Coincidence? I Don't Think So

Charts: In 2011 the S&P 500 closed almost exactly flat after a roller coaster ride of savage volatility. The only other time we had a chart pattern like that was in 1948 when the broad index closed almost exactly flat after the same sort of roller coaster ride. The 1950s saw one of the greatest bull markets in history. The 50s were the golden age of the CIA. Never before or since has Langley had such earth shaking power.

Fundamentals: The most recent GDP data shows the US economy growing at a very weak 2.2%. Strip out inventory distortions and growth was only 1.5%. But corporate profit as a percent of GDP continues to hit new all time highs. In the 1930s corporate profit as a percent of GDP was also very high. Why? Because the loose monetary policies of the 1920s made corporate America fat, happy and stupid. When the Great Depression hit there was plenty of room to tighten up. In the 1980s, 1990s and early 2000s we also had overly loose monetary policy. When the Great Recession hit there were over 2 1/2 decades of fat, happy, and stupid to work off. Corporations keep getting more efficient and profitable because they are hacking off an enormous backlog of fat, happy and stupid business practices.

Long War: Israeli PM Netanyahu is being publicly attacked by the former head of Mossad, the former head of Israeli Internal Security, the former PM, the current top ranking Israeli military officer, and (not publicly) the current head of Mossad. All these powerful Israelis are saying the Israeli Air Force must not bomb Iran. It is a true revolt and more than the PM can counter.

Netanyahu is so weakened politically that he is calling for early elections, where the issue will be whether or not to attack Iran. The voters will probably boot him out and if so there will be no Israeli attack on Iran. And the world will be saved from a disastrous war that would clobber the stock market besides killing hundreds of thousands of people.

Do you think five of the most powerful Israelis spontaneously decided to rise up against the PM out of the blue? Do you think the anti-Israeli CIA actions that I talked about in my last couple blogs are a coincidence to this Netanyahu backlash? Do you think it is a coincidence that the CIA is now run by the most anti-Israeli director to have ever existed? Do you think it is a coincidence that Director Petraeus has demonstrated an ability to reach out and transform internal politics/ tribal structures within Middle Eastern countries?

The Long War is not WW II. And Vietnam was not WW II. Massive conventional firepower, the shock and awe we saw at the start of the first Gulf War, is not the answer to Long War battles. The answer is spooks not nukes.