Month: February 2018

Doubleline CEO Jeffrey Gundlach echoed earlier calls by analysts from SocGen and Morgan Stanley, saying that the “low rate-low volatility” market environment went on for so long that now “the unwind will be turbulent and not over in a couple of days.” In other words, don’t buy the dip.

Low yields/low vol paradigm went on so long and became so heavily invested in that now the unwind will be turbulent and not just a few days.

— Jeffrey Gundlach (@TruthGundlach) February 7, 2018

Speaking to Reuters’ Jennifer Ablan, Gundlach also said that bitcoin was the “lead horse” of risk assets and its recent plunge has had a cascading effect on other risk assets. Incidentally, last Friday we highlighted the oddly close correlation between bitcoin (inverted) and the VIX, when we asked if the VIX “tail” is wagging the Bitcoin “dog.” 

Two weeks ago, Deutsche Bank’s Masao Muraki also discussed this peculiar relationship:

First, implied volatility. Implied volatility is an index calculated from the price of a derivative product (options) of an underlying marketable security. However, we now have a “tail wagging the dog” situation where the price of the derivative product is feeding back into the price of the underling marketable security.

Next, cryptocurrencies. Cryptocurrencies are closely watched by retail investors, affecting their risk preferences for stocks and other risk assets. Although institutional investors recognize that stocks and other asset valuations may have entered bubble territory (US equities’ average P/E is around 20x), they cannot help but continue their risk-taking. Now, a growing number of institutional investors are watching cryptocurrencies as the frontier of risk-taking to evaluate the sustainability of asset prices. The result is that institutional investors, who are supposed to value assets using their sophisticated financial literacy, analysis, and information-gathering strengths, are actually seeking feedback about the market from cryptocurrency prices (which are mainly formed by retail investors).  

Which explains why, unwittingly, bitcoin may have become a systematically important asset class: if it were to crash too far, too fast, the reverse feedback loops would cascade into traditional risk assets, although the cause-effect direction is still up for debate.

One thing that is clear, however, is that the recent dramatic plunge in bitcoin roughly coincided with the biggest point drop in the DJIA and the biggest jump in the VIX on record. It is this coincidence that is clearly troubling to Gundlach.

In addition to his discussion of bitcoin and volatility, Gundlach also touched on what many agree was the proximal catalyst for last Friday’s market plunge which in turn triggered this week’s vol eruption: “Clearly, the market gets shaky when the 10-year hits 2.85 percent,” Gundlach told Reuters.  “Just look at this week, and today. Makes one consider what could be coming if 10s push over 3 and 30s (30-year Treasury bond) over 3.22 percent.”

During his January webcast, Gundlach correctly predicted that if the 10-year U.S. Treasury note yield went above 2.63%, U.S. stock investors would be spooked. The 10-year yield is currently trading around 2.84%, and its spike today on the heels of the “deficit-busting” Senate agreement which would lift spending caps by $300 billion above current levels, sent the markets into the red after an impressive morning rally.

In little comfort for equity bulls, Gundlach said it is “hard to love bonds at even a 3 percent” yield. “Rising interest rates are a problem and the U.S. is in debt and there is massive bond supply.”

Well, if the Senate passes its bipartisan spending deal, which has been blessed by Trump, it is virtually certain that the 10-year is going above 3%, and stocks will not like it, prompting more angry outbursts from Trump who wants both the spending deal and daily all time highs in the S&P, which – absent a new Golden Age for US economic productivity – looks virtually impossible.

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Overnight Tuesday Israel again launched a major attack on Syrian government locations near Damascus in what seems a monthly exercise that many analysts now openly recognize as an Israeli attempt to provoke war with Syria. For at least the third time since the start of the 7-year long war in Syria, Israeli jets attacked a site just outside of Syria’s capital city called Jamraya – believed to be a military research facility related to chemical weapons. 

Jamraya is an area well-known for its multiple government facilities, including a branch of Syria’s Scientific Studies and Research Center, which was the site of two prior attacks by Israel – one in 2013 and another in early December 2017 – but also has sprawling civilian residential areas. It lies on the opposite side of Mt. Qasioun, against which the Damascus city center is nestled.

Like with other recent attacks, Israeli jets are reported to have fired from over Lebanon, with a Syrian military media statement saying that its air defenses intercepted most of the inbound missiles, though no further details were given. Unconfirmed international media reports, however, indicate one or more of the Israeli missiles may have impacted parts of the Syrian government facility during the strikes which occurred at 03:42 am local time Wednesday morning.

