Fundamentals: Today, after the bell, the Obama administration is supposed to tell us how it will pick and choose paying government obligations. This comes after Congressional gridlock has made raising the debt ceiling impossible in the short term. If the picking and choosing is done wisely, then we will instantly have a balanced budget and massive spending cuts might not derail the economy. No matter what there will be a Keynesian hit with the government spigot turned off so quickly. It is hard to guess what psychological effect an instant balanced budget will have on global financial markets.
Long War: In Afghanistan, Kandahar: Over the past few weeks there have been five assassinations of political leaders, all of them President Karzai's allies. The most recent was yesterday when a suicide bomber killed the mayor of Kandahar, which almost completely destroys Karzai's influence in southern Afghanistan. The Taliban was at first surprised by the assassination but then decided to take credit for it. Here is an abbreviated quote from the assassinated mayor's daughter: "The Taliban did not kill my father... there are elements within... the police chiefs, who are criminals... and President Obama invests in them."
So it is possible that the CIA's new point man in southern Afghanistan, Police Chief of Kandahar General Razik, is behind all these assassinations.
In the western mountains of Afghanistan the rebels made their biggest one day advance ever against Gaddafi's army. The rebels say they were given satellite data by NATO. But NATO says it did no such thing. So again we have an example of CIA fingerprints.
Friday, July 29, 2011
Thursday, July 28, 2011
John Boehner Man of the Hour
Charts: Up until a few weeks ago the current bull market had seen low volatility and one of the highest correlations between different stocks in history. There was no point in even buying individual stocks rather than an index because everything was moving up or down in lockstep. But now, all of a sudden, we have the weakest correlation in history. If one stock beats its earning forecast by a penny it might go up 20% in one day. If another stock misses by a penny it might go down by 20% in one day. And volatility is very high. This shift speaks to naked fear permeating the market. The debt ceiling debate is the source of all this fear.
Fundamentals: Speaker Boehner is holding a vote in the House tonight on his debt plan. It makes some real cuts, although not enough. Its main feature is to extend the debt ceiling only 6 months and therefore make America's debt crisis the focal point of the election. This is very smart because real spending cuts can only come by way of a voter mandate with the Republicans taking both the House and the Senate. Contrary to what the Tea Party thinks, real spending cuts cannot be achieved right now. So tonight's vote is crucial. If Boehner gets his way in the House, then the Senate will quickly vote his plan down. Boehner will then have to craft a new bill with Sen. Reid over the weekend, to do this he will have to give away some spending cuts. Then both chambers will have to vote on the new bill and it must pass before anything resembling a default on America's debt can occur, including a downgrade.
The key factor in the new Boehner/Reid bill will not be how much spending is slashed, rather it will be whether or not the spending ceiling is extended to right before the election or after the election. If it is extended until after the election, then voters can pretend that the problem is solved and they can vote for big spending Democrats and the crisis will start all over again.
That is unless a failure of Boehner's bill immediately reignites the crisis. Interest rates are soaring in Italy and Spain. Cyprus is highly exposed to Greek debt and is teetering on default. A tiny shove and Cyprus will be the first European country to default and contagion will spread through Europe like wildfire, plunging the globe back into recession.
US money market mutual funds represent a key source of short term funding for European banks. These funds are jerking hundreds of billions worth of funding out of the European financial markets. A tiny shove and they will jerk everything out, clobbering European banks.
The majority of central banks across the globe have US dollars as their primary source of reserve. If Boehner's plan fails, the dollar will crash and central banks will become insolvent.
These are just a couple examples. Many other bad things will happen if Boehner's plan fails.
Long War: Today's super volatile stock market is similar to the market in 1948. The charts look exactly alike. Charts did not stabilize until after the Korean War in the early 50s when America entered a period where the Pentagon was not fighting the Cold War, but the CIA was. So this blog will continue to chart CIA activity.
Fundamentals: Speaker Boehner is holding a vote in the House tonight on his debt plan. It makes some real cuts, although not enough. Its main feature is to extend the debt ceiling only 6 months and therefore make America's debt crisis the focal point of the election. This is very smart because real spending cuts can only come by way of a voter mandate with the Republicans taking both the House and the Senate. Contrary to what the Tea Party thinks, real spending cuts cannot be achieved right now. So tonight's vote is crucial. If Boehner gets his way in the House, then the Senate will quickly vote his plan down. Boehner will then have to craft a new bill with Sen. Reid over the weekend, to do this he will have to give away some spending cuts. Then both chambers will have to vote on the new bill and it must pass before anything resembling a default on America's debt can occur, including a downgrade.
The key factor in the new Boehner/Reid bill will not be how much spending is slashed, rather it will be whether or not the spending ceiling is extended to right before the election or after the election. If it is extended until after the election, then voters can pretend that the problem is solved and they can vote for big spending Democrats and the crisis will start all over again.
That is unless a failure of Boehner's bill immediately reignites the crisis. Interest rates are soaring in Italy and Spain. Cyprus is highly exposed to Greek debt and is teetering on default. A tiny shove and Cyprus will be the first European country to default and contagion will spread through Europe like wildfire, plunging the globe back into recession.
US money market mutual funds represent a key source of short term funding for European banks. These funds are jerking hundreds of billions worth of funding out of the European financial markets. A tiny shove and they will jerk everything out, clobbering European banks.
The majority of central banks across the globe have US dollars as their primary source of reserve. If Boehner's plan fails, the dollar will crash and central banks will become insolvent.
These are just a couple examples. Many other bad things will happen if Boehner's plan fails.
Long War: Today's super volatile stock market is similar to the market in 1948. The charts look exactly alike. Charts did not stabilize until after the Korean War in the early 50s when America entered a period where the Pentagon was not fighting the Cold War, but the CIA was. So this blog will continue to chart CIA activity.
Tuesday, July 26, 2011
America and World Need The Man
Charts: If the US budget crisis is resolved we will want to buy stocks by using chart analysis. Over the years the KOSPI (Korea) index has led the indexes of Singapore and Taiwan. In other words, Korea moves first and the others follow. YTD Korea is up 8% and Taiwan is down 2%. EWT is the ticker symbol for Taiwan.
Fundamentals: In a whining tone, President Obama gave a speech last night where he begged America to support his vision of pretending to cut the budget after the elections are over. Then House Speaker Boehner gave a speech with a grim face outlining a plan for painful cuts before the election and then more cuts after the election. Boehner promises more unpleasant debate starting now and continuing for years. His plan will make the election about budget cuts. Boehner represents "The Man." You know, the guy starry-eyed left wing college students sell out to when they start making money. In day to day life The Man tells young people to cut up their credit cards and pay cash. If you don't have the cash, go without. The Man is no fun.
Long War: Red-faced, the Pentagon is saying billions of dollars in US Afghan military support contracts have flowed straight into the pockets of the Taliban. America's allies in Afghanistan are corrupt and lazy because aid money and contracts have been thrown around the same way pork barrel spending sloshes around in the US.
In Libya, the Free Libya Army is acquiring a few mine clearing vehicles but 90% of the mine clearing is done by small groups of soldiers poking into sand dunes with sticks while braving withering fire from Gaddafi's Army. These soldiers don't even wear body armor. The FLA doesn't get billion dollar pork barrel contracts from Uncle Sam, just training, leadership, and some limited material support. Yet the FLA is winning while the Afghan Army flounders. You can call this approach The Man or tough love or old school CIA; either way this is the approach that works.
