Dir, this strike is not garnering any complaints from Pakistan.
The British warship Ocean and the French warship Tonnerre are sitting off the Libyan coast. Apache and Tiger attack helicopters are idling on the decks of these two ships, ready to fly into battle, but harsh desert winds are keeping them grounded. Facing Gaddafi's army, The Free Libyan Army is bravely holding fast in dug-in positions south of Misrata, taking casualties from enemy missiles, praying for the winds to die down. Once the weather clears the helicopters will carve a swath through the bad guys and the FLA will surge forward, form pincers, surround and destroy the surviving bad guys. If all this happens, then the FLA must begin a long and grueling march to liberate Tripoli. Months of combat lay ahead. Then comes the guerrilla war.
The North Sudan Army (bad guys) is poised to attack the South Sudan Army (good guys). Ethiopia is willing to send thousands of troops to the Sudanese border region but this probably cannot happen without US involvement. If war flares up in Sudan it will be very bad.
Fighting rages on in Somalia where an overly stretched CIA seems to be missing in action.
The Long War has gone from simmer to boil with the death of OBL. The US needs to step up its game. But a cabal of brain dead Tea Party Republicans and moronic Left-wing Democrats almost passed a bill that would have attempted to take America out of the Libya war. House Speaker Boehner through clever political maneuvering successfully passed a separate bill that requires Pres. Obama to explain the reason for US involvement in Libya to Congress but requires no concrete action other than mere words. The words will be scrutinized and debated for a long time. Boehner's bill precludes any other Congressional efforts to tear America out of the fight. So you are not yet hearing the sound of Nero's fiddle playing while Rome burns. Instead, you are hearing the fiddle being removed from its carrying case; which is still a terrifying sound.
Thursday, June 2, 2011
Peace
Long War: One bill that would take America out of the Libya war was narrowly defeated in the House yesterday. Another bill that will do the same thing is being introduced now. A combination of moronic left-wing Democrats and brain-dead Tea Party Republicans are hammering out bill after bill designed to take the US out of Libya. Scrambling to stem this tide, House leader Boehner is sponsoring legislation criticizing the war effort, but not actually triggering concrete action. The hope is that this will be enough to quiet the restive peace mongers.
America is still flying NATO sorties in Libya. It is providing most of the ammunition NATO is expending, satellite intelligence, aerial refueling, and a host of other vital military support. Britain and France are barely able to keep fighting with the US engaged in its current limited role. Without the US, NATO would have to withdraw from Libya. And Gaddafi could then use mustard gas on the rebels and win.
America's weak-kneed efforts in the Libya war have caused oil prices to sky rocket and poured gasoline on the fires burning throughout the Mideast. This has brought the world economy to the brink of a double-dip recession. Pulling the plug in Libya would be catastrophic.
To gain perspective let's hit the way-back button and look at ancient Rome. Millions of words have been written concerning the fall of the Roman Empire, but the fall can be explained with just three words: Rome stopped fighting.
After defeating all major world powers except Persia, Rome embarked on a campaign to defeat the smaller powers and barbarians tribes on its periphery. This was a long grinding process, unpopular, identical to the Long War of today. The Emperor Hadrian grew weary of Rome's long war and he declared peace, throwing up walls around the Empire's borders. To quiet the barbarian tribes, peace was bought through technology transfers. The barbarians were taught how to make weapons out of steel. This kept them quiet for a long time.
Because of their Puritan ancestors, Americans think the declining centuries of Rome were marked by an increase in sexual orgies. The opposite is true. Christianity took hold and the government cracked down on orgies. The declining period was actually marked by the advent of celebrity chefs, who supplanted gladiators as the most famous and revered figures in the eternal city. Does that sound like America of today?
Peace. The last Romans were very keen on peace. They called their last two centuries the Roman Peace. And it would have been a good idea too, if only the barbarians shared the sentiment.
America is still flying NATO sorties in Libya. It is providing most of the ammunition NATO is expending, satellite intelligence, aerial refueling, and a host of other vital military support. Britain and France are barely able to keep fighting with the US engaged in its current limited role. Without the US, NATO would have to withdraw from Libya. And Gaddafi could then use mustard gas on the rebels and win.
America's weak-kneed efforts in the Libya war have caused oil prices to sky rocket and poured gasoline on the fires burning throughout the Mideast. This has brought the world economy to the brink of a double-dip recession. Pulling the plug in Libya would be catastrophic.
To gain perspective let's hit the way-back button and look at ancient Rome. Millions of words have been written concerning the fall of the Roman Empire, but the fall can be explained with just three words: Rome stopped fighting.
After defeating all major world powers except Persia, Rome embarked on a campaign to defeat the smaller powers and barbarians tribes on its periphery. This was a long grinding process, unpopular, identical to the Long War of today. The Emperor Hadrian grew weary of Rome's long war and he declared peace, throwing up walls around the Empire's borders. To quiet the barbarian tribes, peace was bought through technology transfers. The barbarians were taught how to make weapons out of steel. This kept them quiet for a long time.
Because of their Puritan ancestors, Americans think the declining centuries of Rome were marked by an increase in sexual orgies. The opposite is true. Christianity took hold and the government cracked down on orgies. The declining period was actually marked by the advent of celebrity chefs, who supplanted gladiators as the most famous and revered figures in the eternal city. Does that sound like America of today?
