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Still-employed DOJ official Bruce Ohr says he was simply doing his “duty as a citizen” when he distributed the infamous Steele dossier through “numerous meetings, phone calls and emails” while acting “as a link between the FBI and Hillary Clinton forces” to take down Donald Trump, according to the Washington Times.

All this, while he was the #4 official at the Department of Justice – associate deputy attorney general, and in charge of the agency’s Organized Crime Drug Enforcement Task Force, titles Ohr was stripped of by Deputy AG Rod Rosenstein after his crusade to take Trump down was uncovered by DOJ Inspector General Michael Horowitz in November, 2017.

And while Ohr was swapping anti-Trump research with his wife Nellie – a Fusion GPS employee with CIA ties – he hid his efforts between the summer of 2016 and Trump’s election from his bosses.

Recall that both Bruce and Nellie Ohr had ongoing communications with Christopher Steele, the dossier’s author, even having breakfast with him on July 30, 2016 at the Mayflower Hotel in downtown Washington D.C. – one day before the FBI launched operation Crossfire Hurricane, and one week after Steele had given installments of his Clinton-funded anti-Trump research to the FBI.

Mr. Horowitz’s 434-page report on FBI abuse of wiretap laws to target Trump campaign associate Carter Page includes scores of pages on Mr. Ohr and his one-man Washington operation. The inspector general concluded that Mr. Ohr had committed “consequential errors in judgment” and “lapses in judgment.”

Mr. Ohr’s self-appointed operation started with an alliance with Glenn R. Simpson, the Fusion GPS co-founder who employed Mr. Ohr’s wife, Nellie, as a Trump-Russia investigator. Mr. Ohr then began communications with Christopher Steele. Mr. Simpson paid and controlled the former British spy as he wrote and distributed 17 dossier memos accusing Mr. Trump and aides of various felonies. –Washington Times

Following the Ohrs’ breakfast with Steele, Bruce immediately phoned the FBI and met with Deputy Director Andrew McCabe and Lisa Page, a high-ranking FBI lawyer who was banging the head of counterintelligence – Peter Strzok – as they swapped anti-Trump text messages, while investigating Trump (yet no bias). Ohr later met with Strzok as well.

Clearly the lines between Ohr’s personal crusade and his position as a top DOJ official had blurred, resulting in his demotions.

“The idea that he actually had some role in this Russia investigation was shocking to me,” Rosenstein told the inspector general. “We had been fending off these congressional inquiries. And they were asking for all sorts of stuff, 302s [FBI reports] and things, and … I had no idea that somebody on my staff had actually been involved in … an operational way in the investigation.”

Nellie Ohr, meanwhile, also appears to have gone on a mysterious personal crusade – becoming a late-life Ham radio enthusiast, which some suspect is how she covertly communicated with others about the Trump-Russia investigation.

Dossier breaks down

According to the Times, Christopher Steele’s FBI handler warned Ohr that “Steele could not be trusted.”

Mr. Steele doubted his own source network. “Reporting of Kremlin activities ‘may be exaggerated or conspiracy theory talk,’ so Steele cannot know whether all the reporting is true,” the notes say.

Mr. Ohr assured those around the table that Mr. Steele was not fabricating information.

The next month, Mr. Ohr asked for more information from Mr. Simpson and received it in the form of a thumb drive that he delivered to the FBI supervisory agent with whom he had met in November. –Washington Times

On November 21, 2016, Ohr met with Assistant Secretary of State Kathleen Kavalec, who he told the dossier was “kind of crazy … kind of wild … quite a tale.” Later in the day, Bruce went to FBI headquarters for “his most high-powered meeting,” just one month after the FBI had executed its first warrant to electronically and physically surveil Carter Page after they were finally granted a FISA warrant by the surveillance court.

According to those who were in the meeting, Ohr made clear that there was a link between Steele and the Clinton campaign, which had paid Fusion GPS through law firm Perkins Coie. Fusion owner Glenn Simpson was “hired by a lawyer who does opposition research and the dossier was being fed to the campaign,” according to the IG report.

According to Ohr, Steele was “desperate” to sink Trump.

