Goldman ‘Bear Market Indicator’ Nears Record High: “No Limit To The Stupidity Of Wall Street”

“Get used to this kind of volatility,” warns Hussman Funds’ John Hussman in his latest comment.

“Unfortunately, the moment interest rates hit zero, [historical risk and valuation] limits vanished, and preemptively responding to speculative extremes became terrifically detrimental.”

“Presently, neither valuations nor internals are favorable, and that is what opens up a trap door under the market.”

Goldman  agrees, high valuations in isolation do not provide much of a timing signal for investors but, again, when combined with other factors can indicate risks of a correction or possible bear market.

Goldman aggregated these variables in a signal indicator, and took each variable and calculated its percentile relative to its history since 1948. What it found is that, heuristically, the odds of a bear market at this moment, are in the 73% percentile.

The aggregate Bear Market Risk Indicator shows the average of these factors. Historically, when the Indicator rises above 60% it is a good signal to investors to turn cautious, or at the very least recognise that a correction followed by a rally is more likely to be followed by a bear market than when these indicators are low. By the same token, when the Indicator is very low, below 40% (as was the case in 1975, 1982 and 2009), investors should see any market weakness as an opportunity to buy.

As shown below, the risk of a bear market has almost never been greater.

So where are we now? As Oppenheimer puts it simple, “The signal is red.

While the momo-driven indices have bounced back honorably (fadin Friday), the world’s largest stock index (NYSE’s @24 trillion market cap Composite Index) has bounced and failed at key technical support…

 

While many eyes prefer to focus on ‘Dr.Copper’ as having the economics PhD, it is Lumber that is the real expert…

And it is flashing red…

And the bounce in the last two weeks has decoupled US equity prices from everything…

 

And if cyclicals underperformance is anything to go by, bond yields are set to tumble…

 

US Financial Conditions have tightened dramatically…

 

And as financial conditions have tightened, something dramatic changed in the way ‘smart’ money is flowing across the US equity market…

 

And while we have seen some panic in recent weeks, one very notable signal is not offering hope to the bulls – the put-call ratio is at its lowest since early 2017 – not the over-hedged ammunition for another exuberant leg higher in stocks…

As it appears the all-too-eager momo-chasers piled into calls on the first sign of a rebound…

Bond shorts rebuilt their positions a little last week (after 4 weeks of derisking) but previous metals bears unwound their positions further, and VIX positioning shifted further into net long territory.

Finally, we note that there is currently a record number of assets around the world with negative returns YTD…

And if 70 years of historical relationships are anything to go by, the S&P 500’s annual return over the next 10 years may be about zero.

In conclusion, we given John Hussman the final words:

“We can no longer rely on well-defined limits to speculation, as we could in previous market cycles across history.”

“In hindsight, the fix was simple: abandon the belief in any limit to the stupidity of Wall Street.”

“Despite its discomfort, the market decline we observed in October is only a drop in the bucket toward normalizing valuations.”

“Over the completion of the current market cycle, I fully expect the S&P 500 to lose close to two-thirds of its value from the recent peak.”

Is that what The Fed, The Deep State, or The Dems want?

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Yet Another Trillion-Dollar Unfunded Liability, California Wildfires Edition

Authored by John Rubino via DollarCollapse.com,

Yesterday an entire California town burned down. Paridise, CA has (had) 27,000 residents and over 1,000 buildings, and now it’s pretty much gone. A fire started nearby on a windy day and within hours everything was ash and cinders.

That fire and several others are still expanding across the state, threatening tens of thousands of homes. The sets of the TV show WestWorld are gone. Malibu has been evacuated. And dry, windy conditions persist, so the story is nowhere near over.

If this sounds familiar, it’s because massive, sometimes uncontrollable California wildfires are now an annual occurrence, due in part to gradual warming and persistent drought which combine to suck the moisture out of vegetation and turn the landscape into a tinderbox. Here’s a chart showing the recent take-off in the number of fires reported in the state (2013 was most recent year I could find, but the trend is clear – and since then the number of fires has apparently soared).

The reason this rates coverage in a financial blog is population. We’ve been moving millions of people into a place that has always had and always will have wildfires. California’s population is now about four times what it was in 1950, and the influx continues.

Fire is a crucial part of that and many other ecosystems, clearing out dead plants to make room for living. But add 40 million humans along with their buildings and vehicles, and a healthy, resilient semi-desert becomes a hellscape.

A very expensive hellscape. What does it cost to rebuild a town of 27,000 people from scratch? A back-of-the-envelope calculation (1,000 buildings at $100,000 a pop, 15,000 cars at $25,000 per, $10,000 per person for roads, sewers, landscaping, etc) yields several hundred million dollars. For one little town.

Is California budgeting for this? Are the insurance companies? Is Washington? All probably say they are, but only the insurance companies actually are – and even they are probably under-reserved for the past few years’ natural disasters.

This is a massive public planning failure, and yet another unfunded liability – that is, a future cost incurred but not saved for – to go alongside public pensions, government debt and multiplying environmental time bombs.

The result: A future of unpleasant surprises, in which governments are constantly saying “Oops, there’s this huge new expense that no one could have foreseen, and we’re all going to have to tighten our belts to cover it, sorry about the bad roads and closed libraries” – or – “Oops, there’s a huge unforeseen expense and we’re going to have to create a trillion new dollars to cover it, sorry about the inflation.”

But isn’t this mostly a private sector issue, between homeowner and insurance company, you ask? In many cases that’s true. But insurance companies have to make a profit, which means homeowner policy premiums have to be high enough to cover expected losses. As the latter rise, so necessarily do the former. Which means the part of our cost of living that’s devoted to insurance will soar as a direct result of California’s asleep-at-the-switch population management policy.

