Analysts Are Slashing Guidance Ahead Of Q3 Earnings Results

While CNBC’s Bob Pisani prevaricates on low “high” volume rally days and “the important things,” ahead of Q3 earnings and a horde of hungry commission-takers explain to a gullible public how fundamentals are strong (ignoring entirely the massive manipulation buybacks and financial engineering) and earnings will confirm the equity market’s wisdom any day now; we thought it worth a glance at the dismal evolution of earnings expectations for Q3.

 

 

Since the start of July, S&P 500 Q3 earnings expectations have collapsed from 11.0% to just 6.4% with 9 of the 10 sectors lower and Consumer Discretionary now expected to see negative growth. But… that’s probably not the important thing, right?

h/t @Not_Jim_Cramer




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Brussels Ready To Sanction France For EU Treaty-Busting Budget Plan

"What people underestimate is that what's at stake is the entire credibility of the rules," warns one EU official as The WSJ reports, is preparing to reject France’s 2015 budget, that would be the biggest test yet of new powers for Brussels that were designed to prevent a repeat of the eurozone’s sovereign-debt crisis. With the looming handover to former French FinMin Pierre Moscovici (fox, henhouse?) it appears the current European Commission will not stand for Current French FinMin Sapin's plan that would run a budget deficit of 4.3% of GDP next year (far greater than the 3% deficit it had previously promised) put France’s budget in "serious noncompliance" with the new EU rules and risking sanctions of as much as 0.2% of GDP. The credibility of Brussels' new powers threatens to be seriously undermined if big countries such as France and Italy are able to flout the new rules as "it’s not like they will try – and fail; they're actually planning not do it," another EU official said.

Germany already expressed its open hostility to both France's budget recklessness and putting a French minister in charge of EU financial planning… Germany's finance ministry exclaimed:

German Finance Minister Wolfgang Schaeuble on Tuesday rebuffed calls for Berlin to spend more to boost the euro zone economy, insisting on the need for painful structural reforms.

  • *GERMAN MINISTRY 'CERTAIN' FRANCE 'AWARE OF ITS RESPONSIBILITY'
  • *GERMAN MINISTRY SAYS EUROPE NEEDS FRANCE TO HAVE STRONG ECONOMY

Upholding the EU deficit-busting rules will now fall to Sapin's Socialist predecessor, Pierre Moscovici, an advocate of Keynesian demand-led economics, who was appointed European Commissioner for economic and monetary affairs in the new EU executive team unveiled on Wednesday.

Germany was not happy:

  • *GERMAN CDU LAWMAKER BARTHLE SAYS MOSCOVICI NOMINATION NOT A WISE DECISION

German lawmaker Norbert Barthle from Chancellor Angela Merkel’s Christian Democratic Union says appointment of Pierre Moscovici as European Union Economic and Monetary Affairs Commissioner not “a wise personnel decision.”

 

In e-mailed statement, Barthle also says:

 

“It will be interesting to see how Mr. Moscovici will deal with France’s excessive deficit”

 

“It’s now up to the commission to assess a delayed adherence to the 3% deficit limit and, where appropriate, take further steps against the country”

 

“This is where Mr. Moscovici can show that he really represents the interests of Europe”

And now, as The Wall Street Journal reports, the European Union is preparing to reject France’s 2015 budget, according to European officials, setting up a clash that would be the biggest test yet of new powers for Brussels that were designed to prevent a repeat of the eurozone’s sovereign-debt crisis.

French Finance Minister Michel Sapin said last month that his country would run a budget deficit of 4.3% of gross domestic product next year—far from the 3% deficit it had previously promised.

 

 

That could put France’s budget in “serious noncompliance” with the new EU rules, likely leading the commission to send it back to Paris for revisions, European officials said. So far, the French government has said it won’t take any extra measures beyond what it proposed in the spring, indicating it is ready to risk a public clash with Brussels.

 

 

The conflict with France could be joined by a budget fight with Italy, which has also said that it will miss agreed budget targets. Italy has more leeway because its past budgets have run lower deficits than France’s, but a senior EU official called a decision about whether to confront Italy “borderline.”