Israeli F-15 fighter jet takes off in Negev desert. Image source: AFP via Middle East Eye

In statement picked up by Reuters the Syrian military said, “The general command of the armed forces holds Israel fully responsible for the dangerous consequences of its repeated, aggressive and uncalculated adventures.”

And similar to a September 2017 strike on a military research facility in Masyaf – also said to be a chemical weapons development site, it appears Israel has timed the assault closely on the heels of recent allegations of repeat chemical attacks carried out by the Syrian government against al-Qaeda held pockets of the country – namely Idlib and East Ghouta. Though admitting “no evidence” US Defense Secretary Jim Mattis suggested last week that the Syrian Army may be using sarin gas while also alleging multiple smaller scale chlorine attacks. 

Israel, however, has lately been quick to justify what Damascus has condemned as unprovoked “acts of aggression” in humanitarian terms as retribution for supposed gas attacks. Israel has long been on record as condemning Iran’s presence in the region, however, Israeli leaders lately appear increasingly reliant on chemical attack claims as rationale for bombing Syrian government sites. 

Overhead view of the Jamraya research facility which the Israeli’s targeted. Image via Times of Israel.

Israeli Prime Minister Benjamin Netanyahu recently stated of Iran’s presence in Syria, “We will not allow a regime hell bent on the annihilation of the Jewish state to acquire nuclear weapons. We will not allow that regime to entrench itself militarily in Syria, as it seeks to do, for the express purpose of eradicating our state.” 

Meanwhile, the Israeli Air Force has acknowledged striking targets inside Syria at least 100 times over the past few years of the conflict. Syria has frequently taken its case before the U.N., calling for official condemnation of the unprovoked attacks, but has been just as frequently rebuffed. 

In its pursuit of regime change in Syria, Israel has given covert support to al-Qaeda linked groups in Syria’s south, which has reportedly involved weapons transfers and treatment of wounded jihadists in Israeli hospitals, the latter which was widely promoted in photo ops involving Netanyahu himself. As even former Acting Director of the CIA Michael Morell once directly told the Israeli public, Israel’s “dangerous game” in Syria consists in getting in bed with al-Qaeda in order to fight Shia Iran.

This latest attack near Damascus is the latest in what has developed into an open state of war between Israel, Syria, and Syria’s Iranian allied forces. 

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As more details emerged about today’s bipartisan Senate budget deal, which will lift spending caps by $300 billion above the current limit and which prompted today’s sharp Treasury selloff, it was revealed that the agreement would suspend the federal debt ceiling through March 1, 2019.

This, together with the generous spending terms which are sure to blow out the US budget deficit even more than recent troubling forecasts such as those from Goldman, which recently forecast US debt issuance would more than double in 2018, rising from $488bn in 2017 to $1,030 billion…

… prompted a revolt among GOP conservatives against the massive bipartisan deal which in addition to raising the debt ceiling also busts spending caps, who complained that the GOP could no longer lay claim to being the party of fiscal responsibility.

“I’m not only a ‘no.’ I’m a ‘hell no,'” snapped Rep. Mo Brooks (R-Ala.), one of many members of the conservative Freedom Caucus who left a closed-door meeting of Republicans saying they would vote against the deal.

According to The Hill, one of the Freedom Caucus leader, Rep. Dave Brat (R-Va.), called the budget “a Christmas tree on steroids.”

“This spending proposal is disgusting and reckless — the biggest spending increase since 2009,” conservative Rep. Justin Amash Mich.) tweeted after the meeting. “I urge every American to speak out against this fiscal insanity.”

But the focal issue appears to be the debt hike, which is giving conservatives “heartburn,” said Rep. Dennis Ross (R-Fla.), a member of the GOP vote-counting team.

The swift backlash from fiscal hawks means that Speaker Paul Ryan (R-Wis.) and his leadership team will need dozens of Democratic votes to help get the caps-and-funding deal through the lower chamber to avert a government shutdown set for midnight Friday. At the same time, some Republicans predicted a majority of the majority would back the package.

Opinions were split on the chance of the budget’s passage: Former Republican Study Committee (RSC) Chairman Rep. Bill Flores (R-Texas), who said he will probably support the agreement, estimated that about two-thirds of the lawmakers who spoke at the microphones during the closed-door meeting actually voiced support. Meanwhile, Rep. Mark Meadows (R-N.C.), the current Freedom Caucus chairman, predicted that the budget deal will get support from a majority of the majority, but not enough to pass without Democratic votes.

It’s unclear how many Democrats will support the plan without concessions from Ryan, given immigration demands from House Minority Leader Nancy Pelosi who on Wednesday evening concluded an 8 hour filibuster on “dreamer” immigrants.

