It's a Mad Mad Mad Mad World and The Military Industrial Complex

The week ended on April 26, 2024. Interesting news items to look at this week are:

It’s a Mad Mad Mad Mad World and The Military Industrial Complex: How naive was I last week when I thought rational minds in the West had exercised some restraint to further escalate the affront by Israel against Iran - 4 Quad-copters and two low grade rockets that did little damage. On April 20^th, Pepe Escobar, the respected independent Geo-political commentator dropped a bombshell by disclosing IDF actually sent a nuclear-armed F35 through Jordan to create an EMP (Electromagnetic Pulse) over Iran. The intention was to cripple Iran’s entire electrical and electronic infrastructure. (Fig. 1).  

Russia intervened and shot down the F35 over Jordan. As this type of scenario would inflame the regional conflict to WW3, all sides (the Anglo American Zionist and the head trio of the Shanghai Cooperative) decided to keep the entire incident in camera. I have no information or insight into this event except (i) It is out of character of Israel to respond to a 300 drone and missile attack by Iran with just 4 Quad-copters and 2 low grade rockets and (ii) After beating drums and gongs of a 99% successful interception of Iran’s sorties, days later Israel came out to announce Iran had threatened Dimona. Dimona is where Israel housed its nuclear weapons facilities. (Fig. 2)

This news release, in the opinion of ex CIA analyst Larry Johnson, gave Israel a pretext on a nuclear counter strike against Iran. How much trust can one have on Escobar’s report is up to the individual reader’s due diligence. My take is it is all part of wars and rumors of wars but we truly are in perilous times. A further update by Pepe Escobar can be found below. (Fig. 3).

(i) Every Which Way But Loose: In my Mar 2 Blog titled “Bipolar in a Multi-polar World”, I reported that the talk in Western Circle of high finance was the elites want a war to escalate as early as May to build a platform for sovereign debt repudiation. US has just passed legislation to seize $8 billion of Russian assets to fund arms to Ukraine. Although the amount is small, US unilateral action has put pressure on EU to apply the same principle against a much larger $300 billion Russian assets in Europe. (Fig. 4).

The next move will be against China. In the recent Blinken visit to China, US already exposed her fangs by a planned media leak that US could apply SWIFT sanctions against Chinese Banks that became involved with Russian trade. (Fig. 5).

With US only accounting for 8% and 13.2% of global exports and imports, the role of USD as the requisite settlement currency for international trade is slipping very quickly. Furthermore since the 2008 Lehman Crisis, the continued indiscriminate money printing is weakening the purchasing power of USD by 8% compound annually. This makes USD as a store of value and reserve currency a joke. Despite the dire economic conditions, successive US Administration had abused the exhorbitant privilege of USD as the Reserve Currency by weaponizing its use against other soverign states that refuse to bend the knee to its hypocritical rules.   Dedollarization has now become an irreversible process and all efforts by US Administration to arrest this trend will turn out to be ineffective. Such a scenario reminds me of an old Clint Eastwood movie titled “ Every Which Way But Loose”.  Client Eastwood stood alone with his only friend an orangutan. (Fig. 6).

I will further elaborate on the sign post of the dedollarization endgame in subsequent paragraphs.

(ii) The Military Industrial Complex: On January 17, 1961, in this farewell address, President Dwight Eisenhower warned against the establishment of a "military-industrial complex." (“MIC”) (Fig. 7).

Did the American public heed his plead. No! To ensure the longevity of the MIC, arms and weaponry production is disbursed to many companies to be manufactured in a large number of States such that no individual Congressman will oppose because of jobs and economic consideration of the Congressman’s electorate.  When no real enemy is threatening the US, the MIC, Congressional Committees, Intelligence Agencies, Think Tanks and Media will create one to keep cash flowing. Alliances are formed under US direction to standardize spending 2% of an allied country’s GDP on American Armaments. In its most recent audit, the Pentagon was able to account for just half of its $3.8 trillion in assets (including equipment, facilities, etc). That means $1.9 trillion is unaccounted for — more than the entire budget Congress agreed to for the current fiscal year. No other federal agency could get away with this. (Fig. 8).

