Archive for September, 2014

So again the Scots remain with England after a frightful battle.

They lose again, but in reality they win.

They win as they are getting the best of both world. They are still the UK (for real the economic consequences would not have been pretty) and the power will be devolved / decentralized a lot. Practically the road is paved for a Federal UK where Scotland will have a freedom similar or even better than the one enjoyed by a federal State in the USA.

Practically a win/win scenario.

Two things to learn from this scenario.

– Try to “run” for independence is a win/win scenario – specially if you do not succeed.

-Even one of the most  Democratic Government will do anything in their power (even leak comment from “interested” economic parties such as banks) to incite economic  terror in the population (banks leaving, massive job losses).

It would be interesting if this happens again in on of the productive region of Europe, like Northern Italy (Scotland had “only” oil, while Northern Italy has everything, apart oil)


Ukraine: a Russian Victory

Posted: September 18, 2014 in Uncategorized

Thanks to Islamic State now all the focus is back to the Middle East and President Putin seized the occasion to freeze the Ukrainian conflict in his favour.

– Now winter is coming

– The Ukrainian PM granted special free zone to some of the rebel cities

– Ukraine knows that the US has short attention span, while Russia can play a long game

– Europe is less than convinced to participate to the US cold war. They depend on Russian energy, they have a lot of trade with Russia and the defence budget is just 2% with no intention of increasing it – due to the crisis.

– The US has no intention to support Ukraine with air strikes or boots on the ground.

So now Russia will not invade anyone else (this was a simple defensive move to a US aggression as the ousting of the Pro Russian elected government was done by the CIA – proof in an intercepted phonecall between Washington and their ambassador in Ukraine). But it will use the carrot and stick technique with a lot of Eastern European (and not) countries.

The markets are still wary, but all is good on the surface.

-The France confidence vote has been won

-The Fed stayed the course (but it almost lost control of the interest rate, only seen by the professional market)

-The Scottish referendum is the last obstacle, but it seems that the politicians waged a successful scare campaign and latest polls seems to favour the NO.

In October we will have almost a repeat

-France will have to approve the Budget and it seems the unions are preparing for a big fight

-QE officially ends and there will be more talks on interest rates

In November will be slightly different

The US Mid Term Election. Now it seems that the republican could win 6 more seats in the House and specially the committee that has the oversight of the FED (and it is a lot against market intervention).

Plus Islamic State will definitely try to study a counter offensive. As of now there is a major anti terror operation in Sydney and Brisbane developing that there was a clear and present danger that needed to be addressed.

It seems that in Iraq (and soon Syria) is experiencing a surge of security contractors – the new fashionable word for mercenaries.

There are already more than 5,000 security contractors and they are on the rise.

President Obama knows that airplanes alone cannot defeat Islamic State and, on average, the Iraqi or the Peshmenga forces are not up to the task.

So why not use contractors?

They are efficient (often ex special forces), deniable and politically unaccountable.

Ok there are some minus as the Second Iraq showed (torture, the three American contractor killed in Felluja and hanged, some potential killing of Iraqis civilian (still in court to be decided) – but a much more acceptable solution than boots on the ground, for now.

So the tactic will be air combat, a number of  Special Forces units and contractors. And very little media coverage.

A smart little dirty war. Well you can’t really play fair against Islamic State. Definitely smarter than the previous engagements.


As predicted by the political experts the French Government survived by a decreasing margin (269 votes pro. The last No Confidence vote in April was 306 pro Government).

The next test is October with the Budget.

But the big test will be the predicted social unrest (already the French air pilot are on strike) in Autumn/Winter.

And remember that we are talking a democracy where the President Hollande has just a 13% of votes from the polls.

And Marie Le Pen, National Party, anti Euro is set to win in 2017. And she often declares that she would ditch the Euro. If things stands are they are that could be the end date for the Euro.

As they say in France:

Vive la révolution!

Chinese data keep on swinging between positive and negative, practically on monthly basis – even with manufactured data.

What causes this. Very hard to tell, naturally. I think that the usual tool of Chinese stimulus – Credit – it start to have diminishing effects. It is a but like a medicine that the more you use the less effective it becomes.

Credit is most influential in housing/infrastructure (47% of GDP. while in 2007 it was 39%) as export are not any more the driver ( 26% of GDP, while in 2007 it was 38%). And the house hold consumption that should be the new driver of the Chinese economy is a mere 34% of the GDP at the same level of 2007 (Asian countries household consumption is about 50-55% and in the West circa 70%).

