CIA May Win Big Award

Charts: The S&P 500 closed at 1073, down .3%. It is sitting on support at 1073. Resistance is at 1080. For the last 10 days volume patterns have been bearish.

Fundamentals: Singapore reported Q3 GDP growth was a red-hot 14%, which follows blistering Q2 growth of 22%. The recovery is indeed V-shaped in some of the scorching hot tiger economies. Can they keep growing at these rates even if the US economy stumbles? We’ll find out sooner or later because the US government seems determined to torpedo the recovery with an ever increasing debt load. The latest version of the Baucus healthcare bill claims to be roughly budget-neutral (over 10 years) because it includes $500 billion in phony Medicare cuts to offset $500 billion in new giveaways. These cuts will never happen because they are designed to be easily ignored by future Congresses, closely patterned after tens of billions worth of existing phony Medicare cuts that have been consistently ignored since 2003. There is also another $200 billion worth of smoke and mirrors in the Baucus bill that we won’t analyze to save space. The worst provisions of the stimulus program are being extended, COBRA healthcare subsidies and unemployment benefits, making them into new quasi-permanent entitlements. The home buyer tax credit may also become quasi-permanent. So the US deficit will keep exploding while other high debt countries like Singapore will be lowering goverment borrowing and low debt countries will start racking up surpluses. The dollar is tanking in response and oil is rocketing up. If oil gets high enough it will choke the recovery in Singapore as well as America. The dollar’s decline can also be traced to Obama’s refusal to quickly implement the McChrystal Plan.

Geopolitcs: General McChrystal is offering one plan with three different troop requests: A) Zero new troops. B) 40,000 new troops. C) 60,000 new troops. The Biden plan calls for zero new troops. So if the President really doesn’t want to add new troops to Afghanistan he could toss aside the Biden Plan and go ahead with one version of the McChrystal Plan, which any sane President would do in a heartbeat. But Obama is not doing that, instead he is threatening Congressional opponents of healthcare reform with the Biden Plan. Republicans and Blue Dogs have to roll over on healthcare before the Biden Plan goes away.
In Pakistan, the bad guys are throwing everything they’ve got into suicide bombings throughout the country, staging big flashy attacks, killing lots of civilians and good guys. The Taliban is screaming this message to the Paki voters, “Don’t invade South Waziristan!” The Army continues killing its 15 or so bad guys every day in routine operations and is putting in place final preparations for the big invasion.
In Yemen, over the last 2 weeks the Yemeni Army has killed 300 bad guys. Saudi Arabia is getting more visibly involved as the war escalates. There is now fighting in 19 different towns in northern Yemen, up from three or four a month ago. The Yemeni Army is doing an excellent job in killing bad guys but it is not yet able to seize and hold ground from the rebels. Yemen is a bigger war than Afghanistan or Pakistan right now as measured by combat deaths (super scary).
The CIA is doing a fantastic job in Somalia. We hear a lot about Al-Shabab but not so much about its evil partner, Hizbul Islam. But the two militias are about equally powerful despite Al-Shabab hogging the publicity and both have been walloping the American-backed Somali government lately. In the last few days, the CIA has gotten Al-Shabab and Hizbul Islam to attack each other, taking pressure off the good guys. And then the CIA has Kenya training an anti-Al-Shabab rebel army on its border with Somalia. Al-Shabab is practically at war with Kenya at present (bullish). The CIA needs to work its magic in Yemen once it can break away from Somalia. Already having won the coveted Dave’s Golden Bull Award, the CIA is now being considered for the even more coveted Dave’s Platinum Bull Award.