BREAKING: House Minority Leader Nancy Pelosi ends 8-hour speech on ‘dreamer’ immigrants.

— The Associated Press (@AP) February 7, 2018

As reported earlier, just as Senate leaders announced their bipartisan agreement, Pelosi was on the floor threatening to oppose the emerging budget deal without a commitment to consider legislation in the House to protect  “Dreamers.”

At the same time, there are a lot of other items in the package that are attractive to Democrats, including money for opioids, disaster aid, more Children’s Health Insurance Program funding, community health center funding and the non-defense spending boost.

“We would need votes coming from both ways,” said Rep. Chris Collins (R-N.Y.). “Pelosi I guess won’t vote for it, but … I do think we will have a number of Democrats that would break.”

Ironically, it’s also possible more Republicans will back the legislation given opposition from Pelosi. GOP Rep. Mark Walker, current RSC chairman, acknowledged in a tweet that the deal is “a struggle for any one with fiscal concerns,” but said he was more inclined to support it “the longer Nancy Pelosi bloviates on the House Floor.”

* * *

As described earlier, the deal between Senate leaders Mitch McConnell and Chuck Schumer calls for raising the debt ceiling through March 2019 and busting budget caps imposed by the 2011 Budget Control Act. It would boost funding for the Pentagon and domestic programs by about $300 billion over current levels over the next two fiscal years, but lawmakers said that only about $100 billion of that would be offset.

The Bipartisan Budget Act also calls for an additional four years of funding for a popular children’s health program; $90 billion in additional disaster aid for hurricane-ravaged Florida, Puerto Rico and Texas; billions more to fight the opioid epidemic and funding for community health centers that serve the poor and uninsured.

In short, a debt tsunami.

Many fiscal hawks who were complaining the loudest Tuesday were among those lawmakers who rode an anti-spending, anti-debt Tea Party wave to Washington during the 2010 and 2012 cycles.

Rep. Scott Perry (R-Pa.) described the atmosphere inside the GOP conference room as “tense,” while Rep. Louie Gohmert (R-Texas) said it was “kind of depressing” to think Republicans could be responsible for adding billions of dollars to the deficit when they control all the levers of power in Washington.

“It’s too much money,” Perry said.

Rep. Matt Gaetz (R-Fla.) quipped that fiscal hawks might now be an “endangered species.” Meadows and Reps. Jim Jordan (R-Ohio) and Warren Davidson (R-Ohio) were among the members who stood up during the conference meeting to vent their frustration, lawmakers in the room said.

Retiring Banking Committee Chairman Jeb Hensarling (R-Texas), a close Ryan friend, also railed against lifting the debt ceiling, sources said.

Jordan, a former Freedom Caucus chairman, said earlier in the day that he was disappointed by the tentative deal and expressed surprise that Ryan — who has staked his political career on being a fiscal hawk — would go along with the proposal.

“It’s a terrible deal,” Jordan said. “I never thought Speaker Ryan would be supportive of this … I just never thought the Speaker would go here with these high numbers.”

Speaking to reporters after the meeting, Brooks slammed the deal as a “debt junkie’s dream.”

“I don’t know if we have enough votes amongst the members to stop this legislation,” the outspoken Alabama conservative said. “All I know is that unfortunately those who vote for this bill are betraying our country’s future and they are selling out our kids and our grandkids.

Brooke went on: “I am baffled why the Republican Party has turned into such a big spending party. It is one thing to spend money; it is another thing to spend money you don’t have. No American family can operate that way; no American business can operate that way, and it is folly to believe that the United States of America can operate that way.”

Some defense hawks were also upset over the proposal because of the inclusion of the debt ceiling. Rep. Bradley Byrne (R-Ala.), a member of the House Armed Services Committee, said he was prepared to swallow the spending boost for domestic programs in exchange for the military bulk-up, but he was thrown off by raising the debt ceiling as part of the deal.

Part of Ryan’s pitch to the conference, according to lawmakers who attended, was that the budget deal not only delivers a long-sought-after spending boost for the military, but it also clears the way for an honest debate over immigration if lawmakers don’t have the debt ceiling, the threat of government shutdown and other unresolved issues looming over their heads.

Trump picked up on the defense angle in a tweet on Wednesday afternoon, saying that “the Budget Agreement today is so important for our great Military. It ends the dangerous sequester and gives Secretary Mattis what he needs to keep America Great. Republicans and Democrats must support our troops and support this Bill!”