Are California wildfires as big an unfunded liability as the one resulting from the Right Coast’s soaring Hurricane Alley population? Probably not, because fires, even big ones, are smaller than tropical storms. Still, it could easily exceed a trillion dollars (let’s see what today’s fires end up costing) which – hitting a state that’s already overburdened with unfunded pensions and crumbling infrastructure – will probably end up being added to the federal government’s balance sheet via some kind of bail-out.

All of which makes a currency reset that much more likely in the not too distant future. Paying off this mountain of debts, promises and “guaranteed surprises” with current dollars is mathematically impossible. But after a 70% devaluation the numbers might work.

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All The Democrats’ Investigations: House Ready To “Let The Subpoenas Fly” Early Next Year

As Nancy Pelosi made abundantly clear before her party wrested control of the House on Tuesday, the Democrats will waste little time before they “let the subpoenas fly” after taking control of the House in January. So many potential investigation threads have been reported in the media, that it can be difficult to keep track. We already know that Democrats are planning to investigate Trump’s ties to his business and whether he profited off foreign dignitaries. Trump’s tax returns are expected to be targeted (Democrats on the House Ways and Means Committee could invoke an arcane Congressional rule to force the IRS to hand over Trump’s returns), and – of course – his mysterious ties with Russia. And who could forget the FBI’s handling of the expanded Kavanaugh background check, where Democrats suspect that the White House and/or Senate Republicans interceded to exclude certain key “witnesses” (none of whom are believed to have actually witnessed Kavanaugh sexually assault women). 

Schiff

Well, to this list we can add a couple more possibilities. Because in an interview with Axios’ new HBO Sunday politics show, incoming House Intelligence Committee Chairman Adam Schiff revealed that Dems are planning to extensively investiagate whether Trump’s blood feud with the US media drove him to commit potentially illegal acts. For starters, they’re planning to investigate Trump’s crackdown on the press following his White House briefing room battle with CNN’s Jim Acosta (which resulted in Acosta having his credentials revoked), his efforts to browbeat the Postmaster General into raising shipping rates on Amazon packages (in an effort to get back at the Washington Post), and any role he might have played in the DOJ’s decision to try and stop the merger of Time Warner and AT&T (Time Warner owns CNN).

Here’s Axios:

House Democrats plan to investigate whether President Trump abused White House power by targeting – and trying to punish with “instruments of state power” – The Washington Post and CNN, incoming House intelligence committee chairman Adam Schiff said in an interview for “Axios on HBO.”

Continuing with the press freedom theme, Schiff suggested that Trump’s blood feud with Amazon is grounded in his hatred of the Washington Post, and that Trump has sought to economically punish Amazon as payback for its founder and CEO, Jeff Bezos’s ownership of the Post.

“This appears to be an effort by the president to use the instruments of state power to punish Jeff Bezos and The Washington Post,” Schiff said. Jeff Bezos is founder, chairman and CEO of Amazon, and owns the Washington Post.

And then there’s CNN:

2) Schiff said Congress also need to examine whether Trump attempted to block AT&T’s merger with Time Warner as payback to CNN.

“We don’t know, for example, whether the effort to hold up the merger of the parent of CNN was a concern over antitrust, or whether this was an effort merely to punish CNN,” Schiff said.

While wildfires burn through his home state, Schiff has apparently been busy this weekend rushing from one interview to the next. In a Sunday appearance on “Meet the Press,” Schiff elaborated on the Democrats’ plans for “holding Trump accountable” after offering a token criticism about Trump’s “callous” tweet about the California wildfires…

“Trump…is only the president, I think in his view, of those who voted for him. The rest, he could care less.”

…Schiff immediately moved on to discussing several of the many threads that the House Intel Committee will be pursuing in its quest to hold Trump accountable for whatever the scandal du jour is…This week, it’s possible conflicts involving Trump’s acting attorney general, Matthew Whitaker.

Whitaker isn’t legally required to recuse himself from the Russia probe (though there might be broader constitutional issues surrounding his appointment that Schiff, for whatever reason, didn’t want to get into), but the acting attorney general would do well to remember that the Democrats are planning to stick to him like white on rice…and that any slip-up – however minor – will immediately face searing public scrutiny.

“If he doesn’t recuse himself if he has any involvement whatsoever in this Russia probe…we are going to find out whether he made commitments to the president about the probe, whether he is serving as a back channel to the president or his lawyers about the probe, whether he’s doing anything to interfere with the probe…Mr. Whitaker needs to understand that he will be called to answer and that any role that he plays will be exposed to the public.”

Moving away from the Democratic investigations for a second, Chuck Todd pointed out that the popularity of the Mueller probe has waned over the last year (as we’ve pointed out, opinion polling shows that even Democrats no longer care about Russia), and asked Schiff for his take on what’s driving this trend. Schiff’s explanation? Because Mueller has been in a blackout period for the last two months (though public confidence in Mueller’s probe had been in decline long before the pre-election blackout period began).

“Around the time that he produces indictments and more he produces convictions…support for his probe goes up. When he issues his report or if there are further indictments, you will see public confidence in his work again rise.”

All of this contributes to the growing body of evidence that President Trump had a point when he complained about “election fatigue” earlier this week. With that in mind, Todd asked, how are the Democrats planning to prioritize their investigations? Schiff assured him that the Democrats’ policy objectives won’t be buried by a flurry of investigations.