The FBI, however, never disclosed Ohr’s revelation that the Steele Dossier had partisan funding in three subsequent wiretap applications – which was among 17 instances that Horowitz found the agency misled the FISA court.

Ohr delivers to an underling

After the Steele dossier made its way from Fusion GPS’s Simpson to John McCain associate David Kramer – who gave it to former FBI Director James Comey (who already had most of the dossier already), Kramer gave it to BuzzFeed and other media outlets, which published it on January 10, 2017.

Ohr, meanwhile, passed the dossier to a DOJ underling.

“Ohr’s colleague said that Ohr told her that Steele provided information that the Trump campaign had been corrupted by the Russians,” reads the IG report. “The colleague told us that she asked Ohr if the allegations went ‘all the way to the President’ and that Ohr responded ‘yes.’”

Ohr had effectively become an ‘off-the-books’ investigator, which he failed to tell then-Deputy AG Sally Yates out of fear that she would prevent him from further contacts with Steele.

“He further stated that he did not want to stop talking to Steele because he was alarmed by the information he was receiving and believed he needed to get it to the FBI,” reads the Horowitz report.

“None of the FBI witnesses we interviewed,” the report continues “recalled anyone tasking Ohr to gather information from Steele or to act as an intermediary between the FBI and Steele.”

In other words, Ohr was on a personal – or at least officially disavowed mission to help take down Donald Trump.

Authored by Lance Roberts via RealInvestmentAdvice.com,

Jani Ziedins via Cracked Market recently penned an interesting post:

“As for what comes next, is this bull market tired? Is a crash long overdue? Not if you look at history. Stocks rallied for nearly 20 years between the early 1980s and the late 1990s. By that measure, we could easily see another decade of strong gains before the next “Big One”. Of course, the worst day in stock market history happened during that 20-year bull market in 1987, so we cannot be complacent. But the prognosis for the next 10 years is still good even if we run into a few 20% corrections along the way.”

After a decade of strong, liquidity-driven, post-crisis returns in the financial markets, investors are hopeful the next decade will deliver the same, or better. As Bob Farrell once quipped:

“Bull markets are more fun than bear markets.” 

However, from an investment standpoint, the real question is:

“Can the next decade deliver above average returns, or not?”

Lower Returns Ahead?

Brian Livingston, via MarketWatch, previously wrote an article on the subject of valuation measures and forward returns.

“Stephen Jones, a financial and economic analyst who works in New York City, tracks the formulas that several market wizards have disclosed. He recently updated his numbers through Dec. 31, 2018, and shared them with me. Buffett, Shiller, and the other boldface names had nothing to do with Jones’s calculations. He crunched the financial celebrities’ formulas himself, based on their public statements.”

“The graph above doesn’t show the S&P 500’s price levels. Instead, it reveals how well the projection methods estimated the market’s 10-year rate of return in the past. The round markers on the right are the forecasts for the 10 years that lie ahead of us. All of the numbers for the S&P 500 include dividends but exclude the consumer-price index’s inflationary effect on stock prices.”

• Shiller’s P/E10 predicts a +2.6% annualized real total return.

• Buffett’s MV/GDP says -2.0%.

• Tobin’s “q” ratio indicates -0.5%.

• Jones’s Composite says -4.1%.

(Jones uses Buffett’s formula but adjusts for demographic changes.) 

Here is the important point:

“The predictions might seem far apart, but they aren’t. The forecasts are all much lower than the S&P 500’s annualized real total return of about 6% from 1964 through 2018.”

While these are not guarantees, and should never be used to try and “time the market,” they are historically strong predictors of future returns.

As Jones notes:

“The market’s return over the past 10 years,” Jones explains, “has outperformed all major forecasts from 10 years prior by more than any other 10-year period.”

Of course, as noted above, this is due to the unprecedented stimulation the Federal Reserve pumped into the financial markets. Regardless, markets have a strong tendency to revert to their average performance over time, which is not nearly as much fun as it sounds.

The late Jack Bogle, founder of Vanguard, also noted some concern from high valuations:

“The valuations of stocks are, by my standards, rather high, butmy standards, however, are high.”