Fundamentals: In a whining tone, President Obama gave a speech last night where he begged America to support his vision of pretending to cut the budget after the elections are over. Then House Speaker Boehner gave a speech with a grim face outlining a plan for painful cuts before the election and then more cuts after the election. Boehner promises more unpleasant debate starting now and continuing for years. His plan will make the election about budget cuts. Boehner represents "The Man." You know, the guy starry-eyed left wing college students sell out to when they start making money. In day to day life The Man tells young people to cut up their credit cards and pay cash. If you don't have the cash, go without. The Man is no fun.
Long War: Red-faced, the Pentagon is saying billions of dollars in US Afghan military support contracts have flowed straight into the pockets of the Taliban. America's allies in Afghanistan are corrupt and lazy because aid money and contracts have been thrown around the same way pork barrel spending sloshes around in the US.
In Libya, the Free Libya Army is acquiring a few mine clearing vehicles but 90% of the mine clearing is done by small groups of soldiers poking into sand dunes with sticks while braving withering fire from Gaddafi's Army. These soldiers don't even wear body armor. The FLA doesn't get billion dollar pork barrel contracts from Uncle Sam, just training, leadership, and some limited material support. Yet the FLA is winning while the Afghan Army flounders. You can call this approach The Man or tough love or old school CIA; either way this is the approach that works.
Monday, July 25, 2011
US Debt Debate
Fundamentals: There seems to be four different possible outcomes to the US debt ceiling crisis: 1) President Obama could evoke the 14th amendment and raise the debt ceiling by executive order. If this happened there would be no spending cuts and US debt would get downgraded by the rating agencies. This would jack interest rates and threaten the recovery. 2) The Republicans are trying to pass a resolution in the House that will cut spending by a couple trillion, keep taxes the same, and raise the debt limit only enough to put the issue back into play right before the next election. This is the best scenario on the table right now because it would make cutting the deficit the center piece of the next election. 3) Democrats have a plan where they pretend to cut spending after the election, which they can then ignore if they keep control of the Senate. This would be very bad. 4) If there is no resolution before August 2, then the US will not default on its debt because Treasury can pay interest on the debt, pay all of social security, and keep the Pentagon fully funded with incoming tax receipts. But every other Federal obligation would be in jeopardy. So the rating agencies would probably radically downgrade US debt, which would really jack interest rates and probably trigger another recession.
Long War: Qatar is providing the Libyan rebels with advanced mine detection vehicles to get through the huge mine fields around Brega. Qatar is also ramping up its support for the rebels in a hundred other ways. The rebels are saying that Gaddafi can stay in Libya if he surrenders and agress to live in a highly guarded compound. Presumably Qatar and the CIA are involved in these talks and there may be an endgame in the Libya War.
If Gaddafi were to fall, the rebellion in Syria would explode. The Syrian rebels would see that the sacrifice and misery they have endured could result in victory. The US would have no choice but to support the newly energized Syrian rebels because Assad's government is a puppet of Iran's and Iran will do whatever it takes to keep control of Syria. Remember, Iran's other puppets (the Houthi rebels in northern Yemen and Hezbollah in Lebanon) have made big gains lately. Also, Iran is now supporting Shiite rebels in Iraq with advanced weapons. Iran is on the march and the US cannot allow this. The US public will not want any US involvement in the Syrian rebellion, but perhaps the CIA can get the job done without raising any red flags in the media. It will have to act through Saudi Arabia as it is now acting through Qatar in Libya. There is some evidence of Saudi involvement in Syria already.
The CIA has killed yet another Iranian nuclear weapon researcher in Tehran. This is good news to Saudi Arabia and may help goad them into helping in Yemen and Syria.
In Yemen, Al-Qaeda suicide bombers are hitting Yemeni Army supply convoys that are supporting the war effort in the south. This is hurting the momentum of the good guys and this little war is forming a stalemate. A New York Times Mideast correspondent described what happened when Al-Qaeda took control of Abyan province a few months ago. Jihadist fighters broke into bank vaults and seized stacks of hard currency. The bad guys didn't pocket this loot. Instead they handed it out to people on the street. So we can see that Al-Qaeda is 100% free of corruption and has incredible discipline. This just shows how hard it will be to defeat these bad guys.
Long War: Qatar is providing the Libyan rebels with advanced mine detection vehicles to get through the huge mine fields around Brega. Qatar is also ramping up its support for the rebels in a hundred other ways. The rebels are saying that Gaddafi can stay in Libya if he surrenders and agress to live in a highly guarded compound. Presumably Qatar and the CIA are involved in these talks and there may be an endgame in the Libya War.
If Gaddafi were to fall, the rebellion in Syria would explode. The Syrian rebels would see that the sacrifice and misery they have endured could result in victory. The US would have no choice but to support the newly energized Syrian rebels because Assad's government is a puppet of Iran's and Iran will do whatever it takes to keep control of Syria. Remember, Iran's other puppets (the Houthi rebels in northern Yemen and Hezbollah in Lebanon) have made big gains lately. Also, Iran is now supporting Shiite rebels in Iraq with advanced weapons. Iran is on the march and the US cannot allow this. The US public will not want any US involvement in the Syrian rebellion, but perhaps the CIA can get the job done without raising any red flags in the media. It will have to act through Saudi Arabia as it is now acting through Qatar in Libya. There is some evidence of Saudi involvement in Syria already.
The CIA has killed yet another Iranian nuclear weapon researcher in Tehran. This is good news to Saudi Arabia and may help goad them into helping in Yemen and Syria.
In Yemen, Al-Qaeda suicide bombers are hitting Yemeni Army supply convoys that are supporting the war effort in the south. This is hurting the momentum of the good guys and this little war is forming a stalemate. A New York Times Mideast correspondent described what happened when Al-Qaeda took control of Abyan province a few months ago. Jihadist fighters broke into bank vaults and seized stacks of hard currency. The bad guys didn't pocket this loot. Instead they handed it out to people on the street. So we can see that Al-Qaeda is 100% free of corruption and has incredible discipline. This just shows how hard it will be to defeat these bad guys.
Wednesday, July 20, 2011
CIA Hacks Taliban
Fundamentals: The market rallied yesterday on hope that the US debt ceiling will be raised. The source of hope was a plan put forth by the so-called Gang of Six. This plan is smoke and mirrors. It doesn't specify cuts to the government's budget, but sets up committees to some day make these cuts. Thursday the EU meets to solve Greece's debt problems. Since America's debt problems are being solved with smoke and mirrors, Europe needs a genuine solution.
If every other advanced country on Earth cuts its deficit, then America can be the one lone hold out and keep spending like a drunken sailor. America is in effect taxing the rest of the world. This has been going on for decades, so it's not that big of a stretch. But the superpower needs to win its wars for the tax to stick.
Long War: China is once again experiencing jihadist violence from its Uighur minority. Russia says it foiled a huge Islamic terror attempt in Moscow. Both China and Russia say that their home grown Islamic insurgencies have connections to Al-Qaeda. China shares a border with Afghanistan and Pakistan. Probably because of all this, China is backing off on its aggression against its Asian neighbors over mineral rights to the South China Sea.
The CIA has hacked into the Taliban's mobile network and web sites. It then told the world (pretending it was the Taliban) that Mullah Omar was dead. Now Mullah Omar has to make a public statement to prove he is not dead. This will allow the CIA to trace his courier network. This is how OBL was killed. Probably Mullah Omar will not make a statement. But then he grows more isolated.
If every other advanced country on Earth cuts its deficit, then America can be the one lone hold out and keep spending like a drunken sailor. America is in effect taxing the rest of the world. This has been going on for decades, so it's not that big of a stretch. But the superpower needs to win its wars for the tax to stick.