 

The credibility of Brussels’ new powers threatens to be seriously undermined if big countries such as France and Italy are able to flout the new rules – which give the European Commission the right to demand changes to proposed budgets before they are presented to national parliaments. It would signal the tough budget regime can only be imposed on the eurozone’s smaller economies, such as Greece and Portugal.

 

 

Paris and Rome argue that it makes no sense to cut budgets further in the face of their deteriorating economic outlooks. European policy makers are conscious that anti-EU sentiment in France is running high, and rejecting the budget could play into the hands of the far-right anti-EU National Front party of Marine Le Pen.

 

 

What makes France’s 2015 budget different, though, is that the budget overruns are apparent already now… “It’s not like they will try and fail; they’re actually planning not do it,” another EU official said.

*  *  *

European Dis-Union at its best…




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The “Disappointing” Impact Of Euro Devaluation On European GDP

The divergent prospects for growth, interest rates and monetary policies between the euro zone and the United States has led to a completely normal depreciation of the euro against the dollar, despite this depreciation being limited by the euro zone’s external surplus. Most observers are exuberant about this depreciation of the euro, but Natixis asks, faced with imports that the euro zone cannot do without (commodities, components manufactured outside the euro zone due to the segmentation of production processes), is it certain that it has a positive effect on euro-zone growth? Given the sensitivity of the euro zone's foreign trade (in volume terms and in terms of prices) to the euro's exchange rate, and at the historical link between the relative growth of the euro zone and the euro’s exchange rate, Natixis (devastatingly for the recovery-enthusiasts) find that the effect of a depreciation of the euro on euro-zone growth is very minor at best and, at worst, zero.

 

Via Natixis,

Normal depreciation of the euro

The outlook for growth in the euro zone is much less bright than in the United States (Chart 1, Table 1). This has led to prospects for much higher interest rates – both short- and long-term – in the United States than in the euro zone (Charts 2A and B and 3A, B and C).

Despite the euro zone’s external surplus (Chart 4A), linked to the weakness of its domestic demand (Chart 4B), this outlook for a more restrictive monetary policy in the United States points to a gradual depreciation of the euro (Charts 5A and B), curbed by the surplus in the euro zone’s current-account balance and by the role of the euro as an international reserve currency sought by central banks (Chart 6), which results in purchases of euro-denominated bonds by non-residents.

Most analysts and politicians are pleased about this prospect of a depreciation of the euro. But is it certain that a depreciation of the euro leads to more growth in the euro zone?

Euro exchange rate and euro-zone growth

So we are trying to determine whether a weaker euro leads to stronger growth in the euro zone. The doubt stems from imports that the euro zone cannot do without:

  • Commodities (Chart 7A), which represent 6 percentage points of GDP;
  • Components imported from the rest of the world due to the international segmentation of value chains (Chart 7B).

We will use two approaches:

  • Estimated elasticities of foreign trade to the exchange rate;
  • The observed historical relationship between the relative growth of the euro zone and the euro’s exchange rate.

1. Elasticity of foreign trade to the exchange rate
We estimate econometrically:

  • The elasticity of the euro zone’s exports in volume terms to the euro’s real trade-weighted exchange rate (Chart 8A);
  • The elasticity of the price of euro-zone exports to the euro’s nominal trade-weighted exchange rate (Chart 8B);
  • The elasticity of the euro zone’s imports in volume terms to the euro’s real trade-weighted exchange rate (Chart 8C);
  • The elasticity of the price of euro-zone imports to the euro’s nominal trade-weighted exchange rate (Chart 8D);

We obtain:

  • Elasticity of exports in volume terms to the real exchange rate (an appreciation is a rise in the exchange rate): -0.15;
  • Elasticity of the price of exports to the nominal exchange rate: -0.27;
  • Elasticity of imports in volume terms to the real exchange rate: +0.05;
  • Elasticity of the price of imports to the nominal exchange rate: -0.36.

*  *  *
A 10% depreciation of the euro:

  • Increases euro-zone exports by 4.2% (given the increase in their relative price);
  • Increases euro-zone imports by 3.1% (given their relative price);
  • Therefore increases the euro zone’s level of GDP by only 0.2 percentage point.

