A Perfect Storm

Charts: The S&P 500 smashed downward through its 50-day moving today. Selling accelerated once this key technical level was breached. Volatility has skyrocketed. Yields on Spanish and Italian debt are screaming upward, threatening the Euro-zone.

Fundamentals: The Euro-debt problem was smoothed over in recent months when the ECB injected $1.3 trillion into European banks. That was the Euro-zone's QE1. The market is now demanding a Euro-zone QE2. Of course this is solving a debt problem with more debt. The only way this will work is if the extra debt buys time for free market reforms to be implemented. Right now the Euro-zone has austerity fatigue and free market reforms are linked to austerity. Amazingly, America also has austerity fatigue, even though the US has not implemented any austerity measures.

Long War: The situation in Mali has gotten worse. AQIM (Al-Qaeda North Africa) has carved out a kingdom for itself in the strife torn African nation. The AU army will have to start and win a new war to eliminate this new jihadist nation-state. The AU depends on American funding to wage war. This is a problem. Under the best scenario it will take years to win this new war if it ever occurs. Give peace a chance is not an option, not when you are dealing with Al-Qaeda.

AQAP (Al-Qaeda Arabian Peninsula) continues to defeat the Yemeni Army in open warfare and continues to sport high kill ratios. The Yemeni Army is split into two camps: pro-Al-Qaeda and anti-Al-Qaeda. Probably for this reason we are seeing tanks and other heavy weapons move from the Yemeni Army arsenal to Al-Qaeda. Thus we should not call AQAP's military force a militia, but a true army. There is massive American involvement in Yemen.

A lot of effort was put into defeating Al-Shabab in Somalia last year. This created a strategic buffer separating AQAP and AQIM. We are seeing AQIM move into Nigeria to strengthen its affiliate Boko Haram. And indeed Boko Haram is tearing apart its host country. Probably AQIM will try to move into Somalia once it has firmed up its gains in the other parts of North Africa. If Al-Shabab were to re-emerge it would be very bad.

The Long War has two halves: Iran and Al-Qaeda. The Syrian War is part of the Iranian conflict. And that part of the LW is not going very well.

We are in a period where the good guys are losing the LW. This is a century long conflict, so the tides of war will ebb and flow.