But while this sounds like a sensible strategy on its face, there are reasons to doubt Schiff’s intentions. Because Democrats would like the public to believe that it’s to their benefit to leave no stone unturned while investigating Trump and his administration. But in one of his last comments before the end of the interview, Schiff might have inadvertently exposed his party’s ulterior motive. Investigations, Schiff said, are “sexy.” While health-care policy…not so much.

“Let’s face it: the investigations are sexy, they’re interesting…the legislative process is less so, but nonetheless important to the American people. We are going to need to ruthlessly prioritize on the Intel Committee…and we are doing that now.”

The interview with Schiff begins at the 35-minute mark:

While Schiff, due to his leadership of the House Intel Committee, will likely become Trump’s chief anagonist after the new year, he wasn’t the only Democrat who was making the rounds on the Sunday shows to discuss the many avenues that Democrats are planning to investigate after they take power.

Jerry Nadler said during an appearance on “This Week” that the Judiciary Committee, which he will lead, intends to pursue suspicions that the White House intervened to tamper with the Kavanaugh probe.

Meanwhile, Rep. Elijah Cummings said the House Oversight Committee plans to investigate Republicans’ plans to suppress votes…

…as well as possible violations of the emoluments clause (which prohibits taking gifts from foreign leaders).

While Democrats pursue their investigation into voter suppression, we wonder…will that include efforts to suppress votes cast by non-citizens?

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Ten Years Gone: Iraq And Afghanistan Veterans On What It All Meant

Authored by Kelley Beaucar Vlahos via The American Conservative,

A decade after the worst fighting overseas, five combat veterans put the Forever War and American civilian life into perspective

Possibly the most poignant line of the 1984 breakout hit “19” by electronic musician Paul Hardcastle was the one it deliberately drove home with synthesized drumbeat repetition: “In World War II the average age of the combat soldier was 26. In Vietnam he was nineteen…nineteen.”

When this song hit the radio airwaves, much of the Vietnam veteran cohort—those who had seen the worst fighting in that war—had been home for a little more than a decade. They were in their early 30s now—building careers, raising families, and politically active. The war’s horrors and fallout began reemerging in national headlines and sympathetic Hollywood films, along with Agent Orange and PTSD. A page had turned, too, in the national consciousness. Americans were finally beginning to separate their anger at the government from the young men who fought its war. The mantra became internalized: never again.

“Never” did not mean never, of course, and 20 years after Hardcastle’s cult hit, Washington sent more than two million American men and women into wars of choice in Afghanistan and Iraq, with the heaviest fighting occurring between 2003 and 2010. Many of those veterans are now more than a decade home—building careers, raising families, politically active. On this Veterans Day, TAC asked five of its regular writers to tell us in their words how they’ve come to terms with their own service and what they think of American society as the wars continue quietly, indefinitely, and off the national radar.

*  *  *

Daniel Sjursen, U.S. Army officer (retired), served combat tours in Baghdad (2006-07) and Kandahar (2011-12)

Then-captain Danny Sjursen (left) pausing during a patrol with his interpreter, “Ali,” in Kandahar, Afghanistan in 2011.

The 11th minute of the 11th hour of the 11th day of the 11th month, 1918. The guns fell silent along the trench lines of Northern France. Some nine million men had already died in that hopelessly absurd and unnecessary war—yet on that day, finally, an armistice was called. In the decades that followed, all the combatant nations celebrated November 11 as Armistice Day. The beauty of the old holiday was this: it celebrated peace, not war; it did not seek to glorify the fighting men per se, but to extol the merits of ending an irrational war. It was thought, back in those gloriously naive days, that perhaps the great wars were at last behind us.

Of course they weren’t. The First World War led, soon enough, to the second, and, for Americans, on to Korea, Vietnam, and the Middle East. Recognizing the obsolescence of the old holiday, in 1954, President Dwight Eisenhower changed its name to Veterans Day. Though a realist at heart, I, as a veteran of a new generation of wars, still lament the sentiment and mourn the idealism of Armistice Day—if for no reason other than that my wars, the conflicts of the 21st century, may never end.

One hundred years after the guns fell silent on the Western Front, Veterans Day has morphed into yet another vacuous opportunity for the over-adulation of millions of veterans, without the least bit of actual contemplation on the nature of the wars they’ve been asked to fight. Nowadays, every NFL Sunday is little more than an excessive display of militarism, replete with fighter jets a flying and soldiers a marching—all surrounded by a stadium sized American flag. Observing these regular martial displays, one wonders if we even need a separate holiday for veterans anymore.

Yet there remains a national cognitive dissonance about the post-9/11 wars. Americans celebrate the soldiers, but ignore the wars they fight. During the midterm elections this past Tuesday, foreign policy was hardly on the ballot. And why should it be? The media rarely dares speak the word “Afghanistan.” There is no longer conscription. Taxes aren’t even raised to pay for these failing wars.  

Ultimately, nothing is asked of the American public. Apathy is the norm for a post-2001 generation for whom “Call of Duty” video games are the closest thing to war most will ever get. And yet, disturbingly, some one percent of those young men and women born after 9/11 will enlist this coming year and inevitably fight in Afghanistan.

That war is 17 years old and running—the longest in American history, and it’s failing. So is the entire American military enterprise in the greater Middle East. All the while we’ve permanently damaged millions of our brave troopers. Some 22 veterans commit suicide each day and hundreds of thousands more suffer from physical and mental wounds. Still, it remains a dirty little secret that these wars are, and always were, unwinnable.  