*  *  *

2. Historical relationship between the relative growth of the euro zone and the euro’s exchange rate

We look at the link between growth in the euro zone relative to the United States and to the world (Chart 9A) and the euro’s exchange rate. Chart 9B shows that growth in the euro zone relative to the United States was high in 2001 (with a weak euro) but also in 2006-2007 (with a strong euro), and then declined while the euro depreciated. Chart 9C shows that growth in the euro zone relative to the world fell from 2001 to 2003 (with a weak euro) and has since been stable. We see no link between the relative growth of the euro zone and the euro’s exchange rate.

Conclusion: Should we be thrilled about the euro’s depreciation?

The divergent prospects for growth and interest rates between the United States and the euro zone explain the euro’s depreciation despite the euro zone’s external surplus. Is the euro’s depreciation good news if we take into account the weight of the euro zone’s necessary imports? First we looked at the elasticities of euro-zone export and import volumes and prices to the exchange rate. We saw a slightly positive effect of the euro’s depreciation on real GDP in the euro zone. Next we looked at the link between euro-zone growth relative to the United States and the world and the euro’s exchange rate. It appears no such link exists.




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Why America’s Not Ready For An Ebola Outbreak (In 1 Photo)

Because nothing says “safety precautions” like rolled-up sleeves on a HazMat suit…

 

 

h/t Kirk B

*  *  *

And here is a gentleman jet-washing the puke from the pavement outside the Texas Ebola victim’s apartment building…

 




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Why Civilians Must Acknowledge the Individual Cost of War: War Letter Collector Andrew Carroll

This video was released on September 29, 2014. Here’s
the original write-up:

“We as civilians—who elect certain leaders and rally behind a
war—have an obligation to understand what we’re asking [the troops
to give up] and I hope that these letters do that,” says Andrew
Carroll, a Washington, D.C., based historian. Carroll has devoted
the past 16 years to collecting and preserving war correspondences
throughout American history.

These letters provide an intimate look into the
experiences of the men and women who have fought America’s
wars. “It’s not the president or general who’s far-removed
from the battlefield, it’s the individual who’s right there in the
trenches or in the foxholes, that’s what brings war to life,” says
Carroll.He hopes that these letters will humanize the men and
women in uniform so that “[Americans] no longer see them as just
soldiers, airman, marines, or sailors, but as somebody’s spouse or
child or parent or best friend.” 

His collection, which now contains over 100,000 letters ranging
from the Revolutionary War to the War on Terror, was recently
donated to Chapman University where it will be digitized and made
available to the public. Chapman has incorporated the letters into
their educational studies and aims to be the nation’s largest
and most preeminent archive of personal wartime correspondences.
Carroll says being a privately funded project has helped make the
experience more personal for him and for the people sending in the
letters.

“They aren’t sending in letters to some government bureaucracy.
They’re sending it to people who respond to them personally and who
read every letter. It’s very meaningful to us,” says the
historian.

The vast collection includes a letter from a young GI in Munich
who, using Hitler’s golden embossed stationary, wrote to his
parents about the horrors of Dachau he had witnessed the day
before. Another one is from a Revolutionary War soldier to his
friend, explaining the reasons why General Washington’s army must
fight for freedom. And another one was written from a young marine
in Iraq to his mom right before he was killed, thanking her for
raising him to be the man he was. The collection contains thousands
of these personal stories which serve as a somber reminder of the
horrors that war can bring to individuals and their
families. 

“I think the more we have a sense that these are actual
individuals that we’re sending off to fight, I think it’s better
for the entire country, I think it’s better for the military, it’s
better for all of us,” says Carroll. 

About 3 minutes.

Produced by Amanda Winkler. Camera by Winkler, Joshua Swain, and
Ford Fischer. 

Scroll down for downloadable versions and subscribe to Reason
TV’s YouTube
Channel
for notifications when new material goes live.

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What Will Trigger The Next Round of the Financial Crisis?

Last week we touched upon the “white elephant” in the room: that the biggest, most important bubble investors should worry about is in bonds, NOT stocks.