Long War: China is once again experiencing jihadist violence from its Uighur minority. Russia says it foiled a huge Islamic terror attempt in Moscow. Both China and Russia say that their home grown Islamic insurgencies have connections to Al-Qaeda. China shares a border with Afghanistan and Pakistan. Probably because of all this, China is backing off on its aggression against its Asian neighbors over mineral rights to the South China Sea.
The CIA has hacked into the Taliban's mobile network and web sites. It then told the world (pretending it was the Taliban) that Mullah Omar was dead. Now Mullah Omar has to make a public statement to prove he is not dead. This will allow the CIA to trace his courier network. This is how OBL was killed. Probably Mullah Omar will not make a statement. But then he grows more isolated.
Tuesday, July 19, 2011
CIA Hates Peace Talks
Long War: In Libya, the big push by the Free Libya Army on the eastern front of Brega has bogged down because Gaddafi's army is executing a skillful strategic retreat. As the bad guys are pushed out of Brega, they sow massive minefields in their wake. When the rebels are fully engaged in a laborious effort to dig up these minefields, they suddenly encounter Gaddafi forces disguised as rebels, which is to say bad guys dressed in mismatched civilian clothes driving ragged pickup trucks with homemade rocket launchers. The disguise is so good the rebels can't tell if they are being relieved from their own side or about to be attacked by the bad guys. Then, at the last minute, the disguised bad guys open fire and lay waste to the rebel mine clearing team.
The news out of Yemen is better and in a way similar to the first reports of the rebel offensive in Brega. Here is the similarity: A huge army of anti-Al-Qaeda tribesmen has appeared out of nowhere to attack the bad guys in the southern Yemeni province of Abyan. The difference between the two offensives (One in Libya, the other in Yemen) is that Gaddafi was prepared and ready to deal with the attack while AQAP has been caught flat-footed. And Al-Qaeda is on the retreat in Yemen.
Big armies emerging from the desert out of nowhere speaks to CIA involvement. Recent events in Afghanistan and Pakistan also bear CIA fingerprints but are even harder to interpret. Last weekend we learned that some organization in Afghanistan killed President Karzai's brother. Seemingly a new CIA strongman (Gen. Raziq) was waiting in the wings. During Wali Karzai's funeral there was another attack and several other allies of Pres. Karzai were killed and injured. Gen. Raziq was at the funeral and gave a press conference afterwards, castigating the Taliban for its dastardly deeds. Raziq was unhurt.
Then a day later yet another assassination occurred. This time Pres. Karzai's chief negotiator for the peace talks with the Taliban was killed. With a lot of head scratching, analysts are saying the Taliban must not want to negotiate with President Karzai anymore and rather than simply breaking off the talks, they killed Karzai's representative. If you were Mullah Omar you would want peace talks, you would want to turn the spineless Karzai into a Taliban puppet and return to power without a fight. The CIA, however, has demonstrated in the past that it is willing to kill (with drone strikes) to scuttle peace talks. As a general principle, it is much better to kill bad guys without drone strikes. The best way to kill bad guys is to make it look like other bad guys are killing bad guys.
As far as peace talks, think about how the Vietnam War ended. After years of negotiations, an elaborate peace treaty was hammered out between America and North Vietnam. America then pulled out of Vietnam, pretending that it had not been defeated because of this absurd peace treaty. North Vietnam did not honor its peace treaty commitments but America did. America was played as a fool. The CIA does not want this to happen again.
In any case, we have a change of leadership in Langley. General Petraeus is supposed to take over in September. But he probably has been in charge for a while. Also, Petraeus says he will not make big changes. Instead, he told the media that he is going to sit back for several months and absorb the CIA culture and learn how to become a team player. This is not what he did when he took command of NATO forces in Afghanistan. In Afghanistan he started kicking ass from day one.
The news out of Yemen is better and in a way similar to the first reports of the rebel offensive in Brega. Here is the similarity: A huge army of anti-Al-Qaeda tribesmen has appeared out of nowhere to attack the bad guys in the southern Yemeni province of Abyan. The difference between the two offensives (One in Libya, the other in Yemen) is that Gaddafi was prepared and ready to deal with the attack while AQAP has been caught flat-footed. And Al-Qaeda is on the retreat in Yemen.
Big armies emerging from the desert out of nowhere speaks to CIA involvement. Recent events in Afghanistan and Pakistan also bear CIA fingerprints but are even harder to interpret. Last weekend we learned that some organization in Afghanistan killed President Karzai's brother. Seemingly a new CIA strongman (Gen. Raziq) was waiting in the wings. During Wali Karzai's funeral there was another attack and several other allies of Pres. Karzai were killed and injured. Gen. Raziq was at the funeral and gave a press conference afterwards, castigating the Taliban for its dastardly deeds. Raziq was unhurt.
Then a day later yet another assassination occurred. This time Pres. Karzai's chief negotiator for the peace talks with the Taliban was killed. With a lot of head scratching, analysts are saying the Taliban must not want to negotiate with President Karzai anymore and rather than simply breaking off the talks, they killed Karzai's representative. If you were Mullah Omar you would want peace talks, you would want to turn the spineless Karzai into a Taliban puppet and return to power without a fight. The CIA, however, has demonstrated in the past that it is willing to kill (with drone strikes) to scuttle peace talks. As a general principle, it is much better to kill bad guys without drone strikes. The best way to kill bad guys is to make it look like other bad guys are killing bad guys.
As far as peace talks, think about how the Vietnam War ended. After years of negotiations, an elaborate peace treaty was hammered out between America and North Vietnam. America then pulled out of Vietnam, pretending that it had not been defeated because of this absurd peace treaty. North Vietnam did not honor its peace treaty commitments but America did. America was played as a fool. The CIA does not want this to happen again.
In any case, we have a change of leadership in Langley. General Petraeus is supposed to take over in September. But he probably has been in charge for a while. Also, Petraeus says he will not make big changes. Instead, he told the media that he is going to sit back for several months and absorb the CIA culture and learn how to become a team player. This is not what he did when he took command of NATO forces in Afghanistan. In Afghanistan he started kicking ass from day one.
Sunday, July 17, 2011
Good Guys Strike Back in Libya and Yemen
Charts: At Friday's close the S&P 500 was sitting exactly on its 100-day moving average at 1316. The market is not in a correction nor is it in a rally. It is balanced on a precipice and could go either way from a chart viewpoint. Monday's close and the coming week will be significant to give direction for the rest of the summer.
Fundamentals: This week the US debt ceiling crisis comes to a head and so does the Greek debt crisis with key meetings taking place on either side of the Atlantic. The fundamental picture is balanced on a precipice and this is why the charts are pointing in two directions. On Thursday Greece needs to be actually bailed out with either direct capital injections or EU debt guarantees that lower interest rates, extend and pretend will no longer cut the mustard. Potential outcomes for America's big debt decision is not so clear. If the debt ceiling is raised without meaningful spending cuts, there could be a relief rally as America avoids default. But the global sovereign debt crisis will then get worse. The entire sovereign debt issue is unpredictable.
Long War: Several months ago Al Qaeda seized control over the biggest city in the Yemeni province of Abyan, carving out its own little Caliphate, its own little piece of hell on Earth. In the process it isolated and surrounded the Yemeni Army's heroic 25th Brigade. The bad guys have laid siege to the 25th Brigade ever since. Their inability to destroy the 25th has halted their expansion so far.