The country has asked the impossible of its vets, then practically ignored them, and now implores us to briefly pause and bestow paltry honors on them. This veteran, for one, is sick of the whole vapid charade. Those who served with and under me deserve better. True citizens in an ostensible republic should be engaged in what its military does in their name.

Sure, I am grateful, in a certain sense, to be thanked for my service. But in the long lost spirit of Armistice Day, I’d like to remind the American people of one salient truth: the best way to honor veterans is to create fewer of us.

*  *  *

Dan Grazier, Captain, U.S. Marines, deployed to Fallujah, Iraq (April to October 2007) and then to Helmand Province, Afghanistan (May to September 2013)

Marine Dan Grazier

My thoughts about war have evolved a great deal over the years. I will be the first to admit that I once viewed it as a grand adventure. Such sentiments quickly fell away as I confronted its realities. I must hasten to add that my first exposure to war, commanding a tank platoon in Fallujah in the summer of 2007, was mild compared to what many others experienced. I deployed believing that I was a part of a noble and honorable effort, working within the national interest. For the first few weeks, I focused so much on just trying to keep my Marines alive that I did not take much time to reflect on the bigger picture of why we were there. It slowly dawned on me that we were really not accomplishing much and that no one could provide a satisfying explanation for our continued presence. The waste I witnessed in terms of lives and property and the disruption to normal life patterns, both Iraqi and American, highlighted the futility of the entire enterprise.

Looking back after more than a decade, it is hard to convince even myself that my platoon helped achieve any lasting contribution in a strategic sense. I do believe there are many Marines who came home uninjured because our tanks were there to protect them. For that, I am glad we went and I do not today consider our time and efforts wasted. Protecting our fellow Marines was the best thing we could have done.

War is an unfortunate part of the human condition. Wishing it away would only court disaster. For that reason, we must take the appropriate steps to prepare for it but we should also take caution not to fall prey to the law of the instrument. Just because we spend fortunes building a military doesn’t justify its use in all situations.

Arguments can be made either way as to whether or not we should have invaded any of these places in the first place. I am confident we should not have been sending more people overseas—not when I went to Iraq in 2007 or Afghanistan in 2013, and certainly not today.

*  *  *

Daniel Davis, U.S. Army officer (retired), fought in armor (1991) and military training missions (2009) in Iraq, and liaison missions (2005) and counterinsurgency ops (2011) in Afghanistan.

Daniel Davis posing with members of the Iraqi Security Force during a reconnaissance near Mosul, Northern Iraq, October 2008.

On the eve of the 2018 midterm elections, Gallup polls published a list of the top 12 issues that would be on the minds of voters as they entered the voting booth on November 6. What didn’t make the cut: ongoing wars and combat operations in Afghanistan, Pakistan, Iraq, Syria, Yemen, Somalia, Niger, and dozens of other locations in Africa. Tens of thousands of American men and women are deployed in war zones around the world, risking their lives, yet they’re virtually invisible to the American public.  

This is a tragedy that should be immediately corrected. The men and women who devote their lives to the defense of our republic should not be held in such low regard. Their lives should not be frittered away in far-flung locations across the globe by our political leaders on missions that have little (usually nothing) to do with our security.

I first saw combat at the Battle of 73 Easting in 1991 during Desert Storm. That was the war that President George H.W. Bush said finally “kicked the Vietnam War syndrome” and brought honor back to the U.S. military. We went on a mission halfway around the world, President Bush said on another occasion, “to do what is moral and just and right. And we fought hard, and—with others—we won the war. And we lifted the yoke of aggression and tyranny from a small country that many Americans had never even heard of, and we ask nothing in return. We’re coming home now proud, confident, heads high.”

At the time, that’s exactly how I felt: proud and confident. But as the years went by, I discovered how little that big war had impacted the course of events in the Middle East. A decade later, Saddam Hussein was still in power, violence still prevailed throughout the region as it had prior to our arrival, and America didn’t feel any safer. It would soon get worse.

I’ll admit, I initially bought—hook, line, and sinker—the justification for the Iraq war in 2003 that President George W. Bush laid out and Secretary of State Colin Powell infamously presented at a UN Security Council meeting. Saddam Hussein, they both said, was a menace to the region and a direct threat to U.S. security.

The rationale was soon exposed as having been fraudulent. Yet American troops would still spend eight years there, fighting a pointless war that couldn’t be won militarily (which I observed firsthand during my deployment on the Iran-Iraq border in 2009), suffering tens of thousands of casualties and hundreds of thousands of cases of post-traumatic stress disorder. Many thousands more have since taken their own lives.

My second combat deployment to Afghanistan in 2011 deepened my sense of concern. I went on numerous mounted and dismounted combat patrols throughout the country and witnessed the stark difference between what our senior uniformed and civilian leaders were telling the public and what the on-the-ground reality was. We were again fighting a war that couldn’t be won militarily, losing American lives in operations that did not increase the security of our country.

Now, three years after my retirement, I continue to lament the profound cost of routinely—and now perpetually—fighting wars that cannot be won for purposes that have nothing to do with the actual security of our country. If there are threats that necessitate the sacrifice of our sons and daughters, then the Congress and the people of this country owe them the respect of publicly supporting the war. But above all, they should not send our troops to die in pointless anonymity.

*  *  *

Gil Barndollar, infantry officer, U.S. Marines, deployed twice to Afghanistan, as a light armored reconnaissance platoon commander (2011-12) and as a combat advisor with the Georgian Army (2013-14)

Marine Gil Barndollar (left) in Afghanistan in late 2013 serving as a combat advisor with the Georgian military.