Well, I can tell you at least where some of the money had disappeared. A lot of the foundational research by DARPA (Defense Advanced Research Projects Agency) like the internet, search engines, satellite imagery etc.  were stealthily given to cronies to enrich the pockets of insiders. Tech giants like Microsoft, Meta, Google and Amazon would not be where they are today without such gravy trains and for the benefits received, search engines, social platforms are all doing their part in suppression of truth, censorship of dissenting voices, campaign contributions and retirement directorships of benefactors. (Fig. 9).

An outsider like Tik Tok with its freedom of expressions and business model winning over US Tech giants is not in a true sense a US National Security issue. However Tik Tok posses a real doomsday threat against the ruling elites, Deep States and Shadow Government. The Chinese ownership of Tik Tok just happens to be a convienent excuse, an Indian or French ownership would have met with the same fate. The following is a rare video clip of a US Congressman questioning how ridiculous and corrupt is the US defense spending.  (Video).

The truth is the billions of Aid Packages to Ukraine actually stays mainly within American shores (Fig. 10).

Such weapons for profits in fact is a giant recycling racket of Pentagon to MIC to bribery to US Congressional, Administration Officials to Military Leaders.  The same racket applies to NATO, the Indo Pacific Alliance and AUKUS. Disputes arose between Democrats and Republicans only when the spoils of war were not appropriately distributed. Ever wonder why the huge spending on Weapons for Profits could not compete with a much meagre expenditure of Weapons for Purpose in the Global South. Why after years and huge expenditures US still failed to develop hyper-sonic missiles when even Iran and North Korea are already equipped in their arsenal.

Financial Market performance for the the week ended on April 26, 2024 as follows:

A. Stock Market:  Dow Jones Industrial Average gained 253 points or +0.66%. (Fig. 12).

Stock market reacted to an easing of tensions between Iran and Israel despite US inflation on the rise. For the time being momentum traders like CTA Funds (Commodity Trading Advisory - Algo highly leveraged HFT funds) have not added further to their risk off position but not selling either. CTA funds seems to be rotating their investments from precious metals to energy. Whether the nuke EMP incident as narrated by Escobar proves to be true or otherwise, stalemate in the Middle East seems to have set in. I also do not expect any abrupt moves out of the ordinary in Ukraine so there will be just a continuation of attrition and front line retreat in Ukraine. My take on a sudden rebound in Telsa and Google, each over 10% for the week, was probaly US Govt invisible hands massaging a soft equity market for cosmetics.  

B. Debt Market: Yield on USGGYR10 rose from 4.608% to 4.663%, an increase of 5.5 basis points for the week. (Fig. 13).

UST Yield Curve remained inverse with credit spread extremely tight as bank deposits continued to migrate to the much higher yield Treasury bills.(Fig. 14)

78% of US households are living pay check to pay check and defaults on Credit Cards and Auto Loans have doubled. Soft landing of the US economy is a false narrative.

C. Commodities and Precious Metals: Trading results for the week of as follows: NASDAQ (+4.23%), S&P500 (+2.94%), Uranium (+1.97%), Oil (+1.72%), Russian Ruble (+1.47%), GBP (+0.99%), DJI (+0.94%), Eur (+0.36%), CNY (-0.09%), Bitcoin (-0.97%). Gold (-1.99%), JPY (-2.08) and Silver (-5.05%).

CTA is switching investments from Precious metals to Energy and the Shanghai Gold Exchange and Futures Exchange have tightened rules regarding excessive speculation in metals futures so expect some profit taking on what has been a bull run in the metals. The most note worthy data point is the extreme weakness exhibited in JPY, JCB seems to have totally retreated on defending the Yen and speculators are having a field day in shorting the Yen on Yen Carry Trade. We cannot discount this systemic risk and should keep a close watch on Japan.