The Budget Agreement today is so important for our great Military. It ends the dangerous sequester and gives Secretary Mattis what he needs to keep America Great. Republicans and Democrats must support our troops and support this Bill!

— Donald J. Trump (@realDonaldTrump) February 7, 2018

The irony here is that just on Wednesday morning, Trump was also complaining on Twitter that “good economic news” now make the market go down; what Trump was really complaining about was the rise in the debt yields – an indicator of an overheating economy spurred in part by his fiscal reform – which at or above 2.85% are now officially hurting stocks and other risk assets. To be sure, the Budget agreement will achieve one thing – lead to a surge in US debt issuance, and – by implication – even higher yields, leading to an even steeper drop in the market.

Eventually Trump will have to choose: a budget deal including sharply higher yields and a slump in the stock market, or keep the equity party going and risk a government shutdown every few weeks. For now, he has picked the former, even is his earlier tweet indicates he doesn’t fully understand it.

 

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As originally written at RT, outspoken Aussie economist Steve Keen points out that everyone who’s asking “why did the stock market crash Monday?” is asking the wrong question; the real question, Keen exclaims, is “why did it take so long for this crash to happen?”

The crash itself was significant – Donald Trump’s favorite index, the Dow Jones Industrial (DJIA) fell 4.6 percent in one day. This is about four times the standard range of the index – and so according to conventional economics, it should almost never happen.

Of course, mainstream economists are wildly wrong about this, as they have been about almost everything else for some time now. In fact, a four percent fall in the market is unusual, but far from rare: there are well over 100 days in the last century that the Dow Jones tumbled by this much.

Crashes this big tend to happen when the market is massively overvalued, and on that front this crash is no different.

It’s like a long-overdue earthquake. Though everyone from Donald Trump down (or should that be “up”?) had regarded Monday’s level and the previous day’s tranquillity as normal, these were in fact the truly unprecedented events. In particular, the ratio of stock prices to corporate earnings is almost higher than it has ever been.

More To Come?

There is only one time that it’s been higher: during the DotCom Bubble, when Robert Shiller’s “cyclically adjusted price to earnings” ratio hit the all-time record of 44 to one. That means that the average price of a share on the S&P500 was 44 times the average earnings per share over the previous 10 years (Shiller uses this long time-lag to minimize the effect of Ponzi Scheme firms like Enron).

The S&P500 fell more than 11 percent that day, so Monday’s fall is minor by comparison. And the market remains seriously overvalued: even if shares fell by 50 percent from today’s level, they’d still be twice as expensive as they have been, on average, for the last 140 years.

After the 2000 crash, standard market dynamics led to stocks falling by 50 percent over the following two years, until the rise of the Subprime Bubble pushed them up about 25 percent (from 22 times earnings to 28 times). Then the Subprime Bubble burst in 2007, and shares fell another 50 percent, from 28 times earnings to 14 times.

This was when central banks thought The End of the World Is Nigh, and that they’d be blamed for it. But in fact, when the market bottomed in early 2009, it was only just below the pre-1990 average of 14.5 times earnings.

Safe Havens

That valuation level, before central banks (staffed and run by people with PhDs in mainstream economics) decided that they knew how to manage capitalism, is where the market really should be. It implies a dividend yield of about six percent in real terms, which is about twice what you used to get on a safe asset like government bonds—which are safe, not because the governments and the politicians and the bureaucrats that run them are saints, but because a government issuing bonds in its own currency can always pay whatever interest level it promises. There’s no risk that it can’t pay, and it can’t go bankrupt, whereas a company might not pay dividends, and it can go bankrupt.

Now shares are trading at a valuation that implies a three percent return, as if they’re as safe as government bonds issued by a government which owns the bank that pays interest on those bonds. That’s nonsense.

And it’s a nonsense for which, ironically, central banks are responsible. The smooth rise in stock market prices which led to the levels that preceded Monday’s crash began when central banks decided to rescue the economy by “Quantitative Easing (QE).” They promised to do “whatever it takes” to drive shares up from the entirely reasonable values they reached in late 2009, and did so by buying huge amounts of government bonds back from private banks and other financial institutions (pension funds, insurance companies, etc.). In the USA’s case, this amounted to $1 trillion per year—equal to about seven percent of America’s annual output of goods and services (GDP or “gross domestic product”). The Bank of England brought about £200 billion worth, which was an even larger percentage of GDP.

With central banks buying that volume of bonds, private financial institutions found themselves awash with money, and spent it buying other assets to get yields – which meant that QE drove up share prices as banks, pension funds and the like bought them with money created by QE.

Blind Oversight

So this is the first central bank-created stock market bubble in history, and central banks have just had the first stock market crash where the blame is entirely theirs.