A coalition of Yemeni Army regulars and armed tribesmen are fighting through Al-Qaeda front lines this weekend, tearing through the bad guys to rescue the beleaguered 25th Brigade. If the good guys can do this they will have split the enemy forces in two and can start to dismantle the Al-Qaeda caliphate in southern Yemen.
The fact that tribes are fighting with the Yemeni Army speaks to CIA involvement in the offensive and drones are probably providing air support. Even though it will largely be ignored by the outside world, this is a very important battle in the Long War. If Al-Qaeda crushes the offensive and goes on to destroy the 25th, it will be very bad. If the opposite occurs, it will be very good.
In Libya we have seen the Berber tribes in the western mountains making progress but not much has happened in the oil rich east around the city of Brega. That has now changed. The rebels have pushed a professional army up into Brega from deep inside Benghazi and have launched a big multi-pronged assault on the key oil center. NATO war planes are providing massive air support and as of Sunday 1/3 of Brega has been liberated by the Free Libya Army. As Gaddafi's army retreats it is laying down gigantic mine fields to slow the good guy onslaught.
This offensive comes hot on the heels of America officially recognizing the rebels as the legitimate government of Libya. This move will eventually result in the release of $30 billion to the FLA from frozen Gaddafi bank accounts. With $30 billion the FLA can buy attack helicopters, tanks, etc... The combination of these two events will crash the morale in Gaddafi's officer corp and defections are sure to follow.
Gaddafi, however, has billions of his own and the rebels will need a big fully equipped conventional army to wrest Gaddafi out of Tripoli. Ramadan starts in two weeks. Gaddafi is mounting a propaganda blitz to show the Muslim world that the Christian nations in NATO are getting ready to bomb Muslims during the holy month. This propaganda campaign is already bearing some fruit for Gaddafi.
In Afghanistan, the CIA's point man, Ahmed Wali Karzai, was asassinated by one of his security chiefs. The Taliban claimed responsibility for the killing but experts say this is not the case; so some other organization was behind the killing. Ahmed Karzai used drug money to run a CIA supported militia and spy ring in Kandahar. The CIA seems to be already putting forth another strongman, General Raziq, to take over southern Afghanistan.
Ahmed Karzai rigged the last election and helped his brother (H. Karzai) retain the Presidency of Afghanistan. It is a good thing that A. Karzai is dead. General Raziq will create a power base that will help dethrone H. Karzai, who has become a liability. H. Karzai is now prone to calling NATO an occupying power and is in peace talks with the Taliban. Whoever killed A. Karzai might kill H. Karzai. Who do you think killed A. Karzai?
Fundamentals: This week the US debt ceiling crisis comes to a head and so does the Greek debt crisis with key meetings taking place on either side of the Atlantic. The fundamental picture is balanced on a precipice and this is why the charts are pointing in two directions. On Thursday Greece needs to be actually bailed out with either direct capital injections or EU debt guarantees that lower interest rates, extend and pretend will no longer cut the mustard. Potential outcomes for America's big debt decision is not so clear. If the debt ceiling is raised without meaningful spending cuts, there could be a relief rally as America avoids default. But the global sovereign debt crisis will then get worse. The entire sovereign debt issue is unpredictable.
Long War: Several months ago Al Qaeda seized control over the biggest city in the Yemeni province of Abyan, carving out its own little Caliphate, its own little piece of hell on Earth. In the process it isolated and surrounded the Yemeni Army's heroic 25th Brigade. The bad guys have laid siege to the 25th Brigade ever since. Their inability to destroy the 25th has halted their expansion so far.
A coalition of Yemeni Army regulars and armed tribesmen are fighting through Al-Qaeda front lines this weekend, tearing through the bad guys to rescue the beleaguered 25th Brigade. If the good guys can do this they will have split the enemy forces in two and can start to dismantle the Al-Qaeda caliphate in southern Yemen.
The fact that tribes are fighting with the Yemeni Army speaks to CIA involvement in the offensive and drones are probably providing air support. Even though it will largely be ignored by the outside world, this is a very important battle in the Long War. If Al-Qaeda crushes the offensive and goes on to destroy the 25th, it will be very bad. If the opposite occurs, it will be very good.
In Libya we have seen the Berber tribes in the western mountains making progress but not much has happened in the oil rich east around the city of Brega. That has now changed. The rebels have pushed a professional army up into Brega from deep inside Benghazi and have launched a big multi-pronged assault on the key oil center. NATO war planes are providing massive air support and as of Sunday 1/3 of Brega has been liberated by the Free Libya Army. As Gaddafi's army retreats it is laying down gigantic mine fields to slow the good guy onslaught.
This offensive comes hot on the heels of America officially recognizing the rebels as the legitimate government of Libya. This move will eventually result in the release of $30 billion to the FLA from frozen Gaddafi bank accounts. With $30 billion the FLA can buy attack helicopters, tanks, etc... The combination of these two events will crash the morale in Gaddafi's officer corp and defections are sure to follow.
Gaddafi, however, has billions of his own and the rebels will need a big fully equipped conventional army to wrest Gaddafi out of Tripoli. Ramadan starts in two weeks. Gaddafi is mounting a propaganda blitz to show the Muslim world that the Christian nations in NATO are getting ready to bomb Muslims during the holy month. This propaganda campaign is already bearing some fruit for Gaddafi.
In Afghanistan, the CIA's point man, Ahmed Wali Karzai, was asassinated by one of his security chiefs. The Taliban claimed responsibility for the killing but experts say this is not the case; so some other organization was behind the killing. Ahmed Karzai used drug money to run a CIA supported militia and spy ring in Kandahar. The CIA seems to be already putting forth another strongman, General Raziq, to take over southern Afghanistan.
Ahmed Karzai rigged the last election and helped his brother (H. Karzai) retain the Presidency of Afghanistan. It is a good thing that A. Karzai is dead. General Raziq will create a power base that will help dethrone H. Karzai, who has become a liability. H. Karzai is now prone to calling NATO an occupying power and is in peace talks with the Taliban. Whoever killed A. Karzai might kill H. Karzai. Who do you think killed A. Karzai?
Monday, July 11, 2011
Congress Is Our Greatest Enemy In Long War
Charts: The broad index plunged through key support of 1333 today in a spectacular manner. It is now only 3 points above both the 50-day and 100-day moving averages of about 1316. The Vix (fear gauge) screamed up today. If the index starts punching through 50, 100 and 200 day moving averages with an elevated Vix, it will be very bad. We are approaching Sept. and Oct. These months are the most dangerous for equities.
Fundamentals: The yield and credit default swaps on Italian debt roared up today. The Italian stock market is in a power dive downward. European banks are also falling like rocks. The plan to bail out Greece is unraveling. For the first time there is talk of "controlled" and "selective" default of Greek debt. Greece is bailed out only until September. So without a breakthrough it will default in October. We don't have to guess if there will be contagion to other European countries because there already is. Europe is 25% of the world economy but the real problem is on our side of the Atlantic.
President Obama can raise America's debt ceiling with an executive order. As talks to cut spending fall apart this looks likely. If America does not cut spending the sovereign debt crisis could get worse. There could, however, be a relief rally if he does raise the ceiling. It might be smart to sell into that rally, if it does indeed occur.
Long War: The Pak Army recently mounted an offensive on the tribal land that it will need to secure before a full-scale invasion of North Waziristan can begin. Attacking and conquering North Waziristan is the Holy Grail in the Long War.