 

Consider the following…

 

The financial system is based on debt. US Treasuries, the benchmark for an allegedly “risk free” rate of return, is the asset against which all other assets are priced based on their relative riskiness.

 

This “risk free” rate has been falling steadily for over 25 years.

 

 

As a result of this, an entire generation of investors and money managers (anyone under the age of 55) has been investing in an era in which risk has generally gotten cheaper and cheaper.

 

This, in turn, has driven the rise in leverage in the financial system. As the risk-free rate fell, so did all other rates of return. Thus investors turned to leverage or using borrowed money to try to gain greater rates of return on their capital.

 

The ultimate example of this is the derivatives market, which is now over $700 trillion in size. This entire mess is backstopped by about $100 trillion (at most) in bonds posted as collateral.

 

This formula of ever increasing leverage works relatively well when the underlying asset backstopping a trade is rising in value (think of the housing bubble, which worked fine as long as housing prices rose). However, if the asset ever loses value, you very quickly run into trouble because you need to post more as collateral to backstop your trade. If you can’t do this easily, the margin calls start coming and you can find yourself having to unwind a massive position in a hurry.

This is how crashes occur. This is what caused 2008. And it’s what will cause the next crisis as well.

 

Despite all of the rhetoric, the world has not deleveraged in any meaningful way. The only industrialized country to deleverage since 2008 is Germany.

 

 

This is not unique to sovereign nations either. As McKinsey recently noted, there has been no meaningful deleveraging in any sector of the global economy (the best we’ve got is households and financial firms which have basically flat-lined since 2008).

 

 

In the simplest of terms, the 2008 collapse occurred because of too much leverage fueled by cheap debt. This worked fine until the assets backstopping the leveraged trades fell in value, which brought about margin calls and a selling panic.

 

The big problem however is that NO ONE got the message that leverage was a problem. Instead, everyone has become even MORE leveraged than they were in 2008. And they did this against an ever-smaller pool of quality assets (the Fed and other Central Banks’ QE programs have actually removed high grade collateral from the financial markets).

 

Thus, we now have a financial system that is even more leveraged than in 2007… backstopped by even less high quality collateral. And this time around, most industrialized sovereign nations themselves are bankrupt, meaning that when the bond bubble pops, the selling panic and liquidations will be even more extreme.

 

The next round of the crisis is coming, and it’s going to make 2008 look like a picnic.

 

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

 

You can pick up a FREE copy at:

 

http://ift.tt/1rPiWR3

 

 

Best Regards

 

Graham Summers

 

Phoenix Capital Research

 

 




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Citi Warns “The Land Of The Rising Sun Is Setting”

In the "land of the rising sun," Citi FX Technicals group warns, the sun also goes down sometimes. The present set up on the monthly and daily charts on USDJPY suggests it is time to be cautious, with real danger that we could be 'on the cusp' of a material correction lower for the first time in this 3-month rally. A move as low as 105.50 is not out of the question and that is terrible news for Japanese stocks and Abe's approval ratings.

 

Via Citi FX Technicals,

Given the magnitude and speed of the USDJPY move last month it is worth looking at the long term “log” chart for guidance. When we do, we are a little bit cautious in the near term.

Why?

Our target for the end of 2014 has been around 110.50-111.00 and the speed of the move in the last 3 months has brought us close to that range quicker than we would have expected.

There is major resistance above here on this chart from 110.34-110.66 (76.4% pullback of the 2007-2011 fall, horizontal resistance from the March-August 2008 bounce and trend line off the 2002 and 2007 peaks.)

In addition, as we have surged higher last month there is a real danger that we now see triple momentum divergence on the monthly USDJPY chart which could suggest a material correction.