Were this a standard, private hysteria and leverage driven bubble, we could well be facing a further 50 percent fall in the market—like what happened after the DotCom crash. This would bring shares back to the long-term average of 17 times earnings.

Instead, what I believe will happen is that central banks, having recently announced that they intend to end QE, will restart it and try to drive shares back to what think are “normal” levels, but which are at least twice what they should be.

As I said in my last book ‘Can we avoid another financial crisis?’ QE was like Faust’s pact with the Devil: once you signed the contract, you could never get out of it. They’ll turn on their infinite money printing machine, buy bonds off financial institutions once more, and give them liquidity to pour back into the markets, pushing them once more to levels that they should never rightly have reached.

This, of course, will help to make the rich richer and the poor poorer by further increasing inequality. Which is arguably the biggest social problem of the modern era. So, as well as being incompetent economists these mainstreamers are today’s Marie Antoinette. Let them eat cake, indeed.

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Whether they want it or not, American audiences might soon have a front-row seat to “Fast and Furious: Presidential Drift.”

When asked by reporters during a breakfast Wednesday organized by the Christian Science Monitor, former Obama-era Attorney General Eric Holder refused to rule out a 2020 presidential run, saying only “we’ll see.”

Former AG Eric Holder on whether he’ll run for president, at a @csmonitor breakfast this morning: “We’ll see.”

“I’m focused on NDRC at this point. I think I’ll make a decision by the end of the year about whether there’s another chapter…” #2020

— Eric Bradner (@ericbradner) February 7, 2018

 

Holder added that he’d have a decision by the end of the year, according to the Washington Examiner.

Asked if he planned to reenter politics in any form, he again replied, “I’ll see.”

As the Washington Examiner reminds us, Holder, who was attorney general from 2009-2015, was tarnished by the ATF gunwalking scandal – more widely known as operation “Fast and Furious”, after the famous film franchise.

For those who don’t remember, the ATF Arizona Field Office ran a series of sting operations between 2006 and 2011 in the Tucson and Phoenix area whereby the ATF allowed licensed firearms dealers to sell weapons to straw buyers associated with drug cartels. The plan was to track the guns, hoping they would eventually end up in the hands of Mexican drug cartel leaders. Instead, they were used in a series of crimes, including the murder of a border patrol agent.

Holder is currently serving as the head of a group created by Obama to reform redistricting practices to prevent gerrymander – an issue that’s been thrust into the spotlight since the Pennsylvania Supreme Court upheld a lower court ruling to redraw districts – an unprecedented blow against gerrymandering.

Holder had plenty to say in his speech…

The former top DOJ official also criticized former FBI Director James Comey – formerly his underling at DOJ – for criticizing Clinton during his probe into her mishandling of classified information. In a letter exonerating Clinton, Comey famously said she acted carelessly and with negligence.

Echoing comments from other Obama-era officials, Holder added that the Nunes memo could hurt intelligence agencies.

And finally, he criticized Attorney General Jeff Sessions and the Trump-era DOJ for offering “its sincerest apologies” to a conservative group in the final settlement over the IRS’s unfair targeting of conservative groups, saying that an “apology” in the Tea-Party-IRS case was “unwarranted.”

Holder’s remarks come as he’s about to embark on a tour of the nation to argue for changing House district lines. His group is focusing on 20 states, according to the Examiner.

Eric Holder’s group, backed by Barack Obama, set targets to attack gerrymandering in swing states and all-GOP states https://t.co/dy0sUAAvvc pic.twitter.com/d9Nvxse5ai

— Maggie Jordan: (@MaggieJordanACN) February 7, 2018

 

Almost immediately after Holder’s comments hit the wires, twitter users started ruthlessly mocking the wannabe candidate:

 

Holder’s future cabinet members… pic.twitter.com/cP5A78bzaP

— Doctor Crouton (@dr_crouton) February 7, 2018

 

…

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Authored by Carey Wedler via TheAntiMedia.org,

Fifteen years after the calamitous U.S. invasion of Iraq, an architect of the propaganda used to drum up support for the war is warning that it’s happening again — this time with Iran.

Lawrence Wilkerson, who was chief of staff to former Secretary of State Colin Powell, helped the then-secretary “paint a clear picture that war was the only choice” in his infamous 2003 speech to the U.N. This week, writing for the New York Times — an outlet that, at the time, parroted misleading narratives in support of the war — Wilkerson accused the Trump administration of manipulating evidence and fear-mongering in the same way the Bush administration did to cultivate public support for ousting Saddam Hussein.