Peace. The last Romans were very keen on peace. They called their last two centuries the Roman Peace. And it would have been a good idea too, if only the barbarians shared the sentiment.
Wednesday, June 1, 2011
Al-Qaeda Says Don't Worry Be Happy
Charts: The S&P 500 at midday is plunging back into its downward sloping trading channel, indicating that the correction is ongoing. One day up out of this channel is not technically significant.
Long War: NATO is ordering the Free Libya Army to move back from positions in the front lines around Misrata, the most important battlefield in the war. FLA Posts are quickly being abandoned as the good guys scoot back to dig into new positions under covering fire from NATO war planes. These movements are apparently being directed by British commandos embedded within the FLA. Makeshift helicopter airbases are being constructed close to the new fallback positions.
Within days or hours Apache and Tiger attack helicopters will fly from British and French warships and land in the makeshift air bases. They will then attack Gaddafi's army.
Pro-Gaddafi terrorists exploded a car bomb in the rebel capital city of Benghazi. If the rebels win the conventional war against Gaddafi, then a jihadist type insurgency will spring up in Libya as it did in Iraq. Pro-Gaddafi insurgents will likely reach out to Al-Qaeda for help or join Al-Qaeda outright.
The situation doesn't look so hot in Yemen. Al-Qaeda is getting the word out that the Islamic militants forming their own country there are not Al-Qaeda, but a less worrisome brand of bad guys that nobody has ever heard of. Also, these mysterious less worrisome bad guys are not only forming their own country but helping the tribes aligned against President Saleh in the capital city of Sana. General al-Ahmar is leading the fight against Saleh. He too is aligned with these supposedly less worrisome bad guys. According to Al-Qaeda the entire situation in Yemen is not worrisome to the West and there is no need for a CIA drone campaign. Liberal geopolitical analysts are jumping on Al-Qaeda's clever propaganda and advising Western leaders to not worry, be happy.
In any case the CIA is stretched too thin to mount a campaign in Yemen right now. In fact it seems to have abandoned its mission in Somalia for the time being, perhaps to focus on Libya. Bad guys are therefore making progress in Somalia after several months of steady retreating.
And the situation doesn't look so hot in the Af/Pak war. Yesterday the Taliban launched a huge attack into Pakistan from a safe haven in Afghanistan. It's supposed to be the other way around, the safe haven is supposed to be in Pakistan and the attack is supposed to launch into Afghanistan.
At last we understand the big Al-Qaeda attack on the Pak naval air base that destroyed two electronic surveillance war planes two weeks ago. The Pak Navy had been purging its ranks of dirty officers (pro Al-Qaeda equals dirty). The attack on the naval base was a warning to stop the purge or more military assets needed to fight India would be destroyed. Most likely the purging will continue because the Pak Army is getting ready to invade North Waziristan.
Long War: NATO is ordering the Free Libya Army to move back from positions in the front lines around Misrata, the most important battlefield in the war. FLA Posts are quickly being abandoned as the good guys scoot back to dig into new positions under covering fire from NATO war planes. These movements are apparently being directed by British commandos embedded within the FLA. Makeshift helicopter airbases are being constructed close to the new fallback positions.
Within days or hours Apache and Tiger attack helicopters will fly from British and French warships and land in the makeshift air bases. They will then attack Gaddafi's army.
Pro-Gaddafi terrorists exploded a car bomb in the rebel capital city of Benghazi. If the rebels win the conventional war against Gaddafi, then a jihadist type insurgency will spring up in Libya as it did in Iraq. Pro-Gaddafi insurgents will likely reach out to Al-Qaeda for help or join Al-Qaeda outright.
The situation doesn't look so hot in Yemen. Al-Qaeda is getting the word out that the Islamic militants forming their own country there are not Al-Qaeda, but a less worrisome brand of bad guys that nobody has ever heard of. Also, these mysterious less worrisome bad guys are not only forming their own country but helping the tribes aligned against President Saleh in the capital city of Sana. General al-Ahmar is leading the fight against Saleh. He too is aligned with these supposedly less worrisome bad guys. According to Al-Qaeda the entire situation in Yemen is not worrisome to the West and there is no need for a CIA drone campaign. Liberal geopolitical analysts are jumping on Al-Qaeda's clever propaganda and advising Western leaders to not worry, be happy.
In any case the CIA is stretched too thin to mount a campaign in Yemen right now. In fact it seems to have abandoned its mission in Somalia for the time being, perhaps to focus on Libya. Bad guys are therefore making progress in Somalia after several months of steady retreating.
And the situation doesn't look so hot in the Af/Pak war. Yesterday the Taliban launched a huge attack into Pakistan from a safe haven in Afghanistan. It's supposed to be the other way around, the safe haven is supposed to be in Pakistan and the attack is supposed to launch into Afghanistan.
At last we understand the big Al-Qaeda attack on the Pak naval air base that destroyed two electronic surveillance war planes two weeks ago. The Pak Navy had been purging its ranks of dirty officers (pro Al-Qaeda equals dirty). The attack on the naval base was a warning to stop the purge or more military assets needed to fight India would be destroyed. Most likely the purging will continue because the Pak Army is getting ready to invade North Waziristan.
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