Add to this the rise in “EM” jitters, “Equity market” jitters , “Newport Beach” jitters and it seems only a matter of time before we hear a crescendo of “risk off” comments- (not traditionally good for USDJPY)

(In August-October 1998… a period we are very focused on historically the 2 prongs of concern were Russian default and LTCM leverage…..history does not repeat but it often rhymes)

It seems to us that it may be a good time to exit JPY short positions and let the “dust settle” for a while”

October 2013- Jan 2014: (Q4,2013)

  • Up move in USDJPY begins in the 2nd week of the 2nd month of the quarter
  • Rally peaks on the first full trading day of the next quarter (02 January)
  • Rally is 889.5 pips over 86 days
  • Correction begins on the first full trading day of the new quarter as USDJPY posts a bearish outside day at the peak of the up move.
  • This sees the Q3 rally being corrected by 50% before USDJPY bottoms out

July 2014- Oct 2014: (Q3, 2014)

  • Up move in USDJPY begins in the 2nd week of the 2nd month of the quarter
  • Rally peaks on the first full trading day of the next quarter (01 October)
  • Rally is 902.5 pips over 83 days
  • Correction begins on the first full trading day of the new quarter as USDJPY posts a bearish outside day at the peak of the up move.
  • If we were to see the Q4 rally being corrected by 50% before USDJPY bottoms out that would suggest a move to 105.48, possibly over the next month.

This last leg up has not had yield support

Weekly chart is showing an evening star like pattern very similar to that seen as the Nikkei peak at the end of Dec 2013 (Same point that the USDJPY rally was close to an end)

The rise in implied volatility seems to have paused (3 month) 3 weeks ago.

As in 2012-2013 that rise in volatility gave a good signal of a potential break higher in USDJPY

In Feb 2013 as the move up in volatility paused USDJPY initially continued higher before we saw a quick high to low correction of 4.12%. A similar correction this time off the present trend high of 110.09 would take us to 105.55 in USDJPY (The suggested corrective target in the daily chart above comparing this move to Q4, 2013.)

We also saw the rise in implied volatility stall ahead of the 2 Jan 2014 peak in USDJPY

All this suggests that at this point the short JPY trade does not look to have a great “risk versus reward” dynamic




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The Siege Of Kobani: Obama’s Syrian Fiasco In Motion

Submitted by David Stockman via Contra Corner blog,

Another humanitarian catastrophe may be just hours away at Kobani. The latter is the Syrian Kurdish town on the border with Turkey that is now surrounded by ISIS tanks and is being pounded day after day by ISIS heavy artillery. Already this lethal phalanx, which fuses 21st century American technology and equipment with 12th century religious fanaticism, has rolled through dozens of Kurdish villages and towns in the region around Kobani, sending 180,000 refugees fleeing for their lives across the border.

Self-evidently the lightly armed Kurdish militias desperately holding out in Kobani are fighting the right enemy—-that is, the Islamic State. So why has Obama’s grand coalition not been able to relieve the siege?  Why haven’t American bombers and cruise missiles, for instance, been able to destroy the American tanks and artillery which a terrifying band of butchers has brought to bear on several hundred thousand innocent Syrian Kurds who have made this enclave their home for more than a century? Why has not NATO ally Turkey, with a 600,000 man military, 3,500 tanks and 1,000 modern aircraft and helicopters, done anything meaningful to help the imperiled Kurds?

Let’s see. The US is making perfunctory air strikes. Yet with no boots on the ground in the context of close urban combat in a city of 50,000 – a major air onslaught would result in massive civilian casualties. Although Obama already has much blood on his hands, he is apparently not ready for a Gaza-on-the-Euphrates.

So then why doesn’t Turkey put some infantry and spotters on the ground – highly trained “boots” that are literally positioned a few kilometers away on its side of the border?

Well, Turkish President Erdogan just explained his government’s reluctance quite succinctly, as reported by Bloomberg on Saturday:

For us, ISIL and the (Kurdish) PKK are the same,” Erdogan said in televised remarks today in Istanbul.

And that’s literally true because from Turkey’s vantage point the Kobani showdown is a case of terrorist-on-terrorist. The Kurdish fighters in Kobani are linked to the Kurdistan Workers’ Party or PKK. The latter has waged a separatist campaign of armed insurrection and terror inside and around Turkey for 30-years and has long been considered Turkey’s top security threat. In fact, Turkey has received untold amounts of US aid, equipment and intelligence over the years to help suppress this uprising. That’s the reason that PKK is officially classified as a “terrorist” group by the U.S. and the government in Ankara.