The sign post for a USD led hyperinflation are (i) Central Banks switching to Gold (happening now), (ii) Smart Money following Central Bank Lead (quite minor as at this stage), (iii) as USD devalues sharply against Gold, general public will rush into the poor man’s precious metal which is silver and the gold and silver ratio will decline from the current 85:1 to about 20:1, and (iv) everyone give up hope on fiat currencies and will use dump currencies for tangibles.   

Acts 3:6: “Then Peter said, Silver and gold have I none; but such as I have give I thee: In the name of Jesus Christ of Nazareth rise up and walk.”

World Champion Title Fight (Deterrence and Defiance)

The week ended on April 20, 2024. Interesting news items to look at this week are:

World Champion Title Fight (Deterrence and Defiance): This week, the world sat and watched  a “Political Theatrics” between Iran and Israel and breathed a sigh of relief . Here I am referring to the retaliation drone and missile strike by Iran and a counter attack by Israel in response. Naturally both sides claimed their own successful military mission but an unbiased analysis showed Iran has effectively delivered a strong and clear message across both to Israel and its Anglo American backers.  The response from Israel was sadly a juvenile display of defiance.

(i) Most sophisticated Air Defense System: Israel boast the most sophisticated air defense system in the world even ahead of US and NATO. It is a multi-layered system that cater to different altitude and distances (Fig. 1).

Against this system, Iran’s first gave a 72 hours notice of the impending retaliation strike, then sent a first crop of 185 slow and low flying drones that takes 3.5 hours from Iran to reach Israel with a simultaneous release of video footage of its launch. Then 110 ballistics missiles and again with a simultaneous release of video footage from launch as if to tell Israel and the Anglo Americans saying, “Ready or not, here I come”. Then finally 36 cruise missiles but without further video broadcast. In aid to Israel’s Air Defense System, Israel’s backers also deployed NATO’s complete array of Air Defense equipment encompassing early warning radars and surveillance satellites to detect sorties going to Israel. There were also x-band radar to differentiate decoys from missiles. Then there were interceptors from ground, sea and air plus interceptors that specifically locked onto warheads to isolate them from decoys and to destroy the warheads. (Fig. 2)

Yet despite all the Western arsenal and technology, Iran was able to strike every target it aimed to hit through a cleverly devised plan. The targets were sites where Israel planned, controlled and launched the attack of Iran’s Consulate in Damascus on April 1^{st, .} These were all legitimate targets under Article 51 of the Treaty of Versailles after US vetoed a UN Security Council resolution to condemn Israel’s strike in Syria.  .

(ii)  A Shocking Iranian Message: Iran’s retaliation against Israel was not designed to kill and destroy but launched as a demonstration that Iran was capable to pierce through the most sophisticated Western Air Defence System (“ADS”). The methodology was simple yet clever, a drone swam to trigger the Israeli ADS and at the same time allowing Iran to identify the location of Israeli radar stations and interceptors. Iranian ballistic missiles were deployed to allow the ADS to track and locked in its trajectory but the missiles would subsequently burst open with multiple bomb-lets designed o excite multiple Israeli interceptor response and thereby overwhelm the interceptors to exhaustion. Then another crop of Iranian ballistic missiles with detachable and maneuverable  warheads to strike at the identified Israeli interceptor launchers and radars. Finally a few Iranian cruise missiles to strike at intended targets by which time almost unopposed. In fact, an Israeli media report refuted IDF’s claim of a 99% successful interception and reduced the effectiveness to 84%.  (Fig. 3)

Both Israel and Pentagon were shocked at Iran’s success as after spending US$1.3 billion in the ADS blocking moves, Iran’s $68 million strike still proved to be effective. (Fig. 4).

