(un)intended consequences

Posted: December 7, 2017 in Uncategorized

The world is changing very fast.

President Trump recognized Jerusalem as an Israel capital. It does violate the 2002 Arab peace initiative and start another fire in the already inflamed Middle East situation an a potential Syria (Iran)- Israel confrontation.

Egypt, Jordan, Saudi Arabia and Turkey will protest, but are unlikely to do more than talk – the more dangerous of them all is Turkey as it is already aligning with Russia – the other countries have too much to lose (and Jordan as a mutual defense pact with Israel).

But in the long run is introducing a new schism between the US and the Middle East.

The Gulf Cooperation Council that practically created the stability in the Gulf region has practically been dismantled. There is UAE-Saudi Arabia and the others. Qatar is getting more aligned with Iran (and you can see the consequences from the number of missile shot from Yemen to Saudi Arabia and UAE).

North Korea – even if a war does not happen will signify that the US is weak in Asia. As a consequence it lays a future (5 to 10 years away) war between Japan (technology) and India (manpower) against China (which has technology and manpower).

As the US retreats other players are entering the fray.

Russia in the Middle East is becoming the new superpower (Turkey, Iran, Iraq, Egypt) and building alliances all over the world – Russia has always been renown for cheaper, less sophisticated but more reliable weapons than the West.*

*A typical example is the Vietnam War M16 vs AK47 machine guns comparison. While the M16 had better range, better precision and was lighter – the AK47 was cheaper, more reliable (you could leave it for months underwater!), required less cleaning, no training and had more devastating impact – the better weapon for a jungle warfare.


North Korea ICBM

Posted: November 29, 2017 in Uncategorized

If you follow my blog you know that my idea was not that the US tamed Kim. Simply he could not get wrong the next missile.

And it did not. This is an ICBM. On a proper trajectory (depending on payload) can hit New York or Washington or anywhere it chooses with a range of 13,000km.

Moreover for the first time is a rapid deployment one. North Korea learned to refuel horrizontally and so it can deployed fast.

All this means that a real nuclear ICBM could be deployed in the second half of 2018.

If Trump wants to take care of NK as he says – the safer window is beween now and September 2018.

Sanctions and pressure will not work.

The market will not care until it is too late. Be warned.

Australian real estate

Posted: November 21, 2017 in Uncategorized

The Reserve bank of Australia said that the Chinese residential property demand (3/4 of all foreign sales) has started to peter out as a consequence of the stricter Chinese capital controls.

And automatically the price of the Australian real estate is starting to be softer. So much for our government assertion that Chinese buy only new dwelling (which is correct, if the law wasn’t so easy to circumvent).

This is not the market crash that some people are hoping for, but a first sign.

The other signs will be

-when rising rates (and our banks get their money from the US – so rising rates in the US) will rise

-if prices (eg fuel) will start to go signal inflation – without wage growth.

So let’s say the next 6 to 9 months will be interesting for the housing market and at least I will not hear anymore the Australian catch phrase – houses double in value every 7 years.

End of the real Estate Boom. After the end of the mining one, after the  end of manufacturing.

The Government says that the new infrastructure spending (75bn over 10 year) will save Australia. As PM Turnbull will last at the most one year, he really does not care ( to be fair, not even Bill Shorten wills ave you – actually he will be worse for real estate).

But a real estate end-of- bubble will not be all bad. It will be a good wake up call.

Unspoken News of world

Posted: November 17, 2017 in Uncategorized

This is a quick update as I have been really busy.

  • North Korea

It is still there. The absence of exercises from Kim (plenty from trump) is more due to a classic pattern of the North Korean Army. During the fall usually the army workforce is used for agricultural purposes. There has always been a lull into March. So a normal pattern. I still think Kim is working hard in a sub-orbital hydrogen bomb test – but he needs to make sure it does not fail.

The interesting development is that -first in the last two year – an official Chinese envoy went to North Korea. And China is building a 6 lanes highway to North Korea.

Secondary voices say that there has been a pact China- US during the US tour. Trump gave a free hand to China in the South China Sea in exchange of a serious effort against North Korea. So the envoy is bringing an ultimatum to Kim.

I do not know if he will listen. Three years ago Kim killed all the ally of China – including his own uncle.