And, no, the Syrian and Turkish Kurds so classified as terrorists are not some black sheep cousins of the “good guy” Kurds in Erbil and northeastern Iraq that CNN parades every night as America’s heroic ally on the ground. They are all part of the greater Kurdish nation of some 30 million who inhabit southeastern Turkey, northeastern Syria and Iraq and western Iran. Taken together, these Kurdish enclaves comprise the single largest ethnic population in the Middle East that does not have its own state, and which has been a source of irredentist conflict and instability for decades.

Map showing the Kurdish inhabited areas on the borders of Iran, Iraq, Turkey, Syria and Armenia.

 

As a matter of fact, Erdogan has been pursuing a rapprochement with the Turkish Kurds for the better part of the last decade and had actually made progress in quelling the violence and initiating a political solution. Yet Washington’s two latest campaigns of “regime change” could not have been more inimical to a peaceful resolution of the region’s long-festering Kurdish problem. And, of course, the historic roots of that problem were served up by the West 100 years ago when its strip pants diplomats carved out borders that gave practically every major ethnic group their own nation, except the Kurds.

In that context, the Bush/neocon destruction of Saddam’s dictatorship in Iraq paved the way for fragmentation of the Sykes-Picot borders and the de facto partition of Iraq, including a rump Kurdish state in the northeast. Then Washington’s foolish delusion that it was spending $25 billion to train and equip an “Iraqi army” added fuel to the fire.

The so-called Iraqi army was never a national military arm of the Iraqi state because the latter had already failed owing to the onslaught of the US “liberation” and occupation. Instead, it was a glorified Shiite militia whose members had no interest in dying to protect or hold Sunni lands in the west and north. So the “Iraqi army’s” American arms, abandoned wholesale and then captured by ISIS, literally created the necessity for the Syrian Kurds to mobilize and arm themselves in self defense. Presently, another rump Kurdish state rose along much of Turkey’s 560-mile Syrian border.

The original trigger for that development had actually been Anderson Cooper’s War to liberate the Syrian people from the brutish but secular regime that ruled them in Damascus. It too set off forces of fragmentation and partition that have now come home to roost in Kobani.

Thus, after the Arab spring uprising in 2011, the US ambassador to Syria pulled the equivalent of what we now call a “Yats” or an organized campaign to overthrow the government to which he was accredited; and in short order the R2P ladies aid society in the White House (Susan Rice and Samantha Powers) made the State Department’s maneuvering to undermine Syria’s constitutionally elected government official policy, proclaiming that Bashar Assad “has to go”.

In no time, the Kurdish enclaves in Syria essentially declared their independence, and reached a modus vivendi with Damascus. Namely, they would keep Assad’s main enemy—the majority Sunni Arabs—-out of the Kurdish enclaves on the central and eastern Syrian border with Turkey in return for being left alone and exempt from visitations by the Syrian air force.

Needless to say, that looked to the Turks like collaboration with Assad – whose removal from power ranks far higher on Ankara’s priority scale than making war on ISIS. On the other hand, Turkey’s proposal to staunch the flood of Kurdish and other Syrian refugees across its border by occupying a 20 mile “buffer zone” inside Syria is seen by the Kurds as a plot against them. As Bloomberg explains,

Kurds say the plan is aimed at crushing their nascent autonomous administration, carved out during Syria’s three-year civil war as Assad’s government lost control of their part of the country. Turkey says the Syrian Kurds are collaborating with Assad and should have been fighting him.

Meanwhile, the modern-day George Washington of the Kurdish peoples, Abdullah Ocalan, who has languished in a Turkish prison on an island outside Istanbul since 1999, warns that if Turkey does not come to the aid of Kobani his negotiations with Erdogan might end and the three decade civil war which had resulted in 40,000 Turkish deaths might resume.  Yet as one expert in the region further explained to Bloomberg, coming to the aid of the Kurdish militia affiliated with the PKK would go beyond the pale for Ankara:

It’s “unthinkable” for Turkey to go beyond that and assist PKK-linked groups such as the Syrian Kurds, according to Nihat Ali Ozcan, an analyst at the Economic Policy Research Foundation in Ankara.