When considering stock valuations, Bogle’s method differs from Wall Street’s. For his price-to-earnings multiple, Bogle uses the past 12-months of reported earnings by corporations, GAAP earnings, which includes “all of the bad stuff.” Wall Street analysts look at operating earnings, “earnings without all that bad stuff,” and come up with a price-to-earnings multiple of something in the range of 17 or 18, versus current real valuations which are pushing nearly 30x earnings.

“If you believe the way we look at it, much more realistically I think, the P/E is relatively high. I believe strongly that [investors] should be realizing valuations are fairly full, and if they are nervous they could easily sell off a portion of their stocks.” – Jack Bogle

These views are vastly different than the optimistic views currently being bantered about for the next decade.

However, this is where an important distinction needs to be made.

Starting Valuations Matter Most

What Jani Ziedins missed in his observation was the starting level of valuations which preceded those 20-year “secular bull markets.”  This was a point I made previously:

“The chart below shows the history of secular bull market periods going back to 1871 using data from Dr. Robert Shiller. One thing you will notice is that secular bull markets tend to begin with CAPE 10 valuations around 10x earnings or even less. They tend to end around 23-25x earnings or greater. (Over the long-term valuations do matter.)”

The two previous 20-year secular bull markets begin with valuations in single digits. At the end of the first decade of those secular advances, valuations were still trading below 20x.

The 1920-1929 secular advance most closely mimics the current 2010 cycle. While valuations started below 5x earnings in 1919, they eclipsed 30x earnings ten-years later in 1929. The rest, as they say, is history. Or rather, maybe “past is prologue” is more fitting.

Low Returns Mean High Volatility

When low future rates of return are discussed, it is not meant that each year will be low, but rather the return for the entire period will be low. The chart below shows 10-year rolling REAL, inflation-adjusted, returns in the markets. (Note: Spikes in 10-year returns, which occurred because the 50% decline in 2008 dropped out of the equation, has previously denoted peaks in forward annual returns.)

(Important note: Many advisers/analysts often pen that the market has never had a 10 or 20-year negative return. That is only on a nominal basis and should be disregarded as inflation must be included in the debate.)

There are two important points to take away from the data.

1. There are several periods throughout history where market returns were not only low, but negative.(Given that most people only have 20-30 functional years to save for retirement, a 20-year low return period can devastate those plans.)

2. Periods of low returns follow periods of excessive market valuations and encompass the majority of negative return years. (Read more about this chart here)

“Importantly, it is worth noting that negative returns tend to cluster during periods of declining valuations. These ‘clusters’ of negative returns are what define ‘secular bear markets.’” 

While valuations are often dismissed in the short-term because there is not an immediate impact on price returns. Valuations, by their very nature, are HORRIBLE predictors of 12-month returns and should never be used in any investment strategy which has such a focus. However, in the longer term, valuations are strong predictors of expected returns.

The chart below shows Dr. Robert Shiller’s cyclically adjusted P/E ratio combined with Tobin’s Q-ratio. Again, valuations only appear cheap when compared to the peak in 2000. Outside of that exception, the financial markets are, without question, expensive. 

Furthermore, note that forward 10-year returns do NOT improve from historically expensive valuations, but decline rather sharply. 

Warren Buffett’s favorite valuation measure is also screaming valuation concerns (which may explain why he is sitting on $128 billion in cash.). The following measure is the price of the Wilshire 5000 market capitalization level divided by GDP. Again, as noted above, asset prices should be reflective of underlying economic growth rather than the “irrational exuberance” of investors. 

Again, with this indicator at the highest valuation level in history, it is a bit presumptuous to assume that forward returns will continue to remain elevated,.

Bull Now, Pay Later

In the short-term, the bull market continues as the flood of liquidity, and accommodative actions, from global Central Banks, has lulled investors into a state of complacency rarely seen historically. As Richard Thaler, the famous University of Chicago professor who won the Nobel Prize in economics stated:

“We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping. I admit to not understanding it.

I don’t know about you, but I’m nervous, and it seems like when investors are nervous, they’re prone to being spooked. Nothing seems to spook the market.”