As this courageous and vital offensive gets underway, the Pak Army learned Team Obama is slashing its military aid by $800 million. Pak military leaders went incandescent with rage after hearing this. No doubt, the ISID ("D" for dirt) was overjoyed to hear that America is pulling the rug out from under the clean ISI and Pak Army.
The Pak Army will halt its offensive and shut down NATO supply lines that run through Pakistan if pushed hard enough. It has more soldiers involved in much bloodier combat on its side of the Af/Pak border than NATO does on the Afghan side. Furthermore, civilian terror strikes in Pakistan have increased since the death of OBL by (perhaps) a hundredfold. Just last weekend, the streets of Karachi ran red with blood after a huge Taliban terror episode. And the bad guys will be only to happy to make a deal with the Pak Army and stop the terror strikes if offered a deal.
Now is an incredibly bad time to cut off military aid to Pakistan. Team Obama is not stupid, just weak-willed. The House of Representatives is hellbent on taking America out of the Long War. The House would cut off aid to Pakistan if Obama did nothing. And it would have cut off more aid than Obama did. So the cut off was a form of damage control, the lesser of two evils.
But it doesn't make any difference who is to blame. If Pakistan stops fighting in the tribal lands, then the Taliban, Haqqani Network, and Al-Qaeda have in one fell swoop more than doubled their combat capability.
Editor's Note: The Staff of Dave's Market Update is leaving for its annual summer vaction. The blog will be offline for one week.
Fundamentals: The yield and credit default swaps on Italian debt roared up today. The Italian stock market is in a power dive downward. European banks are also falling like rocks. The plan to bail out Greece is unraveling. For the first time there is talk of "controlled" and "selective" default of Greek debt. Greece is bailed out only until September. So without a breakthrough it will default in October. We don't have to guess if there will be contagion to other European countries because there already is. Europe is 25% of the world economy but the real problem is on our side of the Atlantic.
President Obama can raise America's debt ceiling with an executive order. As talks to cut spending fall apart this looks likely. If America does not cut spending the sovereign debt crisis could get worse. There could, however, be a relief rally if he does raise the ceiling. It might be smart to sell into that rally, if it does indeed occur.
Long War: The Pak Army recently mounted an offensive on the tribal land that it will need to secure before a full-scale invasion of North Waziristan can begin. Attacking and conquering North Waziristan is the Holy Grail in the Long War.
As this courageous and vital offensive gets underway, the Pak Army learned Team Obama is slashing its military aid by $800 million. Pak military leaders went incandescent with rage after hearing this. No doubt, the ISID ("D" for dirt) was overjoyed to hear that America is pulling the rug out from under the clean ISI and Pak Army.
The Pak Army will halt its offensive and shut down NATO supply lines that run through Pakistan if pushed hard enough. It has more soldiers involved in much bloodier combat on its side of the Af/Pak border than NATO does on the Afghan side. Furthermore, civilian terror strikes in Pakistan have increased since the death of OBL by (perhaps) a hundredfold. Just last weekend, the streets of Karachi ran red with blood after a huge Taliban terror episode. And the bad guys will be only to happy to make a deal with the Pak Army and stop the terror strikes if offered a deal.
Now is an incredibly bad time to cut off military aid to Pakistan. Team Obama is not stupid, just weak-willed. The House of Representatives is hellbent on taking America out of the Long War. The House would cut off aid to Pakistan if Obama did nothing. And it would have cut off more aid than Obama did. So the cut off was a form of damage control, the lesser of two evils.
But it doesn't make any difference who is to blame. If Pakistan stops fighting in the tribal lands, then the Taliban, Haqqani Network, and Al-Qaeda have in one fell swoop more than doubled their combat capability.
Editor's Note: The Staff of Dave's Market Update is leaving for its annual summer vaction. The blog will be offline for one week.
Panetta Kicks Congress In The Teeth
Charts: If the S&P 500 trades below 1333 for several days in a row it is likely that another correction will ensue. Ideal chart action would be consolidation or trading flat. If the market were to develop a long running flattish trading channel, then we can pick individual stocks and make some money.
Fundamentals: The US government's payroll survey showed a paltry 18,000 jobs were created last month. The household survey showed 455,000 jobs were lost. If the household survey is correct, then a double-dip recession is on the horizon.
The Greek debt crisis has spread to Italy, with the yield on Italian debt soaring last week. Greece is a midget and Italy is a giant. Italy has more outstanding debt than any other Euro-zone country. It is too big to bail out. Still, the real problem is America's debt, which dwarfs that of any other country. If America were to sharply cut spending, the global sovereign debt crisis would ease.
Over the weekend we learned inflation is accelerating in China and growth is slowing. China's problem is high oil. This is also Italy, Greece and America's problem because high oil is slowing economic growth, which is exacerbating the sovereign debt problem. Which takes us to the Long War.
Long War: The US House of Representatives passed a military spending bill which restricts the CIA's ability to place detainees in Gitmo. This is the House's fourth attempt to clip the CIA's wings. A coalition of hard left Democrats and Tea Party Republicans wants America to stop fighting the Long War. The CIA is in their cross hairs because it is taking the lead in the global conflict.
Shortly after the House passed its bill, Sec. of Defense Leon Panetta announced that the CIA is on the verge of strategically defeating Al-Qaeda. Panetta says the CIA has the location of the top 10 Al-Qaeda leaders and can reach out and kill them anytime, which (he claims) will effectively destroy the bad guys.
It is likely that a few Al-Qaeda leaders either have been killed recently or are about to be killed. But this won't destroy Al-Qaeda and it is nowhere close to being defeated. Panetta's statement has very little to do with Al-Qaeda and everything to do with the House's efforts to stick its beak into Company business.
The American public holds the CIA in much higher esteem than its holds Congress. Panetta can paint a picture of heroic CIA operatives battling for America's freedom and blast Congress for hindering these efforts. For instance, he can point out that the current leaders of AQAP were released from Gitmo because of Congressional interference.
Fundamentals: The US government's payroll survey showed a paltry 18,000 jobs were created last month. The household survey showed 455,000 jobs were lost. If the household survey is correct, then a double-dip recession is on the horizon.
The Greek debt crisis has spread to Italy, with the yield on Italian debt soaring last week. Greece is a midget and Italy is a giant. Italy has more outstanding debt than any other Euro-zone country. It is too big to bail out. Still, the real problem is America's debt, which dwarfs that of any other country. If America were to sharply cut spending, the global sovereign debt crisis would ease.
Over the weekend we learned inflation is accelerating in China and growth is slowing. China's problem is high oil. This is also Italy, Greece and America's problem because high oil is slowing economic growth, which is exacerbating the sovereign debt problem. Which takes us to the Long War.
Long War: The US House of Representatives passed a military spending bill which restricts the CIA's ability to place detainees in Gitmo. This is the House's fourth attempt to clip the CIA's wings. A coalition of hard left Democrats and Tea Party Republicans wants America to stop fighting the Long War. The CIA is in their cross hairs because it is taking the lead in the global conflict.
Shortly after the House passed its bill, Sec. of Defense Leon Panetta announced that the CIA is on the verge of strategically defeating Al-Qaeda. Panetta says the CIA has the location of the top 10 Al-Qaeda leaders and can reach out and kill them anytime, which (he claims) will effectively destroy the bad guys.
It is likely that a few Al-Qaeda leaders either have been killed recently or are about to be killed. But this won't destroy Al-Qaeda and it is nowhere close to being defeated. Panetta's statement has very little to do with Al-Qaeda and everything to do with the House's efforts to stick its beak into Company business.