This Veterans Day, a casual observer could almost be forgiven for thinking America is at peace. Almost. Few Americans know a service member who is actually in harm’s way, the very real perils of training aside. Our shadow wars and drone strikes continue but American cavalrymen are more likely to be near Kaliningrad than Kandahar these days. 

The majority of veterans of our post-9/11 wars, however, are not Americans, and the vast majority of casualties were definitely not Americans. The Afghans and Iraqis who fought alongside us for years and even decades remain at war. Secretary of Defense James Mattis revealed last week that “the Afghan lads” suffered over 1,000 dead and wounded in August and September.

Many, probably most, American servicemen didn’t like or trust our foreign partners in the greater Middle East. They had their own cultures and their own agendas, which seldom matched ours. Insider attacks in Afghanistan continue, a depressing drip in a stalemated war. We, the overwhelming majority of us, never understood them, and we have suffered for it. As Kipling’s famous epitaph goes: “A Fool lies here who tried to hustle the East.”

These are their wars and have been since the initial shooting stopped. Most of us who went overseas to conduct nation-building-in-all-but-name were told we would only win by, with, and through the local security forces. The reality seldom matched the rhetoric, and an “Afghan face on operations” was often literally just a couple of much browner faces on a patrol. If not nameless, they were the twentieth Muhammad you’d yelled at that month. They might earn a nickname, “Birdman” or “John Wayne,” if they happened to stick around the patrol base long enough. When we left after seven months, or even 15, their war continued unabated.

Thankfully, we did get tens of thousands of interpreters out, though we have often failed to fulfill even this basic moral duty. But the soldiers and policemen remain behind, most still fighting. You won’t find them driving your Uber in Arlington or Palo Alto.

America will spend this Veterans Day as it has the last few. There will be speeches, some heartfelt, many by the numbers. Any guilt in the national subconscious will be assuaged with an avalanche of veterans’ discounts and suitable expressions of outrage at that guy from Saturday Night Live. Washington won’t get its promised jingoistic grand pageant but many cities and towns will have more subdued and genuine ceremonies.

Veterans, though, should spare a prayer for their former comrades-in-arms in Iraq, Afghanistan, and a half dozen lesser campaigns. There will be few parades for those men. Many are still being consumed by the fires we halfheartedly tend to.

*  *  *

Scott Beauchamp, U.S. Army Infantry, deployed to Baghdad (September 2006 t0 October 2007), and then in Northern Diyala Province (November 2008 to October 2009)

SPC Scott Beauchamp, United States Army.

As Americans, amnesia is in our cultural DNA. Emerson himself, the luminous sage of unfettered positivity, wrote, “No facts are to me sacred; none are profane; I simply experiment, an endless seeker, with no past at my back.”

It could be our national motto. Nothing really seems to stick to us or stand in the way of what Justice Anthony Kennedy called our right to “define our own conception of existence.” And according to this twisted logic, we should forget the ongoing war (and our experiences in Iraq) if it serves our unbounded appetite for self-creation.

We’re too busy trying to transcend the hard lessons of history, either using it as a convenient and simplified political prop or forgetting it altogether, to actually learn from it. As Vox founder and journalist Ezra Klein recently demonstrated, even those who define themselves as sensible moderate voices in a howling wilderness of ideology can’t be bothered to remember the facts of our shared biography.

But for those of us who were there, who actually served and continue to serve, these memories still bleed. We’re forced to learn the hard lessons on everyone else’s behalf. I consider it both a responsibility and gift.

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Macron Blasts Nationalism As “Betrayal Of Patriotism” While Trump Speaks With Putin

With President Trump already under fire as he attended the World War I centenary commemoration events in Paris for skipping a planned visit to Belleau Wood battlefield and cemetery due to heavy rain, French President Emmanuel Macron used the ceremony’s culmination on Sunday to issue a firm condemnation of nationalism. Amidst a steady drizzle and just feet from world leaders including Presidents Trump and Vladimir Putin, Macron emphasized a theme which he said led to the irreversible build-up of tensions that caused the outbreak of WWI. Macron said: 

“Patriotism is the exact opposite of nationalism, nationalism is a betrayal of patriotism.”

During Sunday’s events Trump and Putin are reported to have had brief face-to-face discussions after the French previously requested that no formal sideline summit take place, Reuters confirms. 

Image via Getty

The French president followed this with: “In saying ‘our interests first and who care about the others,’ we erase what a nation has that’s most precious, what makes it live, what is most important: its moral values,” according to Bloomberg. Macron called for the strengthening of international institutions like the EU and U.N. and in comments simultaneously widely interpreted as “a rebuke to present-day leaders such as Trump who shun the international order in favor of nationalist policies.”

“Let’s add up our hopes and not our fears,” Macron said. “Let’s reject the fascination for turning in on ourselves, violence, and domination.” Included among his examples were poverty, hunger, inequality, climate change, as well as general “ignorance” about global challenges. 

Throughout the weekend events pundits remarked on what they perceived as Trump’s “isolation” in contrast to Chancellor Angela Merkel frequently at Macron’s side. Just prior to landing in Paris Trump had blasted Macron on Twitter for his “very insulting” comments surrounding the idea of a “European Army” that would be independent of US influence and policy. Trump echoed during an amicable meeting with Macron at the start of the weekend’s events: “We want a strong Europe, it’s very important to us, and whichever way we can do it the best and more efficient would be something we both want,” said Trump. “We want to help Europe but it has to be fair. Right now the burden sharing has been largely on the United States.”

During Sunday’s ceremony Macron sat with Merkel on his immediate right, and Trump sat just beyond the German Chancellor, while Putin was seated to Macron and the French first lady’s left. 

