Art of War

Week ended December 15, 2023, interesting news items to look at this week were:

1.  Art of War: I have only been to Chengdu (成都), West China twice, the first time on a one day business trip, the other time as a tourist years later. The most memorable thing I recalled was the city just kept on oozing out  Chinese history and culture. The magical sights and sounds was not by some bureaucratic design but the fragrance so naturally infused with people from all walks of life, a  legacy that flowed from the times of the Three Kingdoms, the origin of Shu Han (蜀漢). One of the must see in Chengdu was the mausoleum of Zhuge Liang ( 諸葛亮), a brilliant General and Military Strategist. On the entrance of Liang’s mausoleum was a couplet that I found most profound. (Fig. 1).

The 30  characters on the couplet just summed up why the Anglo American Empire has eventually failed in every geopolitical initiative since 1991.

(i) Perpetual Wars: Even after the collapse of the Soviet Union, the Anglo American Empire did not achieve a restful state as the sole super-power because dollar hegemony has never been a naturally stable phenomenon. The reason, Euro dollars in the hands of other nations came about because of US’s twin deficits - fiscal and trade deficits that provide the world a continuous supply of dollars. This letting of blood saps the energy and vitality from the economy and enrich exporting nations. Periodically,therefore, the Anglo American Empire will need to destabilize and take down some external governments that dare to challenge the throne. In the words of General Wesley Clark “ The US has a good military that can take down governments and if the only tool you have is a hammer, then every problem have to look like a nail”. Please see Video Clip below (Video).

Table below are the direct military interventions and proxy wars which have been sponsored by US since 1991 (Fig. 2).

Up till the Ukraine war, the Anglo Americans had only tactical victories against weakened small states and insurgents. But even in the occupied state of Afghanistan or Iraq, the effective control of US in those two countries were limited to control of a corrupt puppet government within a 10 square Km Green Zone in Kabul or Baghdad. The Green Zones with its high concrete blast walls were in a sense a prison/fortress for the occupying force. (Fig. 3).

The Ukraine War then immediately show cased that NATO in its entirety simply do not have the resource for a conventional peers war with parallel if not superior combined arms warfare capability. For some reasons, the West thought retaining advisors familiar with the Art of War by Sun Tze, (Steve Bannon, General James Mattis, Dominic Cummings (Boris Johnson’s chief adviser) means they will have a good grasp of China’s bag of tricks. Little do the Anglo Americans realized “militancy” has always been looked upon as an inferior tool by the Chinese.

A soldier in defense for his country is willing to take a pay sacrifice. A US Corporal is paid $31,641 per annum but a starting pay for a mercenary in Blakwater is $90,000. DOD and the MIA shares a revolving door and that’s where the problem lies. A US Aircraft Carrier cost $12 billion but a Made in China  It cost only $2 billion. The West is nonetheless fooled by a deception that large military budget in dollar terms means strength. It is far from the truth. At the start of the Ukraine war, US could only produce 14,000 155mm artillery shells a month, stepping up to the current level of 330,000 per year. Russia is now producing 1.5 million per annum. It would not matter if Ukrainian boots in the battlefield were swapped with US boots, command and control in Ukraine has always been in the hands of US Generals. Russia has defeated NATO.

(ii) Throwing dollars at a problem is not the answer: After Huawei launched the Mate Pro 60, the US Commerce Department is desperate to come up with new containment measures against China. The Chips and Science Act could not provide the impetus to kick start new chip plants in the US. TSMC pulled out because for the meagre subsidy US Govt wants to squeeze dry all its proprietary technologies. Intel pulled out because they just lost the Chinese market. Intel also pulled out from Vietnam. US Govt sponsorship is one thing, but insufficient stable electricity in Vietnam is the Achilles heel. (Fig. 4)

This type of reactionary responses by US under threat is apparent to the world at large and now Vietnam is all out to embrace China. The Philippians is the last US lapdog in the South China Seas and when China got tough the US Navy backs off.   

2. The Gaza Powder Keg: It is day 71 for the war in Gaza but Day 662 for the war in Ukraine. The whole world wants an immediate ceasefire in Gaza because of the senseless killing of civilians, women, children, the aged and the infirm in Gaza. From Russian Intelligence, the cost to Israel in the Gaza war is US$300 million per day against an Israeli GDP of US$1,338 per day (2021 reported GDP) - some 22%. If we adjust IDF war expenditure against an economy that has been severe disrupted by soldiers in reserve being all called to action and a complete collapse of the lucrative tourism industry. The Gaza war expenditure to Israel matches a scale of WWII. US gave Israel until end of the year to do what they want to do in Gaza (Fig. 5).

In the meantime, the Houthi in Yemen is effectively blocking all cargo ships linked with Israel from entering through the Red Sea through missile attacks.(Fig. 6)

This week’s financial markets:

A. Stock Market: (Fig. 7): Dow closed at 37,305 for the week, a rise of 878 points (+2.4%), S&P 500 +2.5% and NASDAQ +3.35%.. 

The stock market gap up after post FOMC speech by Powell on pivot towards interest rate reduction in 2024.

B. Debt Market: (Fig. 8): USGG10YR ended the week at 3.915%, a drop of 31.4 basis points. 

The 10 Year Treasury was bid up by 2.88% on the back of Powell pivot speech. However on Friday, the Vice-Chair of FMOC John Williams came out with an unscheduled interview and said rate cuts is not part of current discussion. (Fig. 9).

This is reinforced by ECB Lagarde that rate cuts is not on the cards. (Fig. 10).  

Something spooked Powell and he is using talk to hold the market steady.

C. Commodities and Precious Metals: Trading results for the week: (Fig. 11) Silver (+3.57%), NASDAQ (+3.35%), S&P 500 (+2.50%), Uranium (+2.21%), JPY( +1.96%), Rubble (+1.89%), Eur (+1.25%), GBP (+1.05%), Gold (+0.94%), Oil (+0.87%), CNY (+0.65%) and Bitcoin (-4.04%),  

USD had decidedly weakened upon Powell’s pivot . The market volatility is on the rise as CTA (Commodity Trading Advisory Funds, an algo driven, highly leveraged and derivatives heavy Fund) been washed and rinse through a squeeze last week in the precious metals paper market by the US Exchange Stabilization Fund to protect a breakout in gold price. The financial markets are littered with land mines.

^{Isaiah 26:20-21} Come, my people, enter your chambers, And shut your doors behind you; Hide yourself, as it were, for a little moment, Until the indignation is past.