The American public holds the CIA in much higher esteem than its holds Congress. Panetta can paint a picture of heroic CIA operatives battling for America's freedom and blast Congress for hindering these efforts. For instance, he can point out that the current leaders of AQAP were released from Gitmo because of Congressional interference.
Friday, July 8, 2011
The Big Picture
Charts: On a down day when the key Fibonacci retracement level of 1333 is once again under assault it pays to look at both the immediate details of the Long War and the grand cycle that governs the long term outlook.
Long War: American troops in Iraq are now engaged daily against Shiite militias supported by Iran. Casualties in Iraq are greater than in Afghanistan. Obama says he wants to keep 10,000 American troops in Iraq to serve as a trip wire in case Iran invades Iraq, much like the 30,000 US troops in South Korea who also serve as a trip wire, i.e. if North Korea invades South Korea, the US would have to go to war.
The Yemeni Army yesterday lost 10 soldiers in ground combat with Al-Qaeda. It appears that Al-Qaeda is (for the moment) winning in Yemen.
The Berber tribes and the CIA are taking the wood to Gaddafi. The good guys are winning in Libya.
Okay, let's look at the big picture. Shortly after the Bush administration coined the phrase "War on Terror" scholars at the Pentagon rejected this term because it was inaccurate. Terrorism is actually not the main focus of the enemy. Suicide bombers are more likely to hit military targets than civilian ones and the bad guys are even more likely to fight in conventional military units such as what we are now seeing in Yemen.
So the term Long War Against Islamic Extremist Militias was created. But this is also inaccurate and reflects wishful thinking. The Long War encompasses much more than Islamic militias. The first Gulf War was a Long War action and it was against a nation state, Saddam Hussien's Iraq. The three decade long cold war against Iran is nation state vs. nation state. The war in Libya is against a truncated nation state, Gaddafi's rump government. Eritrea and North Sudan are jihadist nation states. Once Syria crushes its "Arab Spring" revolution it will certainly become a jihadist nation state. If Hezbollah were to take full control of Lebanon it would become a jihadist nation state. North Waziristan is pretty much a jihadist nation state and can only be conquered by a conventional army. All jihadist nation states are enemies in the Long War.
The more accurate term then should be the Long War Against Islamic Extremist Militias and Jihadist Nation States. And this is the big picture: Around the beginning of the Christian era, Rome had conquered every major power in the known world except the gigantic Persian Empire to the east. Rome then went to war against all the existing smaller powers, as well as barbarian tribes on the periphery of its empire, and it continued what proved to be a 700-year long cold war with Persia. The historical parallels between then and now are stark. America = Rome. China = Persia. Islamic militias = Barbarian tribes. Jihadist nation states = Smaller powers.
There were three different enemies facing Rome just as there are three different enemies facing America. For economic expansion to gain ground the two different kinds of Islamic enemies need to be steadily ground down and China needs to be held at bay. Sometime in the distant future radical Islam will be defeated and a day of reckoning with China will occur.
Long War: American troops in Iraq are now engaged daily against Shiite militias supported by Iran. Casualties in Iraq are greater than in Afghanistan. Obama says he wants to keep 10,000 American troops in Iraq to serve as a trip wire in case Iran invades Iraq, much like the 30,000 US troops in South Korea who also serve as a trip wire, i.e. if North Korea invades South Korea, the US would have to go to war.
The Yemeni Army yesterday lost 10 soldiers in ground combat with Al-Qaeda. It appears that Al-Qaeda is (for the moment) winning in Yemen.
The Berber tribes and the CIA are taking the wood to Gaddafi. The good guys are winning in Libya.
Okay, let's look at the big picture. Shortly after the Bush administration coined the phrase "War on Terror" scholars at the Pentagon rejected this term because it was inaccurate. Terrorism is actually not the main focus of the enemy. Suicide bombers are more likely to hit military targets than civilian ones and the bad guys are even more likely to fight in conventional military units such as what we are now seeing in Yemen.
So the term Long War Against Islamic Extremist Militias was created. But this is also inaccurate and reflects wishful thinking. The Long War encompasses much more than Islamic militias. The first Gulf War was a Long War action and it was against a nation state, Saddam Hussien's Iraq. The three decade long cold war against Iran is nation state vs. nation state. The war in Libya is against a truncated nation state, Gaddafi's rump government. Eritrea and North Sudan are jihadist nation states. Once Syria crushes its "Arab Spring" revolution it will certainly become a jihadist nation state. If Hezbollah were to take full control of Lebanon it would become a jihadist nation state. North Waziristan is pretty much a jihadist nation state and can only be conquered by a conventional army. All jihadist nation states are enemies in the Long War.
The more accurate term then should be the Long War Against Islamic Extremist Militias and Jihadist Nation States. And this is the big picture: Around the beginning of the Christian era, Rome had conquered every major power in the known world except the gigantic Persian Empire to the east. Rome then went to war against all the existing smaller powers, as well as barbarian tribes on the periphery of its empire, and it continued what proved to be a 700-year long cold war with Persia. The historical parallels between then and now are stark. America = Rome. China = Persia. Islamic militias = Barbarian tribes. Jihadist nation states = Smaller powers.
There were three different enemies facing Rome just as there are three different enemies facing America. For economic expansion to gain ground the two different kinds of Islamic enemies need to be steadily ground down and China needs to be held at bay. Sometime in the distant future radical Islam will be defeated and a day of reckoning with China will occur.
Thursday, July 7, 2011
Brain Dead US House of Representatives
Long War: The US House of Representatives voted 225-201 to cut off funding for any US effort to train and equip Libyan rebels. This measure is unlikely to pass the Senate and even then it would be vetoed by the President. Nevertheless, it is troubling because the vote takes direct aim at the CIA, a towering example of Congressional stupidity and hubris. And previous House attempts to muzzle the CIA were defeated. This is the first one to pass. I don't like the momentum it is seemingly creating.
Consider the backdrop behind this ill-conceived vote. The youthful "Arab Spring" Libyan rebels in the east are unable to make any progress against Gaddafi's army. But the Berber tribes in the western mountains are capturing village after village and severing supply lines to Tripoli, a python strangling a goat. The Berbers are winning the war and as explained in yesterday's blog, there is reason to believe heavy CIA involvement is propelling these gains.
There was good news on jobs today but the price of oil rocked up. Any bit of good economic news is self-defeating because it spikes oil in the current geopolitical environment. The global expansion will only continue if oil comes down and this will only happen if Gaddafi is defeated, which will not only reopen production in the massive Libyan oil fields it will also tamp down Islamic violence in oil rich Nigeria and Sudan.
The House doesn't have the foggiest notion what a victory for Gaddafi would entail. The sanctions on Libyan oil would then become permanent. The current Libyan war has knocked oil prices up by about $20 a barrel, but this increase is predicated on the Libyan oil shut down being temporary. If it were permanent, oil would really rock up.
Gaddafi at one time was the largest sponsor of state terrorism on the planet. If he were victorious he would surely unleash a hurricane of terror across the globe. And for the first time in history NATO would have been defeated in combat. This would probably spell the end to NATO as an effective fighting alliance. The war in Afghanistan is a NATO effort. If NATO were to effectively collapse, Afghanistan would be handed over to the Taliban and Al-Qaeda.
America is tired of war but war is not tired of America. Just yesterday Homeland Security admitted that it is monitoring a plot by AQAP to put suicide bombers with surgically implanted bombs in airliners. The mainstream media is treating this like a joke. But there have been reports for years of Pakistani surgeons training with Al-Qaeda to use breast implants as bombs. These would be undetectable by current electronic screening devices. Only trained dogs could detect these devices and there is no effort to use dogs in this fashion.