In his Monday op-ed, titled “ I Helped Sell the False Choice of War Once. It’s Happening Again,” he wrote:

“As his chief of staff, I helped Secretary Powell paint a clear picture that war was the only choice, that when ‘we confront a regime that harbors ambitions for regional domination, hides weapons of mass destruction and provides haven and active support for terrorists, we are not confronting the past, we are confronting the present. And unless we act, we are confronting an even more frightening future.’”

Though the U.N. and much of the world didn’t buy it, Wilkerson says Americans did, and it amounted to the culmination of a two-year effort by the Bush administration to initiate the war, which he now condemns.

“That effort led to a war of choice with Iraq — one that resulted in catastrophic losses for the region and the United States-led coalition, and that destabilized the entire Middle East,” he wrote, going on to call out the Trump administration for pushing the United States down the same path in Iran.

“This should not be forgotten,” he urged, “since the Trump administration is using much the same playbook to create a false impression that war is the only way to address the threats posed by Iran.”

Wilkerson singled out Nikki Haley, the U.S. ambassador to the United Nations, for her recent saber-rattling against Iran. He accused her of presenting questionable evidence that “Iran was not complying with Security Council resolutions regarding its ballistic missile program and Yemen,” comparing her directly to Powell. “Just like Mr. Powell, Ms. Haley showed satellite images and other physical evidence available only to the United States intelligence community to prove her case. But the evidence fell significantly short.”

Wilkerson accused Haley’s claims about Iran of essentially mirroring Powell’s claims about Iraq, also warning that war with Iran will be very different. It is “a country of almost 80 million people whose vast strategic depth and difficult terrain make it a far greater challenge than Iraq, would be 10 to 15 times worse than the Iraq war in terms of casualties and costs,” he cautioned, still asserting that countries like China, Russia, and North Korea pose far more “formidable challenges to America” than Iran does.

The former chief of staff to Powell further criticized the Trump administration, citing its National Security Strategy, which claims:

“The longer we ignore threats from countries determined to proliferate and develop weapons of mass destruction, the worse such threats become, and the fewer defensive options we have.”

“The Bush-Cheney team could not have said it better as it contemplated invading Iraq,” Wilkerson wrote, going on to call out not just Haley and the Trump administration but also the executive branch in general, Congress, and the media.

“Though Ms. Haley’s presentation missed the mark, and no one other than the national security elite will even read the strategy, it won’t matter,” he lamented.

“We’ve seen this before: a campaign built on the politicization of intelligence and shortsighted policy decisions to make the case for war. And the American people have apparently become so accustomed to executive branch warmongering — approved almost unanimously by the Congress — that such actions are not significantly contested.”

He implicated the news media, as well, noting that outlets recently “failed to refute false narratives” from the Trump administration that Iran worked with Al-Qaeda to undermine the U.S. (never forget the CIA’s overseas meddling helped lay the foundation for Al-Qaeda in the first place, and its policy of arming extremists in Syria also ended up empowering the terror group). He compared this false conflation with Dick Cheney’s attempts to link Saddam Hussein to Al-Qaeda during the Bush years.

Nevertheless, Wilkerson wrote, “[t]oday, the analysts claiming close ties between Al Qaeda and Iran come from the Foundation for Defense of Democracies, which vehemently opposes the Iran nuclear deal and unabashedly calls for regime change in Iran.”

He went on to list the variety of ways the Trump administration is drumming up unfounded support for war against Iran:

“We should include the president’s decertification ultimatum in January that Congress must ‘fix’ the Iran nuclear deal, despite the reality of Iran’s compliance; the White House’s pressure on the intelligence community to cook up evidence of Iran’s noncompliance; and the administration’s choosing to view the recent protests in Iran as the beginning of regime change. Like the Bush administration before, these seemingly disconnected events serve to create a narrative in which war with Iran is the only viable policy.”

Considering Iran has long been a crown jewel in the U.S. hegemonic efforts, it should be no surprise the Trump administration isn’t budging on its plans to intervene. Wilkerson, however, knows far better than most the dangers of pushing unsubstantiated claims to advocate war.

He warned:

“As I look back at our lock-step march toward war with Iraq, I realize that it didn’t seem to matter to us that we used shoddy or cherry-picked intelligence; that it was unrealistic to argue that the war would ‘pay for itself,’ rather than cost trillions of dollars; that we might be hopelessly naïve in thinking that the war would lead to democracy instead of pushing the region into a downward spiral.”