While market analysts continue to come up with a variety of rationalizations to justify high valuations, none of them hold up under real scrutiny. The problem is the Central Bank interventions boost asset prices in the short-term, in the long-term, there is an inherently negative impact on economic growth. As such, it leads to the repetitive cycle of monetary policy.

1. Using monetary policy to drag forward future consumption leaves a larger void in the future that must be continually refilled.

2. Monetary policy does not create self-sustaining economic growth and therefore requires ever larger amounts of monetary policy to maintain the same level of activity.

3. The filling of the “gap” between fundamentals and reality leads to consumer contraction and ultimately a recession as economic activity recedes.

4. Job losses rise, wealth effect diminishes and real wealth is destroyed. 

5. Middle class shrinks further.

6. Central banks act to provide more liquidity to offset recessionary drag and restart economic growth by dragging forward future consumption. 

7. Wash, Rinse, Repeat.

If you don’t believe me, here is the evidence.

The stock market has returned more than 125% since 2007 peak, which is roughly 3x the growth in corporate sales and 5x more than GDP.

It is critical to remember the stock market is NOT the economy. The stock market should be reflective of underlying economic growth which drives actual revenue growth. Furthermore, GDP growth and stock returns are not highly correlated. In fact, some analysis suggests that they are negatively correlated and perhaps fairly strongly so (-0.40).

However, in the meantime, the promise of another decade of a continued bull market is very enticing as the “fear of missing out” overrides the “fear of loss.”

Let me conclude with this quote from Vitaliy Katsenelson which sums up our investing view:

“Our goal is to win a war, and to do that we may need to lose a few battles in the interim.

Yes, we want to make money, but it is even more important not to lose it. If the market continues to mount even higher, we will likely lag behind. The stocks we own will become fully valued, and we’ll sell them. If our cash balances continue to rise, then they will. We are not going to sacrifice our standards and thus let our portfolio be a byproduct of forced or irrational decisions.

We are willing to lose a few battles, but those losses will be necessary to win the war. Timing the market is an impossible endeavor. We don’t know anyone who has done it successfully on a consistent and repeated basis. In the short run, stock market movements are completely random – as random as you’re trying to guess the next card at the blackjack table.”

For long-term investors, the reality that a clearly overpriced market will eventually mean revert should be a clear warning sign. Given the exceptionally high probability the next decade will be disappointing, gambling your financial future on a 100% stock portfolio is likely not advisable.

After a dip in Manufacturing PMI (and plunge in ISM Manufacturing), analysts expected the final December print for Services to hold at its highest since July.

As US Macro data has serially disappointed, PMI’s Services survey instead accelerated further in December to 52.8 (from 52.2 flash and 51.6 in November).

Source: Bloomberg

Commenting on the latest survey results, Chris Williamson, Chief Business Economist at IHS Markit, said:

“Business activity in the vast service sector picked up pace at the end of last year as rising domestic demand and signs of reviving exports led to higher workloads. Combined with indications of manufacturing lifting out of it’s recent lull, the survey data suggest the overall pace of economic growth accelerated to its fastest since last April.

“The missing ingredient compared to this time last year is optimism about the future, with business sentiment regarding prospects for the next twelve months running well below levels seen this time last year, and close to the lowest for at least seven years. Indeed, much of the recent improvement in demand has come from stronger sales to consumers, with business spending and investment remaining under pressure amid this anxiety about the economic and political outlook.”

However, as Williamson notes, while moving in the right direction, “service sector growth remains well below that seen in the early months of 2019, and the overall survey results are indicative of GDP rising at a relatively modest annual rate of 1.8% in December.“

 

 

 

Authored by Paul Joseph Watson via Summit News,

Authorities in Australia have arrested close to 200 people for deliberately starting the bushfires that have devastated the country, yet the media and celebrities continue to blame “climate change” for the disaster.

The fires have caused at least 18 deaths, destroyed thousands of homes, millions of hectares of land and killed hundreds of millions of animals.

A total of 183 people have been arrested by police in Queensland, NSW, Victoria, South Australia and Tasmania for lighting bushfires over the last few months, figures obtained by news agency AAP show.

In New South Wales, 24 people were arrested for arson, risking prison sentences of up to 25 years.