Among the uncertain possibilities of the weekend’s commemoration events was whether or not Trump and Putin would meet. Russian officials had revealed that the French requested that no separate Trump-Putin meeting take place on Sunday as it would serve as a distraction. 

Following the Arc de Triomphe event Putin confirmed to RT News that “We agreed that we wouldn’t break the schedule of the host country and at their request we’re not organizing any meetings here,” and added, “But possibly we will at the G-20 or later. We’re open to dialog.”

However, the two appear to have had some level of informal dialogue as both Russian state media and Turkey’s TRT World reported: “Putin says he managed to talk to US President Donald Trump in Paris on Sunday and that his conversation with the American president was good.” 

Per RT News:

A last-minute seating change did not prevent Vladimir Putin and Donald Trump from exchanging words at the Elysee Palace lunch, the Russian president told reporters. The French hosts earlier objected to their meeting in Paris.

When asked by Russian news agencies if he had a chance to talk to Trump, Putin responded “Yes,” adding that the chat was “good.”

This is despite Putin’s spokesman saying earlier that the presidents didn’t have time to talk at the table and then said their goodbyes when leaving the Elysee Palace lunch, the final gathering event for the world leaders who arrived to mark the WWI commemoration in Paris.

Putin’s spokesperson had told reporters previously that Putin and Trump didn’t have time to talk at the table, but Putin later contradicted this with his comments. Apparently the interaction was made possible through the unexpected seating change. 

Meanwhile on a less serious note the only brief disruption or disturbance to the solemn commemoration events in Paris came in the form of a bare-breasted FEMEN protester who climbed over barricades to try to run in front of Trump’s motorcade. 

She was promptly tacked by police while Trump’s vehicle made its way along the Champs Elysees in Paris.

Concerning Trump and Putin and the possibility of future talks, perhaps the positive interaction from this weekend will indeed pave the way for a formal meeting at the G-20 summit in Buenos Aires, Argentina which will open November 30. 

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No More Vietnam Syndrome: New at Reason

U.S. foreign policy for decades proceeded in the shadow of the failure in Vietnam. Some 58,000 Americans were killed in that war. Stateside protests were fierce enough to persuade President Lyndon Johnson to sit out the ’68 election. Seven years later, after about 2 million civilian Vietnamese deaths, the U.S. finally gave up without having prevented a Communist takeover of the country.

“Vietnam syndrome” restricted our foreign conflicts, for a time, to such swift and relatively petty adventures as 1983’s post-coup invasion of Grenada (which, though it involved fewer than 8,000 U.S. troops, did kill 19 U.S. soldiers, wound 116 more, and prompt a massive majority of the U.N. General Assembly to dub the American action a “flagrant violation of international law”) and the 1989 overthrow of troublesome Panamanian leader Manuel Noriega, writes Brian Doherty.

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OPEC+ Floats 1 Million Barrel Production Cut After Oil Price Tumbles Into Bear Market

With oil prices entering a bear market last week, tumbling 21% from recent highs as it became clear that Trump will significantly water down Iran oil export sanctions by granting waivers to its 8 largest clients even as US inventory stockpiles are once again rising amid almost weekly records in US oil production, OPEC and its non-OPEC allies – which is pretty much everyone except US shale producers – are starting to sweat, and during today’s meeting in Abu Dhabi they hinted that an oil output cut to limit excess production may be coming.

Speaking to reporters, Oman’s Oil Minister Mohammed Al-Rumhy said that “a number of global producers agree they should pump less oil in 2019, and a reduction of 1 million barrels a day would be a good number” according to Bloomberg. Others echoed his sentiment, floating a range of cutbacks, however the most often cited number was a decrease in output by as much as 1 million barrels a day, roughly the amount of Iranian oil production that is expects to continue flowing thanks to the recent sanction waivers.

“I think probably there is support that right now there is too much oil in the market and stock, inventories are building up,” Al-Rumhy told reporters today in the UAE capital.

Of course, OPEC can not be seen as responding to every political whim in the White House, especially if it will result in higher gasoline prices and an angry Donald Trump, so a technical committee representing the coalition framed the need for a production cut in the context of its projections according to which the global oil surplus – which hit unprecedented levels in 2015 – will resurface in 2019 if they continue pumping at current rates, according to delegates cited by Bloomberg. Nonetheless, Saudi Arabia’s Energy Minister Khalid Al-Falih – clearly cognizant of the political risks of Riyadh being singled out as the reason for the next oil price spike – said ahead of Sunday’s meeting in Abu Dhabi between OPEC+ member that it was “too premature” to discuss cutting output.

Even so, he hinted that it was only a matter of time before the Saudis agreed, and while he hedged that OPEC+ “won’t respond to weekly oil market gyrations”, and that “it’s too early to talk about oil cuts” Al-Falih also noted that a “gradual trend of rising stockpiles is emerging” and will “cut output if persistent glut emerges.”

While Kazakhstan’s deputy energy minister, Magzum Mirzagaliev, also shared the prevailing production cut sentiment telling reporters that a production cut in 2019 by the OPEC+ producers cannot be ruled out, so far biggest OPEC+ member – Russia – was not ready to disclose its position on whether the group should reduce output further before the committee’s meeting, according to a person familiar with the matter.

One day earlier, the Saudi energy minister “agreed in a meeting in Baghdad on Saturday on joint coordination with Iraq to achieve more stability in the oil market.” Meanwhile, Iraq, OPEC’s second-largest producer after Saudi Arabia, has announced ambitious plans to keep expanding its output capacity.