*  *  *
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The Lead Inspector General has released a report to the United States Congress on Operation Inherent Resolve (OIR), the overseas contingency operation (OCO) to combat ISIS. The report covers the status of foreign operations from the period of Oct. 01, 2017, to Dec. 31, 2017.

According to the bombshell audit, the Department of State (DoS) finally acknowledged that “U.S.-provided military equipment” made its way into the hands of “of non-authorized end-users.”

The audit specified as many as nine M1 Abrams main battle tanks worth just over $80 million in inflation-adjusted dollars provided to Iraq’s military for the fight against the Islamic State (IS) ended up in the hands of Iranian-backed terrorist groups. The audit details that Popular Mobilization Forces (PMF) obtained the tanks, which ultimately were seized by ISIS after the fall of Mosul and the second battle of Tikrit.

This quarter, the Department of State (DoS) acknowledged that some U.S.-provided military equipment sent to support the mission, including as many as nine M1 Abrams tanks, had fallen into the hands of Iranian-backed militias that fought against ISIS in Iraq. The DoS pressed the Iraqi government to prioritize the return of defense articles provided by the United States as designated in the sale agreements.  

Further, the audit highlights that the DoS and Department of Defense (DoD) have many “challenges” when it comes to accountability of arms and equipment transferred to the Iraqi Army, which has ended up in the hands of terrorist organizations.

The challenges for the DoS and DoD to account for the whereabouts of arms and equipment transferred to the ISF have grown since the fight to drive ISIS from Iraq.248 During the past quarter, the DoS reported that it continued to stress to the Iraqi government that it had an obligation to maintain U.S.-origin equipment under the operational control of the end-user designated in the sale agreement. Further, the DoS pressed Iraq to act as quickly as possible to return these articles to their intended recipients.  

The audit’s findings add validity to a news report by Baghdad-based al-Ghad news agency, which said American defense company General Dynamics, producer of Abrams tanks, had suspended maintenance support for 160 of its tanks in December amid allegations that Iraqi Security Forces (ISF) broke an agreement on the terms of use.

“The US tank company [General Dynamics] withdrew from its base in Baghdad’s al-Muthanna airport after finding out that Iraq violated the terms of the contract which only authorized the Iraqi army to use the US provided tanks,” the report stated.

According to Kurdistan 24, General Dynamics removed its staff from Iraq once it learned that the Iraqi Army gave Abrams tanks to illegitimate armed groups.

According to the report, the US company had previously informed the Iraqi government about the provision of Abrams tanks to armed groups that do not belong to the Iraqi army. After the company’s compliance, the Iraqi government retrieved one of the tanks from the Hashd al-Shaabi during an anti-Islamic State (IS) operation in Anbar Province, the report added.

General Dynamics’ staff in Iraq left the country for the Christmas holidays and had not returned yet as the Iraqi government promised it would return the tank to the company’s maintenance site by the beginning of February, al-Ghad Press explained.

Al-Ghad Press also noted the company had threatened “a final withdrawal” from Iraq if it was proven that Iran, which backs the Hashd al-Shaabi, had reproduced the tank. 

If the DoS and the DoD transferred M1 Abrams tanks to Iraq’s Defense Ministry despite the understanding that it could be given to PMF or other terrorist organizations, then the DoD could have violated the Leahy Law – which prohibits the United States military industrial complex and the DoS from selling defense products to security forces guilty of abusing human rights.

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The Department of Homeland Security’s top cybersecurity official, Jeanette Manfra, has told NBC News that Russia targeted the voter registration rolls of 21 states before the 2016 presidential election, successfully penetrating systems in “an exceptionally small number” of them.

“We were able to determine that the scanning and probing of voter registration databases was coming from the Russian government.” –Jeanette Manfra

Manfra said that the list of 21 states is a “snapshot in time with the visibility that the department had at the time.” ABC reached out to five of the 21 states, including Texas and California, who said they were never attacked. 

As we reported in September when word that the 21 states were being targeted (but before DHS claimed some had been breached), California Secretary of State Alex Padilla released a statement in response to the DHS, the whole thing was just a bunch of “fake news.”  Padilla noted that after requesting additional information from DHS on the “hacks” it quickly became clear that their “conclusions were wrong” and that “California’s elections infrastructure and websites were not hacked or breached by Russian cyber actors.”

Critical Infrastructure

Former Obama DHS secretary Jeh Johnson said “2016 was a wake-up call and now it’s incumbent upon states and the Feds to do something about it before our democracy is attacked again.” In January, 2017 – weeks before Johnson left his post, he declared the nation’s electoral systems part of the nation’s federally protected “critical infrastructure,” which puts it in the same category as entities such as the power grid, communications, and emergency services. 