In Queensland, police concluded that 103 of the fires had been deliberately lit, with 98 people, 67 of them juveniles, having been identified as the culprits.

“The link between arsonists and the deadly fires that devastate Australia every summer is well known and well documented, with the rate of deliberately lit fires escalating rapidly during the school holiday period,” reports Breitbart’s Simon Kent.

Around 85 per cent of bushfires are caused by humans either deliberately or accidentally starting them, according to Dr Paul Read, co-director of the National Centre for Research in Bushfire and Arson.

“About 85 per cent are related to human activity, 13 per cent confirmed arson and 37 per cent suspected arson,” he said.

“The remainder are usually due to reckless fire lighting or even just children playing with fire.”

Read also highlighted the link between school holidays and kids starting fires, commenting, “School holidays are a prime time for fire bugs, but especially over summer.” The kids have got time to get out there and light, and the most dangerous adults choose hot days.”

Police are now working on the premise arson is to blame for much of the devastation caused this bushfire season. A strike force will investigate whether blazes were deliberately lit, and bring those responsible to justice. https://t.co/TWh1KQycs4 @ebatten7 #NSWFires #7NEWS pic.twitter.com/Dul8dMFrZv

— 7NEWS Sydney (@7NewsSydney) January 3, 2020

“Police are now working on the premise arson is to blame for much of the devastation caused this bushfire season,” reports 7 News Sydney.

New environmental policies that restrict “prescribed burning,” where land owners burn off flammable ground cover in cooler months in a controlled manner so it doesn’t contribute to bushfires, have also exacerbated the problem.

The fact that the bushfires were deliberately started and have nothing to do with man-made climate change hasn’t prevented that being the dominant narrative.

Last week, Bernie Sanders blamed those who were “delaying action on climate change” for “the blood-red sky and unbreathable air in Australia because of raging forest fires.”

Virtue-signaling celebrities have also pounced on the issue to push their dogma, including at the Golden Globes last night when Australian-born Cate Blanchett asserted, “When one country faces a climate disaster, we all face a climate disaster.”

‘When one country faces a climate disaster, we all face a climate disaster.’

Australian-born Cate Blanchett took to the stage at the #GoldenGlobes to highlight the wildfires fires ravaging her native country and demand action against climate changehttps://t.co/pVuyhgrFDh pic.twitter.com/Bb25YwfQGi

— ITV News (@itvnews) January 6, 2020

*  *  *

My voice is being silenced by free speech-hating Silicon Valley behemoths who want me disappeared forever. It is CRUCIAL that you support me. Please sign up for the free newsletter here. Donate to me on SubscribeStar here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.

Turkish President Recep Tayyip Erdogan announced late on Sunday that Turkish troops have been deployed to Libya to support the internationally-recognized Government of National Accord (GNA) in Tripoli, Al Jazeera reported. Erdogan’s troop deployment announcement comes days after Turkey’s government approved operations in Libya after it received a request for military support by GNA. 

“Our troops are gradually departing to Libya. They will coordinate [their action with the GNA] there. Our goal is to support the legitimate government,” Erdogan told CNN Turk during an interview, adding that “the goal is to support a legitimate government. This will not hurt our agreement. The task of the Turkish military there is to ensure a ceasefire, not to fight. On the other hand, by supporting a legitimate government, prevent a humanitarian catastrophe.”

CNN Türk-Kanal D Ortak Canlı Yayınıhttps://t.co/FNVls1TUTz

— Recep Tayyip Erdoğan (@RTErdogan) January 5, 2020

“Right now, we will have different units serving as a combatant force,” he said without giving much detail about the number of troops and the type of weapons that will be used to support GNA. 

Erdogan said the object of the new deployment is not about combat operations but instead to support the government and prevent a humanitarian crisis: “Our soldiers’ duty there is coordination. They will develop the operation center there. Our soldiers are gradually going right now.”