Separately, the OPEC+ Joint Technical Committee, which met for talks ahead of Sunday’s meeting, announced a 104% compliance rate to its cuts deal in October, once again largely the result of Venezuela’s involuntary “banana republic” production reduction. Producers exceeded output targets in September with 111% compliance, and agreed to boost supply by restoring compliance to 100 percent.

What is ironic is that just a few weeks ago, with uncertainty over Iran’s sanctions looming, OPEC+ was scrambling to assured the world it can produce more, not less.  The International Energy Agency had called for OPEC to open the taps to ensure global demand for crude is met, with its Executive Director Fatih Birol speaking of the market entering “a red zone” if output losses from Venezuela and exports from Iran are not offset.

Funny, then, that just in the span of a few weeks, we went from a “red zone”, to a radioactive “green” one, and with producers ramping up output rapidly since May, responding to pressure from U.S. President Donald Trump and making up for supply losses from Iran and Venezuela, “now, they’re considering a U-turn.”

And sure enough, the Oman oil minister, just a month after saying the opposite now claims that “there’s too much in the market, and we’re going to go back where we were if we’re not careful.”

It’s not just the Iran wildcard: record U.S. shale output is adding to what is already an oversupplied market, complicating the challenge for OPEC and its allies which unsuccessfully tried to cripple US oil producers in 2014 by flooding the world with oil, resulting in a historic plunge in crude prices. Fast forward to today, when U.S. production rose last week to a record 11.6 million barrels a day, and stockpiles rose by 5.8 million barrels. Meanwhile, OPEC’s output in October reached the highest level since 2016, while Russia last month pumped 11.4 million barrels a day, a post-Soviet record.

And while few mention it, an even greater concern than excess supply is dropping demand, as a result of the surging dollar which has crushed demand for the USD-denominated black gold in emerging-market economies, while the trade war between the U.S. and China has sent Chinese GDP to a decade low.

What happens next? As Bloomberg suggests, if the group does decide fresh cutbacks are necessary, it would mark its second production U-turn this year. And most comically, for the world’s biggest oil exporters Saudi Arabia it would be the third time in recent years that the kingdom has delivered a supply surge only to quickly reverse it. “Comically” because on Sunday Falih said that “we won’t respond to weekly oil market gyrations” when that precisely what OPEC+ does all the time.

Furthermore, as Bloomberg’s Javier Blas demonstrates, “the last three times that Saudi Arabia has lifted oil production significantly, it had backfired:”

At the end of the day, As Reuters’ John Kemp writes, OPEC’s policy options are the same as in late 2014:

  • Cut production to try to maintain higher oil price but concede market share to U.S. shale producers
  • Maintain production and accept lower price to defend market share, curb U.S. shale output and boost consumption growth

So until OPEC decides, it is currently inbetween Stage 6 and 7 of OPEC:

  1. Despair (low prices forever?)
  2. Cautious hope (prices start to rise)
  3. Boom (prices and revenues surge)
  4. Denial (rising prices not our fault)
  5. Acceptance (we can and will boost output)
  6. Concern (volatility is unhealthy)
  7. Regret (uh oh …)

Finally, while the Saudis will face a challenge in obtaining the support of “rival-turned-partner” Russia, which has less need for high oil prices, in cutting production, the biggest risk will be antagonizing Trump, who has repeatedly accused the group of inflating prices, and who – already contemplating Saudi sanctions and halting the refueling of its fighter jets in Yemen – will likely see any Saudi act resulting in higher oil prices as a provocation and demand another pound of flesh from the embattled middle eastern kingdom.

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The Wild Rise of Lyndon LaRouche: New at Reason

Paul Krassner reviews the new book Operation Chaos by Matthew Sweet in the latest issue of Reason. A snippet:

In March 1981, I delivered a comedy routine cum keynote address at a convention of Yippies. I asked the audience a rhetorical question: “How would you like to be a Secret Service agent guarding Ronald Reagan, knowing that his vice president, George Bush, is the former head of the CIA?” Satire would soon be outdistanced by reality: At the end of the month, John Hinckley shot the president, hoping to impress the actress Jodie Foster and take her bowling.

On April 2, the Los Angeles Herald-Examiner quoted a dispatch from the New Solidarity International Press Service, an outfit run by followers of the unlovable conspiracy theorist Lyndon LaRouche. “A group of terrorists and drug traffickers linked to Playboy magazine,” it said, “met in New York City’s Greenwich Village area and publicly discussed an assassination of President Ronald Reagan and Vice-President George Bush. The meeting, convened by the Yippie organization, featured former Playboy editor Paul Krassner and numerous individuals associated with High Timesmagazine, Hustler magazine and the Chicago Sun-Times.”

I was scheduled to perform stand-up at Budd Friedman’s Improvisation Comedy Club in Hollywood the next month, and Friedman had asked me to try to get some advance publicity. “Paul,” he told me after the report appeared, “that’s not exactly what I meant.”

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European Central Bank In Panic Mode As Economy Stalls

Authored by Andrew Moran via LibertyNation.com,

The eurozone could not borrow from the momentum of the U.S. economy in the third quarter as economic growth slumped to a tepid 0.2%, the slowest rate in more than four years.

With the 19-nation currency bloc beginning to stagnate, and the heavyweights failing to post significant gains, Brussels is in panic mode, likely leaning on the European Central Bank (ECB) for further stimulus.

Economists originally anticipated growth of 0.4%. But global trade woes, tumbling business confidence, Italian distress, and the gradual dissipation of an accommodative monetary policy all contributed to the poor numbers in the July-September period.

