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.