Media reports have alleged that the Trump administration was mulling an ambitious plan to divide Libya into three areas based on three old Ottoman provinces: Cyrenaica in the east, Tripolitania in the north-west and Fezzan in the south-west, according to Sputnik News. And who better to implement this split than the country which once was the Ottoman Empire…

Libya has been stuck in a civil war since the killing of Muammar Gaddafi in 2011, with the country fracturing into two parts, with two separate governments controlling the eastern and western parts of the country. GNA controls Tripoli in northwestern Libya, and Khalifa Haftar’s self-styled Libyan National Army (LNA) controls the eastern part of the country that has an abundance of oil reserves. 

#Turkey sending troops to #Libya is more serious than people think.

Libya is now the scene for a proxy war being fought out between the Turks + Qatar (aiding the UN-backed Islamist GNA) & Egypt, Saudi + UAE (backing warlord General Khalifa Haftar).

Further escalation coming. pic.twitter.com/OatHrHFZBL

— H. Sumeri (@IraqiSecurity) January 5, 2020

President Trump warned Erdogan that intervention in Libya would make things a lot more complicated in the country. Coming at a time on unprecedented regional tensions following the killing of Qassem Soleimani, that appears to be the understatement of the year so far.

Predicatbly, the LNA’s field marshal, Haftar, slammed Turkish support of the western-backed GNA and declared “a jihad”, calling for the mobilization of “men and women, officers and civilians” to resist Turkish military operation.

Submitted by Michael Every of Rabobank

“World War Three!” is trending on social media the day I return to work after two weeks off deliberately not reading any news for once: ironic given my reputation for being bearish about geopolitics. Markets, of course, have failed to react much: Middle-East bourses closed down 2-4% on Sunday, which is not exactly end of the world stuff; WTI futures are up around 3%, again not a real panic; while US 10-year yields were down from 1.94% intraday Thursday to 1.79% as of the Friday close – but the weak US ISM survey (47.2 headline; 46.8 new orders; 45.1 employment) could be to blame for that alone.

You know what? For once the markets are arguably right, albeit for all the wrong reasons. Markets think nothing that happens in the Middle East matters because central banks will have their backs regardless. That is patent nonsense, even if Ben Bernanke is muttering about not ruling out negative rates and further purchases of “private securities” during the next down-turn. If Iran launched a devastating missile attack on Saudi and UAE oil facilities, and means it this time; or on Tel Aviv and the nuclear reactor at Dimona; if it unleashed a wave of global terrorist attacks and assassinations from sleeper agents – none of those things are made better by a lower cost of borrowing. They aren’t even helped by (not) helicopter money, as Bernanke alludes to. Central banks can and would be funding a lot more defence spending immediately on a helicopter money basis in those scenarios, but much of the world economy would take a hit regardless – most so if the oil complex is hit. Sorry Central banks, but in those kind of scenarios–as Ayatollah Khamenei tweeted to US President Trump right before he then killed Iranian Revolutionary Guards Council head Qassem Suleimani–“You can’t do anything.” So in the case of the PBOC, keep lowering the reserve requirement ratio further to no real effect; or in the case of the FOMC, kidding yourself rates are on hold even as you do more and more NOT QE to keep the ship afloat for now.

“What, no World War Three?” I hear you ask. Well, consider that most of these panicked claims are being made by the same commentators who thought that Clinton had the 2016 election in the bag; that moving the US embassy to Jerusalem also meant World War Three; that the Fed and RBA were raising rates in 2019; and that Russiagate and Ukrainegate spelled doom for Trump. Yes, there ARE real risks of a truly devastating geopolitical scenario playing out; but they are perhaps arguably LOWER for the killing of Suleimani.

Consider this: for years the US has been unable to deal with Iran’s advantage in asymmetric warfare against it, all led by Suleimani. For decades, the US maintained massively-expensive military forces in the Gulf; Iran used low-cost terrorist proxies to prod and provoke and expand its regional influence, all the time knowing the US was unwilling to respond with a Gulf War Three in response as it simply cannot afford another war like the last one on multiple fronts. With the killing of Suleimani the commentators are right: the US has crossed a red line – yet it’s not the one they think.

The new message is simple: the US does not have to rely on sanctions, or conventional war, or trying to rally a reluctant international community to act while Iran runs rings round it. It can simply kill the Iranian leadership or take out their key facilities – as Trump has just threatened to do at 52 unspecified locations if Iran retaliates. (His threat against ‘cultural sites’ is either a war-crime…or recognition that cultural centres in Iran allegedly house cyber-resources for the regime.) As such, asymmetry is now for the US too – and they can do it very well too. This is not to debate the constitutionality or legality or morality of Trump’s move, merely the real politik – which is where market should nonetheless focus.