Italy fell into stagnation, failing to record any growth. Rome has been contending with a debt crisis, sending the yield (interest rates) on government bond prices higher. Officials are embroiled in a contentious battle with the EU because their borrowing plans violate the trade bloc’s rules. There is now talk of a Keynesian-style fiscal stimulus to rev up the national economy.

France, which endured a terrible first half, reported a 0.4% increase, lower than the market forecast of 0.5%. The economy gained on surging business investment, household consumption, and net trade. While the figures are commendable, French Finance Minister Bruno Le Maire did not help matters when he suggested that the eurozone is not prepared to contain a new financial crisis, adding that “it is in no one’s interest that Italy be in difficulty.”

Germany, the economic engine of the eurozone, will not publish its Q3 numbers until mid-November. But the Bundesbank has warned that growth might have flat-lined in the previous quarter. Researchers do predict a recovery for Berlin in the final quarter of 2018, driven by a resurgence in the automobile sector and falling unemployment.

The data sent the euro plunging to an intraday low against the greenback.

What Happened?

There were some bullish spots in the Eurostat report, but it was primarily bearish. What happened?

The Royal Bank of Canada (RBC) placed the blame on Germany’s lackluster manufacturing for dragging down the economy. But Chinese demand, which was up nearly 20% last year, has cooled to just 3% this year, causing many businesses to fear that the U.S.-China trade spat is creating a ripple effect.

Figures also pointed out that industrial output declined, with overseas sales taking a hit.

Some are eyeing Italy as a key scapegoat because not only is the country embroiled in a debt crisis but its manufacturing sector is about one-fifth smaller than it was in 2008. But some analysts say that these trends are affecting global financial markets more than the main street economy – for now.

With the ECB on the cusp of raising interest rates, at a time when governments plan to increase spending and slash taxes, there are concerns that debt levels will spike in the coming months. This might impact spending by consumers and companies; a European Commission survey found that business and consumer confidence dipped to its weakest level in more than a year in Q3.

ECB Out of Bullets

The Centre for Economics and Business Research (CEBR) says that the risk of a global recession by 2020 hasjumped from one-fifth in 2017 to one-third this year.

In the immediate aftermath of the last financial crisis, governments and central banks sprang into action. Politicians spent recklessly, and central banks enabled it by adopting low rates.

Since the Great Recession, Mario Draghi and the ECB have tried to spur growth through quantitative easing (QE), the act of buying government securities from the market to decrease rates and introduce new money into the economy. With record low rates and hundreds of billions of new euros in the market, Keynesians would expect a rallying economy. But growth has been subdued.

A recession is inevitable – both in the United States and in Europe. Unlike the last economic contraction, the ECB will be out of bullets, unless it wants to experience rampant inflation and a currency crisis. European nations are deeply in debt, running budget deficits and witnessing putrid results. There isn’t much left for these bloc members to do, except employ pro-market measures, like rolling back aggressive spending efforts, paying off the debt, and cutting taxes.

Draghi and Co. have only exacerbated the eurozone’s problems by adopting easy-money, inflationary policies. Now that it has fired all the big guns to barely achieve 2% quarterly growth, the ECB is out of bullets, unable to do anything more. Governments can only raise the white flag of surrender and propose their own secession from the currency bloc. To save yourself from drowning on this sinking ship, an exit from the eurozone may be the only reasonable solution.

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French Authorities Seize Ryanair Plane On Runway Over Unpaid Bills, 147 Passengers Kicked Off

A Ryanair plane scheduled to fly to London was seized by French authorities on Thursday over the low-cost airline’s failure to pay local authorities €525,000 euros (US$595,000) in subsidies, reports the Daily Mail

Photo: Björn Van Der Velpen

The dispute arose after French subsidies paid to Ryanair between 2008 and 2009 in exchange for providing flights between Angouleme and London were deemed illegal. The airline had paid approximately half of the subsidies, leaving an outstanding balance.

The French civil aviation authority halted the departing Boeing 737, removing 149 London-bound passengers before seizing the plane. The de-planed travelers had to wait five hours before being able to resume transportation from the Bordeaux-Merignac airport on another Ryanair plane. 

“This measure was taken as a last resort by the French authorities after several reminders and attempts to recuperate the money failed,” said the DGAC civil aviation body, adding “By this action, the government reaffirms its intention to guarantee the conditions of fair competition between airlines and between airports.” 

Until Ryanair satisfies the outstanding balance, the plane “will remain immobilized,” said one official, adding that it was “regrettable” that the passengers on board the plane had to wait five hours. 

Regional newspaper Charente Libre reported that the airline owes the regional authority 525,000 euros ($595,000), the paper said on its website.

French airport official Didier Villat told Sud Ouest newspaper: ‘To my knowledge it’s the first time a Ryanair plane has been seized in this way.

Just because we manage a little airport in Charente it doesn’t mean we are not going to defend ourselves.’

A spokesman for the DGAC, France’s aviation authority, said: ‘By this act the French state reaffirms its desire to guarantee the conditions of fair competition between airlines and its airports. –Daily Mail

Ryanair’s fleet is comprised primarily of Boeing 737-800 aircraft, which sell for more than $90 million each. 

The airline came under investigation by EU anti-trust authorities in October, after it emerged that it may have unfairly benefitted from measures at a German airport which give the Irish low-cost carrier a disproportionate advantage over competitors. 

Meanwhile, ministers from five European governments last week warned Ryanair that they may find themselves in legal trouble if it fails to address national labor laws following a series of strikes across the continent. Compounding the airline’s woes is a battle with Italian regulators who ordered the airline to stop charging passengers for carry-on bags. 

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