As I said before changing household consumption pattern is extremely difficult and attainable only in multi generation trend. And China does not have the luxury of time as by 2020 it will have over 700 million pension age.

The direct link between Credit and Housing makes the issue quite problematic. If credit does not work any more as stimulus – we will have an issue.

This does not mean that we are going to have a crisis soon. But it does mean that the chances of a serious crisis between now and 2020 are getting bigger by the day.

Well, as US puppet, I suppose.

US and Europe have an interest because there is Qatar oil pipeline that should pass via Syria and “free” Europe from Russian energy monopoly. Interestingly the US last year officially did not enter the Syrian conflict for the supposedly phenomenal Assad’s air defence…..which were not even being considered this time.

Iran reasonably wants to fight Islamic State, but not defeat it as otehrwise the US backed rebels would go after Assad.

Turkey and Qatar they want substitute Islamic State and Assad with a pliable Muslim Brotherhood kind of kingdom.

Saudi want to fight Islamic State as they want to be known as the ultimate salafist – but they oppose Iran point of view and Turkey/Qatar as they are dangerous for the kingdom.

Egypt slighlty approves Saudis, but with its own peculiarities.

Israel and Jordan prefer the status quo with Assad in power and a decreased islamic State

The Kurds and specially Iraq let’s say they lean towards Iran’s point of view.

Australia……probably a me too complex.

As you see the “defeat Islamic State” is just marketing. It will take decades.

And just now on TV we hear that long stolen manpad (man handled missile) long stolen are practically the target of massive police search operation.

The stolen M72 LAW is a quite old weapon. It’s range is up to 1,000 meters – but its effective range (50% chance hit) is 165 meter for moving target and 200 meter for stationary targets. Air planes should be safe.

Scotland: a Brave Heart Moment

Posted: September 12, 2014 in Uncategorized

Next week there is the Scottish referendum.

Even if the polls are neck to neck, I do not think that the Free Scottish will win.

But if they win the consequences will be massive, not only for the UK.

All the small independence movement (just in Europe there is Catalonia, North Italy, the Flemish and many more…around the world are almost uncountable) will have a big boost that could lead, in the years, to a very different and fragmented world!

So it is not just the UK that has to hope for another defeat of Brave Heart. Otherwise it will be for real the Revenge of Brave Heart

US and the ISlamic State

Posted: September 12, 2014 in Uncategorized

US decided to go gun blazing (from the air) to pursue Islamic State.

Air power alone will not defeat Islamic State. President Obama even went to the point to use Somalia and Yemen example.

US Air Power in Somalia and Yemen decreased the effectiveness of the terrorist, but did not defeated them. They are still there and pretty strong too. In a sense they helped the terrorist recruit more people. It is practically a stand off that goes on for 13 years.

Syria is even more complex as it will have to fight also the Assad’s regime (and Iran which is an ally in Iraq). Probably in reality there will be some kind of secret deal between President Obama and Assad of ” no conflict”.

Islamic State also is shifting his positioning. It is getting more recruits and concentrating in cities where it is harder to strike without collateral damage. Also it looks like it starts to employ a scorched earth tactic destroying oil field and infrastructure (and soon I guess dams) since they cannot hold them due to the US airpower.

So Islamic State will be in the news for a long long time!

Note the “ides” is mid month in Latin. famous are the ides of March when Julius Caesar was killed.

There are a few sign of an increase danger in November.

– One of my models gave off a signal nearly identical of August 2007, 3 month before the Global Financial Crisis. Not confirmed, but it is there.

– In October there should be the end of Quantitative Easing

– Next week there are the Scottish vote and a French confidence vote on Government (very important)

– In November there are the US Mid term Election. Even if the Federal Reserve is supposedly independent it will support the market at least until then (and the Fed built this rally)

– the Congress is increasing the pressure on the FED. The Republicans are pushing for more oversight of the FED action claiming that the their Open Market . The Republicans in the House are expected to increase their majority by 6  seats and Richard Shelby of Alabama will take the lead of the Senate Banking Commitee with the the FED  in its sight. And it does have quite a few reason as in several instances the Federal Reserve denied or refused access to important information (Eg Commodities holding in the US Banks, transaction on money markets funds, denied information on emergency plans in the 2011 Debt limit impasse etc).  So in November the Congress will go gun blazing against the Fed and its unchecked and unlimited power.