Crucially, economically-feeble and massively out-gunned Iran does not want a real war with the US even more than the US does not want one with Iran. As such Tehran can either respond to Suleimani’s death by escalating with further US deaths, which triggered this crisis, and in which case war looks more realistic; or it can accept Trump has upped the ante to a level where it will have to make only a token response (against US allies?) instead. In doing so it will lose face domestically, where the regime has already just faced an uprising that has seen hundreds shot and the internet closed down (to no real Western opprobrium), and internationally the limits of tweaking the US’s nose will be made clear to *all* globally. As I have written many times: Si vis pacem, para bellum: if you desire peace, prepare for war. That’s what the US just did.

Hence the market, ignorant as it is about how little central banks can do if things go wrong geopolitically, is arguably right to see only a limited risk-off move so far. That said, Iran is meeting rhetoric with rhetoric and just pledged to abandon the terms of the nuclear deal the US has already walked away from and to enrich uranium on its terms. If Tehran is going for a mad dash for a nuke to try to prevent US military pressure *rather than just pretending to* then we are in for a very wild ride. Yet is Iran really that suicidal? And if so, why did anyone think it was a regime that could be trusted to stick to the terms of a nuclear deal? (I point this out to see if commentators are internally consistent with their World War Three logic.)  

Meanwhile, recall fear and greed run markets. Markets are still thinking central-bank ‘greed!’, and rallying, but in one respect it’s US military ‘fear!’ that matters most. The USD is still global top FX dog because it’s top F-35 gun, and that’s true even if Iraq just asked US forces to leave the country. To those who want to buy gold and Bitcoin or CNY as a hedge vs. US power: ‘Who has all the guns?’ And guess who has just shown it isn’t afraid to use them against those who seek to undermine it? In short, if World War Three kicks off, go long USD as you head for the shelters; and if US muscle-flexing prevents World War Three here, it’s even more the time to remember why the USD is still the USD.

On which front, allow me to segue to another story from Friday. The Economist magazine has always been a fan of free markets. Guess what they have to say about the US-China trade deal due to be signed on 15 January? “Don’t be fooled by the trade deal between America and China: the planet’s biggest break-up is underway” – which we have been saying since before there even was a deal. They add ”The threat to the West from China’s high-tech authoritarianism has become all too clear. Everything from its pioneering artificial-intelligence firms to its gulags in Xinjiang spread alarm across the world,” while decrying the muddled US response so far. That was just before China’s Global Times reported Beijing will not “sit idle” if Huawei is excluded from Germany’s 5G rollout. Sides are being picked here, just as they are vs. Iran, and Europe is again caught impotently in the middle. This time markets might be right to panic. Even The Economist now gets that the US-China struggle is the main act and Iran the relative side-show – for now.

In a move which is sure to enrage President Trump, Nancy Pelosi said in a Sunday letter to colleagues that the House will introduce an vote on a “War Powers Resolution” which will “limit the President’s military actions regarding Iran.”

“Last week, the Trump Administration conducted a provocative and disproportionate military airstrike targeting high-level Iranian military officials.  This action endangered our servicemembers, diplomats and others by risking a serious escalation of tensions with Iran,” reads the letter.

“As Members of Congress, our first responsibility is to keep the American people safe.  For this reason, we are concerned that the Administration took this action without the consultation of Congress and without respect for Congress’s war powers granted to it by the Constitution.”

The Resolution is similar to one introduced in the Senate by Tim Kaine, and “reasserts Congress’s long-established oversight responsibilities by mandating that if no further Congressional action is taken, the Administration’s military hostilities with regard to Iran cease within 30 days.“

Former CIA and DoD analyst Rep. Elissa Slotkin (D-NY) will lead the House Resolution.

The announcement comes as the Trump administration deploys thousands of additional troops to the Middle East after US forces killed Iran’s top commander last week, Qasem Soleimani.