CIA or Mossad?

Charts: The S&P 500 has been meeting fierce resistance at 1292, its October peak. Support is at 1285. At midday this Friday it has moved in and out of this support level about ten times. It needs to hold above support or we could see further technical damage.

Fundamentals: The S&P rating agency is set to announce downgrades on France, Austria, and maybe a few other EU countries after the bell today. Hopefully it does not also downgrade the European Financial Stability Fund (the bailout fund for Europe's weaklings). And there are rumors that Greece's second bail out package is falling apart. The big picture is that Europe needs to at least stabilize enough to have a lost decade like Japan, rather than a huge depression. A fledgling euro carry trade has emerged, just like the yen carry trade during the first two of Japan's lost decades. If the euro carry trade strengthens we will be okay. If not, we are screwed. Such a carry trade will weaken the euro. Up until recently a weak euro has been bad. It might now be good.

Long War: President Obama has a mechanism for communicating with Iranian dictator Ayatollah Khomeini. Obama is telling the Ayatollah that if the Strait of Hormuz is closed, then the US 5th Fleet will unleash everything it has on the Iranian regime. What does it have? Right now there are two aircraft carrier battle groups ready to go. Just one of these carrier air wings is much stronger than the entire Iranian Air Force. In the nearby Med there are USMC amphibious assault ships. The 5th Fleet also can take command and control of the substantial British naval assets in the region. All Gulf Arab navies and air forces will come under 5th Fleet control in the event of war. Gulf Arab military assets are designed to work with the American military like a hand and glove. The US Air Force has a huge land based presence in the Gulf, which will come under the flag of the 5th Fleet when and if hostilities begin.

What will happen if The 5th Fleet goes to war against Iran? Consider the Powell Doctrine, which was created to prevent another Vietnam War type outcome. The Powell Doctrine says America should never engage in a conventional war unless overwhelming forces are brought to bear and US public opinion firmly supports the use of this force in a decisive manner. The doctrine asserts that victory is assured if these criteria are met. American public opinion supports going to war against Iran in survey after survey. This is the only military action that the US public supports. And the force I just described is indeed overwhelming. So Iran would be annihilated.

Now think about the recent assassination of an Iranian nuclear scientist. This incident occurred at the most sensitive possible moment. The scientist killed, we now know, was in charge of procurement for the Iranian nuclear weapons program. This is the most important position in the program because Iran cannot acquire the materials and technologies for nuclear weapons from within its own borders. Coming when it did, the assassination seemed to be designed to enrage and goad Iran into taking action that would unleash the fury of the 5th Fleet against the jihadist regime. The bulk of the American military establishment and the Western alliance does not want to goad the bad guys into war. Yesterday the EU called off its sanctions on Iranian oil to cool the temperature and give Iran breathing space, working against whatever entity committed the assassination.

If Iran thought that entity was Israel's Mossad it wouldn't be super afraid, more pissed off. If it thought that entity was the CIA, then it would be terrified. Because the CIA has a long history in the 50s and 80s of going rogue and working against other parts of the US government to push the superpower into acting in a bellicose manner.

There has been a 100% correlation between an out-of-control, berserk, bellicose CIA and a bull market for US stocks. So it is important we answer the question in the title of this blog. Perhaps we should start with an easier question: Does Israel have the stones to push America toward a war?