Finally, clipping the CIA's wings right now as it is taking over from the Pentagon as the main instrument for fighting the Long War would be toxic beyond belief.
The reason for the vote against the CIA is the ongoing talks to curb the US deficit. These talks need to be finalized and the wild thrashing around on the part of Congress needs to halt.
Consider the backdrop behind this ill-conceived vote. The youthful "Arab Spring" Libyan rebels in the east are unable to make any progress against Gaddafi's army. But the Berber tribes in the western mountains are capturing village after village and severing supply lines to Tripoli, a python strangling a goat. The Berbers are winning the war and as explained in yesterday's blog, there is reason to believe heavy CIA involvement is propelling these gains.
There was good news on jobs today but the price of oil rocked up. Any bit of good economic news is self-defeating because it spikes oil in the current geopolitical environment. The global expansion will only continue if oil comes down and this will only happen if Gaddafi is defeated, which will not only reopen production in the massive Libyan oil fields it will also tamp down Islamic violence in oil rich Nigeria and Sudan.
The House doesn't have the foggiest notion what a victory for Gaddafi would entail. The sanctions on Libyan oil would then become permanent. The current Libyan war has knocked oil prices up by about $20 a barrel, but this increase is predicated on the Libyan oil shut down being temporary. If it were permanent, oil would really rock up.
Gaddafi at one time was the largest sponsor of state terrorism on the planet. If he were victorious he would surely unleash a hurricane of terror across the globe. And for the first time in history NATO would have been defeated in combat. This would probably spell the end to NATO as an effective fighting alliance. The war in Afghanistan is a NATO effort. If NATO were to effectively collapse, Afghanistan would be handed over to the Taliban and Al-Qaeda.
America is tired of war but war is not tired of America. Just yesterday Homeland Security admitted that it is monitoring a plot by AQAP to put suicide bombers with surgically implanted bombs in airliners. The mainstream media is treating this like a joke. But there have been reports for years of Pakistani surgeons training with Al-Qaeda to use breast implants as bombs. These would be undetectable by current electronic screening devices. Only trained dogs could detect these devices and there is no effort to use dogs in this fashion.
Finally, clipping the CIA's wings right now as it is taking over from the Pentagon as the main instrument for fighting the Long War would be toxic beyond belief.
The reason for the vote against the CIA is the ongoing talks to curb the US deficit. These talks need to be finalized and the wild thrashing around on the part of Congress needs to halt.
Wednesday, July 6, 2011
CIA Doing Better
Charts: Last week's gigantic rally came on volume that was the lowest yet for the current bull market. Volume could be described as paper thin, very fragile. As such the market desperately needs to consolidate, e.i. trade flat to slightly up. Since it breached the key level of 1333, it needs to consolidate above that level.
Fundamentals: The big American rating agencies recently downgraded Euro-periphery debt. This should have sent the Dow down 1000 points. But counter-intuitively it ignited a fire under the Germans and the European troika charged with bailing out the weak Euro countries. The Germans are essentially saying, "Nobody is allowed to beat up my little brother, except me." The Germans have so far put together a Mickey Mouse bail out package. But today they are so insulted by the Americans calling their little brother (Greece and Portugal) an insolvent mess, they are (perhaps) gearing up to mount a more serious bail out effort. This is good news but the Euro-debt problem is still a huge mess that could tear down the world economy. Credit markets are saying there is an 85% chance Greece will default and 59%chance Portugal will also. The ultimate solution is for the EU to guarantee all of Greece's debt and then have the Germans run an expanded privatization program. Guaranteeing Greece's debt would slash the interest rates it has to pay to service its debt. The current bail out locks in super high interest rates, which will definitely cause a default in time. The current bail out program is a typical "Extend and Pretend" gimmick similar to how Japan's zombie banks dealt with bad loans. It will not work.
Long War: The CIA is over-stretched and having a hard time fighting everywhere in the global war against Islamic bad guys but in Libya the situation is looking better. In Tripoli (Gaddafi's only real stronghold) the night is filled with armed revolutionaries attacking police check points. During the day Gaddafi's secret police comb neighborhoods and arrest suspected insurgents. But the next night the good guys are only stronger. This is a sort of new front in the war and it bears Agency fingerprints.
The rebels have mounted a co-ordinated two pronged assault on Gaddafi's army from Misrata and the western mountains. The strongest rebel force and the one doing Gaddafi the most damage is the Berber tribesmen in the western mountains. There are reports of Qatar and France arming these rebels and while these reports are certainly true the activation of a non-Arab tribal fighting force is classic CIA tactics. In a broader historical context, this divide and conquer tactic is also what the British East India Company would have done and when we see actions that look imperial it speaks to CIA involvement. Furthermore, the co-ordination of the Free Libya Army in Misrata with the Berber tribe speaks to an outside force directing a larger overall strategy.
Fundamentals: The big American rating agencies recently downgraded Euro-periphery debt. This should have sent the Dow down 1000 points. But counter-intuitively it ignited a fire under the Germans and the European troika charged with bailing out the weak Euro countries. The Germans are essentially saying, "Nobody is allowed to beat up my little brother, except me." The Germans have so far put together a Mickey Mouse bail out package. But today they are so insulted by the Americans calling their little brother (Greece and Portugal) an insolvent mess, they are (perhaps) gearing up to mount a more serious bail out effort. This is good news but the Euro-debt problem is still a huge mess that could tear down the world economy. Credit markets are saying there is an 85% chance Greece will default and 59%chance Portugal will also. The ultimate solution is for the EU to guarantee all of Greece's debt and then have the Germans run an expanded privatization program. Guaranteeing Greece's debt would slash the interest rates it has to pay to service its debt. The current bail out locks in super high interest rates, which will definitely cause a default in time. The current bail out program is a typical "Extend and Pretend" gimmick similar to how Japan's zombie banks dealt with bad loans. It will not work.
Long War: The CIA is over-stretched and having a hard time fighting everywhere in the global war against Islamic bad guys but in Libya the situation is looking better. In Tripoli (Gaddafi's only real stronghold) the night is filled with armed revolutionaries attacking police check points. During the day Gaddafi's secret police comb neighborhoods and arrest suspected insurgents. But the next night the good guys are only stronger. This is a sort of new front in the war and it bears Agency fingerprints.
The rebels have mounted a co-ordinated two pronged assault on Gaddafi's army from Misrata and the western mountains. The strongest rebel force and the one doing Gaddafi the most damage is the Berber tribesmen in the western mountains. There are reports of Qatar and France arming these rebels and while these reports are certainly true the activation of a non-Arab tribal fighting force is classic CIA tactics. In a broader historical context, this divide and conquer tactic is also what the British East India Company would have done and when we see actions that look imperial it speaks to CIA involvement. Furthermore, the co-ordination of the Free Libya Army in Misrata with the Berber tribe speaks to an outside force directing a larger overall strategy.
Tuesday, July 5, 2011
Surge in Long War Violence
Long War: Equity markets are (for now) ignoring the overall bad situation in the LW. The price of oil, however, continues to trade at elevated levels and this is due mostly to the recent big surge in LW violence.
North Sudan is locked into a relatively large war in the disputed province of South Kordofan and a small war in Blue Nile. North Sudan is not at war with South Sudan, but rather with tribes allied to South Sudan in the two disputed provinces. The US is restraining South Sudan and trying to get Ethiopia to install peacekeepers in the disputed provinces. It looks as though North Sudan is using the peace talks with Ethiopia as a delaying tactic to keep pounding S. Kordofan. South Sudan will only put up with this for so long and appeasement never works. The possibility of full-scale war between North and South Sudan is at least 50/50.