Blinken immediately called for a G7 Foreign Minister meeting in Italy to co-ordinate a proper response. (Fig. 5)

 

(iii) Israel’s Quad-copter Response: When news broke of an Israeli counter attack against Iran, the financial market went into a panic spin. Oil and gold spiked and Dow futures dropped 450 points. The financial markets quickly recovered as later news revealed the Israeli response was a nothing burger. (Fig. 6).

The interesting part of all these was the US media was banging drums and gongs about a massive Israeli counter offense but outside the Western controlled media, journalists just routinely reported what happened.

I considered what transpired was a good outcome because for the first time, some common sense begin to return to the political arena that restrain and tolerance of the Global South does not equate to weakness. A continuous challenge of a sovereign nation’s red line eventually would invite a slap on the wrist not necessarily to the Zionist’s liking. In this context, technology and human ingenuity was the big equalizer. Tons of borrowed money spent on weapons for profits can prove to be a strategic flaw when compare with a few penny spent wisely on weapons for purpose.

Upon a review of my notes, I posted the following cartoon in my October 2021 Blog (Fig. 7).

Nothing much has changed except those bad fruits the Anglo American Hegemon has cultivated nearly all come into maturity. I pray that green shoots of peace and rationality would flourish and that eyes and hearts may once again be opened, otherwise, the intoxication may irreversibly result in some deadly collision.

Financial Market performance for the first 3 weeks of Q2 2024 as follows:

A. Stock Market:  Dow Jones Industrial Average dropped 1,821 points or -4.5%. (Fig. 8).

As previously mentioned, the liquidity driven US Stock Market has been badly squeezed by a diversion of funds to bail out the insatiable US Fiscal Deficit. At the end of Q1, the Magnificent 7 Tech darlings has already been trimmed to just 4 AI sisters and in just 3 weeks of Q2, the much hyped AI wonder stocks are all crashing back to earth. Nvidia down -15.7% (Fig. 9),

and layoffs were announced for Amazon’s brightest division - Cloud Computing (Fig. 10).

The so called robust US economy were proved to be just contrived federal government election hot air.

B. Debt Market: Yield on USGGYR10 jumped from 4.206% to 4.623%  or an increase of 41.7 basis points for the first 3 weeks of Q2, 2024. (Fig. 11).

This is equivalent to a drop of 3% of the “zero risk” asset in just 3 weeks. Together with a drop of stock prices, a perfectly modeled US portfolio has just shown a loss of 3.9% within the first 3 weeks of Q2. Arguments began to appear that US interest rates have not yet peaked but it appears that the Wall Street still pinned their hopes on a Fed that will eventually bring out the punch bowl and happy days will reappear. YR2 lagged behind Fed Funds rate and that is a sign the bulls are refusing to go away. (Fig. 12).

I suppose USD should still bump along until Zombie Japan is long gone. From the Reverse Repo balances, a credit event is still expected to arrive sometimes in May. (Fig. 13)

 

C. Commodities and Precious Metals: Trading results for first 3 weeks of Q2, 2024 (Fig. 14) as follows: 

Silver (+15.33%), Gold (+7.72%), CNY (-0.17%), Oil (-0.21%), Russian Ruble (-0.48%), Uranium (-0.77%), Eur (-1.24%), GBP (-2.04%), JPY (-2.09), DJI (-4.51%), S&P500 (-5.13%), NASDAQ (-6.16%), Bitcoin (-9.18%). The debt death loop is having an effect on all fiat currencies and its related currency linked assets. As the power projections of US continued to wane from the many misadventures, the purchasing power of USD and valuation of USD denominated stocks will drop further until equilibrium is achieved.

Isaiah 13:17  "Behold, I will stir up the Medes against them, Who will not regard silver; And as for gold, they will not delight in it. 18  Also their bows will dash the young men to pieces, And they will have no pity on the fruit of the womb; Their eye will not spare children. 19  And Babylon, the glory of kingdoms, The beauty of the Chaldeans' pride, Will be as when God overthrew Sodom and Gomorrah.