 

“No Turkish politician can explain to the public why the government is aiding the PKK and its affiliated groups after fighting against it for 30 years,” he said by phone.

In short, the region’s logical bulwark against ISIS – the huge, modern, lethal Turkish military – is stymied by a tide of Kurdish irredentism that Washington’s “regime change” policy has elicited all around it and within Turkey’s own borders. In fact, it now has two rump Kurdistan’s on its borders and its huge internal Kurdish population bestirred and mobilized in a pan-Kurdish drama. Rather than progressing toward internal political settlement, the Kurdish political leadership in Ankara—-which has supported Erdogan in return for lavish economic development funds in Kurdish areas—is now openly critical:

“The people of Kobani feel deserted and furious,” Faysal Sariyildiz, another pro-Kurdish legislator, said yesterday.

The current activities of the Turkish military on the border check-by-jowl with the ISIS militants laying siege to Kobani say it all. On the one hand, they are managing the flow of Syrian Kurdish refugees desperately fleeing across the border. At the same time, they are systematically attempting to stop the inflow of native Turkish Kurd fighters streaming toward Kobani to join the defense of their kinsmen. Ankara clearly does not want Turkish Kurds to become battle-trained in urban warfare. So far, however, they have apparently not fired even a single round of artillery at the ISIS-manned American tanks that are within a kilometer of an epic slaughter in Kobani.

Vice-President Biden was right for once. Washington has no real allies in the region because they all have another agenda. Turkey is focused on its near enemy in the Kurdish regions and its far enemy in Damascus, not the ISIS butchers who have laid claim to the Sunni lands of Euphrates valley in parts of what used to be Iraq and Syria. The Qataris want Assad gone and a new government—even one controlled by ISIS—which will grant them a pipeline concession through Syria in order to tap the giant European market for their immense natural gas reserves.

Likewise, the Saudi’s want to destroy the Assad regime because it is allied with their Shiite enemy across the Persian Gulf in Iran and because they fear their own abused Shiite populations which are concentrated in their oilfield regions. Consequently, they see the fight against ISIS as essentially a pretext for escalating their war against Damascus, and are not even interested in bombing the non-ISIS jihadi like the Nusra Front that they see as allies in the campaign against Assad.

At the end of the day, Obama’s air campaign amounts to nothing more than a glorified international air force training exercise. Pilots and air crews from the UK, Denmark, Belgium, France, Australia, Saudi Arabia, the UAE, Jordan etc.  will get to run a few live fire sorties at politically correct targets. So the Brits will bomb in Iraq but not Syria; the Saudi’s will bomb ISIS targets close to Assad-held territories, but not Nusra Front positions; and the Qataris will go along for the ride pretending to help, even as they preserve deniability that they ever dropped an actual bomb for that day down the road when they seek to make a pipeline deal with the Islamic State.

Never in recorded history has a fading imperial power conducted a more feckless, pointless, and strategically irrational war. The ISIS beheadings are surely barbaric, but they pose no threat to the security and safety of the American people that can’t be handled by enhanced domestic vigilance and police protection. After all, isn’t it evident after 20 years of the so-called war on terror that somewhere on the planet earth failed states and god-forsaken desert and mountain redoubts will always give rise to radical sects and violent gangs that cannot be exterminated with bombs and drones?

Indeed, the real lesson is that by inserting itself into tribal and sectarian conflicts in these pockets of anarchy Washington only succeeds in generating more of the same. That is exactly what the siege of Kobani is all about.

So maybe Joe Biden could explain this to the big thinkers in the White House. If the Turks are unwilling to stop an easily preventable mass slaughter by ISIS on their own doorstep what kind of fractured and riven coalition has Washington actually assembled? And how will this coalition of the disingenuous, the hypocritical and the politically opportunistic ever succeed in bringing peace and stability to the historic cauldron of tribal and religious conflict in Mesopotamia and the Levant that two decades of Washington’s wars and regime change interventions have only drastically intensified?




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