The nearly century old Sudanese conflict pits African Muslims against African Christians and has its roots all the way back to the crusades. Nigeria has seen a huge increase in Muslim on Christian terror strikes in the past couple weeks. This is directly linked to violence in Sudan. Nigerian oil infrastructure has not been hit yet by Islamic radicals, but this would be the next step if Sudan descended into full-scale war. Nigeria is a major oil supplier.
Al-Qaeda in the Arabian Peninsula (AQAP) has seized control over the Yemeni province of Abyan. As I write the Yemeni Air Force is bombing AQAP positions in Abyan cities. The truncated Yemeni government of deposed pro-American dictator Saleh says it needs help against AQAP soon or it will be directly threatened by AQAP.
The CIA and US Army Special Forces have mounted a robust drone campaign in Yemen and this campaign has recently expanded to Somalia because AQAP has also expanded into Somalia, reaching out to Al-Shabab.
There is good news, the Pakistan Army has mounted a large offensive, involving thousands of soldiers, against a tribal land bordering North Waziristan. This would be the logical staging ground for a full-scale assault on North Waziristan.
In Iraq, US soldiers are in combat once again. Not against Al-Qaeda but Shiite militias funded by Iran. This is in conjunction with the success of the pro-Iranian Houthi rebels who have carved out an independent country in northern Yemen. The US Army and USMC will leave Iraq vulnerable to intimidation from Iran once they leave in a few months.
The overall Long War situation can be described as entering a transition period between the Pentagon in charge and the CIA in charge. The transition period though has a lag built into it, the Pentagon is retreating faster than the overly stretched CIA can advance, leaving a gap. This gap is causing the current surge in LW violence.
North Sudan is locked into a relatively large war in the disputed province of South Kordofan and a small war in Blue Nile. North Sudan is not at war with South Sudan, but rather with tribes allied to South Sudan in the two disputed provinces. The US is restraining South Sudan and trying to get Ethiopia to install peacekeepers in the disputed provinces. It looks as though North Sudan is using the peace talks with Ethiopia as a delaying tactic to keep pounding S. Kordofan. South Sudan will only put up with this for so long and appeasement never works. The possibility of full-scale war between North and South Sudan is at least 50/50.
The nearly century old Sudanese conflict pits African Muslims against African Christians and has its roots all the way back to the crusades. Nigeria has seen a huge increase in Muslim on Christian terror strikes in the past couple weeks. This is directly linked to violence in Sudan. Nigerian oil infrastructure has not been hit yet by Islamic radicals, but this would be the next step if Sudan descended into full-scale war. Nigeria is a major oil supplier.
Al-Qaeda in the Arabian Peninsula (AQAP) has seized control over the Yemeni province of Abyan. As I write the Yemeni Air Force is bombing AQAP positions in Abyan cities. The truncated Yemeni government of deposed pro-American dictator Saleh says it needs help against AQAP soon or it will be directly threatened by AQAP.
The CIA and US Army Special Forces have mounted a robust drone campaign in Yemen and this campaign has recently expanded to Somalia because AQAP has also expanded into Somalia, reaching out to Al-Shabab.
There is good news, the Pakistan Army has mounted a large offensive, involving thousands of soldiers, against a tribal land bordering North Waziristan. This would be the logical staging ground for a full-scale assault on North Waziristan.
In Iraq, US soldiers are in combat once again. Not against Al-Qaeda but Shiite militias funded by Iran. This is in conjunction with the success of the pro-Iranian Houthi rebels who have carved out an independent country in northern Yemen. The US Army and USMC will leave Iraq vulnerable to intimidation from Iran once they leave in a few months.
The overall Long War situation can be described as entering a transition period between the Pentagon in charge and the CIA in charge. The transition period though has a lag built into it, the Pentagon is retreating faster than the overly stretched CIA can advance, leaving a gap. This gap is causing the current surge in LW violence.
Friday, July 1, 2011
CIA = British East India Co.
Charts: At midday on the first of July the S&P 500 is at 1333, the last Fibonacci number in the series and a level freighted with cosmic significance. Earlier in the year the index blew past this key level twice in low volume and both times it came crashing back. At the time I said the index needs to hug 1333 and consolidate. That is also true now.
Fundamentals: American employment data is weak. Over the past two days American industrial data has come in stronger than expected. This could mean that the last two months of weak American industrial data was due to the Japanese earthquake and this negative effect is ebbing. Chinese industrial data continues to be weak. But if oil prices stabilize and Chinese real estate cools, which appears to be happening, then China can hit the monetary gas and juice its economy again.
Long War: The US Justice Department had been investigating 100 CIA interrogation cases where torture had been employed. Justice has narrowed its investigation to just two cases, where both detainees were killed during interrogation. Justice hinted that it really isn't going to go after these two cases very hard. The ACLU was enraged by this development. The CIA was very happy.
Combine this with the recent House vote where brain dead politicians failed to interfere in Company business and we are seeing (hopefully) the beginning of all non-CIA branches of government removing their long beaks from CIA affairs.
If it is totally left alone and allowed to act with 100% freedom, the CIA will evolve into something like the British East India Company (BEIC) of the 19th century. Britain didn't conquer the world with its army, BEIC did that under government license using inexpensive native troops. America has spent over a trillion dollars fighting in Afghanistan and Iraq. If a modern day BEIC were to have performed the same task, it would have made a profit and paid taxes to the government. Also, it would have won more easily.
BEIC invented the modern stock market. It was the first ever publicly traded company, the first where short and long positions were struck. The modern industrial world evolved from BEIC and the establishment of the British Empire. So if the CIA were to evolve into a modern version of BEIC, then history will be repeating itself or we could say retracing a previous path. And this helps explain why Fibonacci retracement levels are so important.
Fundamentals: American employment data is weak. Over the past two days American industrial data has come in stronger than expected. This could mean that the last two months of weak American industrial data was due to the Japanese earthquake and this negative effect is ebbing. Chinese industrial data continues to be weak. But if oil prices stabilize and Chinese real estate cools, which appears to be happening, then China can hit the monetary gas and juice its economy again.
Long War: The US Justice Department had been investigating 100 CIA interrogation cases where torture had been employed. Justice has narrowed its investigation to just two cases, where both detainees were killed during interrogation. Justice hinted that it really isn't going to go after these two cases very hard. The ACLU was enraged by this development. The CIA was very happy.
Combine this with the recent House vote where brain dead politicians failed to interfere in Company business and we are seeing (hopefully) the beginning of all non-CIA branches of government removing their long beaks from CIA affairs.
If it is totally left alone and allowed to act with 100% freedom, the CIA will evolve into something like the British East India Company (BEIC) of the 19th century. Britain didn't conquer the world with its army, BEIC did that under government license using inexpensive native troops. America has spent over a trillion dollars fighting in Afghanistan and Iraq. If a modern day BEIC were to have performed the same task, it would have made a profit and paid taxes to the government. Also, it would have won more easily.
BEIC invented the modern stock market. It was the first ever publicly traded company, the first where short and long positions were struck. The modern industrial world evolved from BEIC and the establishment of the British Empire. So if the CIA were to evolve into a modern version of BEIC, then history will be repeating itself or we could say retracing a previous path. And this helps explain why Fibonacci retracement levels are so important.
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