That said, Johnson told NBC News he is now worried that since the 2016 election a lot of states have done little to nothing “to actually harden their cybersecurity.”

Of note, individual states are ultimately responsible for the security and operation of their own voter rolls. 

Some state officials had opposed Johnson’s designation of electoral systems as critical infrastructure, viewing it a federal intrusion. Johnson said that any state officials who don’t believe the federal government should be providing help are being “naïve” and “irresponsible to the people that [they’re] supposed to serve.” –NBC

DHS’s Manfra disagrees with Johnson, stating “I would say they have all taken it seriously.” 

Many of the states complained the federal government did not provide specific threat details, saying that information was classified and state officials did not have proper clearances. Manfra told us those clearances are now being processed

Other states that NBC contacted said they were still waiting for cybersecurity help from the federal government. Manfra said there was no waiting list and that DHS will get to everyone.

Russia, Bernie and Black Activism

Adding to the Russia narrative, BuzzFeed News reports that researcher Jonathan Albright has found evidence that Russian trolls pushed pro-Bernie Sanders / anti-Hillary Clinton content on Tumblr around the time of the election.

“The evidence we’ve collected shows a highly engaged and far-reaching Tumblr propaganda-op targeting mostly teenage and twenty-something African Americans. This appears to have been part of an ongoing campaign since early 2015,” Albright, research director of the Tow Center for Digital Journalism at Columbia University, told BuzzFeed.

In many instances, Tumblr accounts featured their corresponding Twitter accounts, which were revealed by the company to be linked to the Internet Research Agency, a Russian “troll farm” that pushed misinformation on Facebook and Twitter around the time of the election. –The Hill

Several of the accounts featured names associated with black activism and BLM, such as “4mysquad,” “Blacktolive,” and “Bleepthepolice,” and pushed messages of racial empowerment and incendiary content meant to spark outrage.

4mysquad, for example, galvanized outrage when it posted a video of a police officer assaulting a black teenager, falsely claiming that the officer worked for the New York Police Department.

BuzzFeed reports that the 4mysquad accrued hundreds of thousands of followers

The accounts also pushed anti-Clinton rhetoric during the election, including a video in which Hillary Clinton called black gang members superpredators in the 1990s.

The Tumblr news echoes an October report by CNN which alleged that Russian propagandists used the popular Pokémon Go ‘outdoor scavenger hunt’ game in an effort to stoke racial tensions, sending players to areas in which police brutality had occurred. Players were then encouraged to name their Pokémon after black victims, such as Eric Garner, who died after a NYPD officer put him in a chokehold.

To be clear, CNN is claiming that Russia tried to trick Americans into taking up a traditionally liberal cause, in alignment with Black Lives Matter (BLM), to divide America through racial tension and somehow drive voters into the arms of Donald Trump. The other logical conclusion which CNN somehow overlooked, is that said propaganda would have encouraged left-wing political activism – bringing sympathetic social justice warriors to the polls – ostensibly voting for Hillary Clinton.

Via CNN: 

The campaign, titled “Don’t Shoot Us,” offers new insights into how Russian agents created a broad online ecosystem where divisive political messages were reinforced across multiple platforms, amplifying a campaign that appears to have been run from one source — the shadowy, Kremlin-linked troll farm known as the Internet Research Agency

A source familiar with the matter confirmed to CNN that the Don’t Shoot Us Facebook page was one of the 470 accounts taken down after the company determined they were linked to the IRA. CNN has separately established the links between the Facebook page and the other Don’t Shoot Us accounts.

The Don’t Shoot Us campaign — the title of which may have referenced the “Hands Up, Don’t Shoot” slogan that became popular in the wake of the shooting of Michael Brown — used these platforms to highlight incidents of alleged police brutality, with what may have been the dual goal of galvanizing African Americans to protest and encouraging other Americans to view black activism as a rising threat.

The motive…

CNN couldn’t really figure out why the Russians would take up primarily liberal social justice causes, writing “It’s unclear what the people behind the contest hoped to accomplish, though it may have been to remind people living near places where these incidents had taken place of what had happened and to upset or anger them.”

Who participated?

Nobody, apparently.

CNN has not found any evidence that any Pokémon Go users attempted to enter the contest, or whether any of the Amazon Gift Cards that were promised were ever awarded — or, indeed, whether the people who designed the contest ever had any intention of awarding the prizes.

There you have it – Russians influenced US politics by taking up liberal social justice activism in alignment with Black Lives Matter, their endgame being to stoke racial tensions and somehow, some way, influence the election in favor of Donald Trump.

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