  • Saudi Arabia

It has been reported that the condition of release of the jailed prices is..giving up their wealth (some up to 70%!) – close to a USD trillion dollar. So, aside the power consolidation, this as a pure money grabbing exercise as the Saudi Reserves were down from USD700bn to USD400bn. This also could come handy in the next war Israel/Saudi versus Hezbollah/Iran.

Iran has been very restrained (from an historically point of view), but definitely preparing for the worst.

Everyone is trying to tame this scenario as it would be really cataclysmic. Hezbollah probably could not fight alone versus the power of Israel and Saudi Arabia – so iran would be dragged in and all the Middle East would go up in flame. Oil would spike to over USD100 starting a new financial crisis that would be exacerbated by Exchange Traded Fund and Robo trading. You understand why everyone wants to stop it.

  • US

The House passed the first step of tax reform. It is a great achievement. It still needs to pass the Senate. It will be a close call – but it could happen as the Republican – after the loss of two states – now they are sure that by Mid Term Nov 2018 election their majority will be evaporated.

A report from BBC showed the US let escape over 4,000 angry IS fighter from Raqqa with truckloads of weapon. Most of them disappeared in thin air to Turkey – there were a lot of foreign fighters heading back to Europe ( a lot from France). In the next IS attack you know who to blame.

A Game of Saud Throne

Posted: November 12, 2017 in Uncategorized

Saudia Arabia is in complete turmoil

The kingdom was ruled by consensus.

The Saud family boasts 15,000 person of which 4,000 of power. Always intriguing, fighting and vying for power.

Now the Crown Prince eliminated this structure with a Games of Thrones textbook operation.

Arrested a number of ultra powerful families and killed 2 princes (one directly, one unknown helicopter crash).

Meanwhile they put in house arrest the Lebanese PM and the Yemeni PM.

It accused Lebanon of waving war against them (as Lebanon is practically governed by Hizbollah).

Also via a leaked Israeli cable, they are allied to Israel.

Saudi Arabia and UAE demanded their citizens to leave Lebanon.

Yemen launched a ballistic missile (US and Saudi accused Iran of it. Definitely Iran produced the rocket. Nobody knows if the Houthis obeywd an order- quite a few time they disobeyed). Baharain just accused Iran to blowing up a gas pipeline.

Israel just had its greatest wargames evee and developed a new technology that enables them to see tunnels (used a lot by Hizbollah in 2006). And a general said that the next war against Hizbollah is just a “when” not an if.

And this is just the surface as in the client newsletter I dig a bit deeper.

Iran answer, on the surface, has been quite restrained for now. They even closed for 2 days one of the most warmongering newspaper. But definitely the Iran hawks are gaining ground.

As Cersei Lannister of Games of Thrones put it. In a game of thrones you either win or die. There is no middle ground.

Naturally the largest repercussions will be felt on oil and gold.

North Korea: signals

Posted: October 28, 2017 in Uncategorized

While the media are silent things are moving in the background that signal a real preparation for war.

3 aircraft carrier groups are now in the Pacific.

The US moved over 812k munitions to forward bases in Japan.

A new squadron of F35 arrived in Japan.

At least 2 nuclear subs arrived in the area and the Seal “decapitation” team.

The B52 fleet is in high alert (this news has been disallowed, but no one knows why iybhas been announced to Fox news in the first place.

And this is what you can find freely.

Plus now there is starting to be a consensus in the US that the only solution is striking. In the Pentagon estimates probability of war is now 30% and the chance that war could provoke a major war (China) 50%.

PM Abe’s just got overwhelmingly re-elected and the Japanese index is at its best for the last 10 years.

The implication of a rising Japan are multiple. It will be definitely another centre of power contrasting China and especially North Korea.

One of the major targets of PM Abe is to change the Constitution that does not allow Japan to  have an offensive army (and for all pacific purpose, Japanese army budget was already the world 7th military budget in 2015).

And it is already aligned with India (the other anti-Chinese superpower in Asia).

Definitely North Korea has started an arms race in Asia and Japan will keep pace.

And if you like the movies like Terminator…..look no further than Japan. It is the most advanced country robot-wise and its army, for how well trained and well equipped it is, is just a fraction of the size of the Chinese one – due to population.

It will be able to inflict pain to China – but never win in a confrontation. Unless you have Terminators and a long view. Japan is one of the few democracy that have a long view notwithstanding the election cycles.

On the economic side – there are still issues – but Japan is one of the better positioned countries with  continuing QE.