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Lows are in.
We now rally to 18th Sep or early Oct (5th or 8th).
We should see a secondary low between 22nd and 28th Aug (Friday 24th or Tues 28th favored).
We have done abc down with A=C.
If the Uk's FTSE exceeds 6554 by Oct 8th the bull is alive and well.
Otherwise it's dead meat.
Regards,
Ian
Are you familiar with this cycle?
http://www.nowandfutures.com/buscycle.htm
Regards,
Ian
Airedale
I have heard of and been reading up on Hurst cycles.
I am a novice in this area.
However a circa 8% correction seems a tad small for a 4.5 year cycle low?
Regards,
Ian
Why can't the 80 and 40 wk lows be shifted 3.5 months to the left?
That seems to line up the lows better?
Regards,
Ian
With thanks to Earnie Adams
Hold On to Your Seat: America and Its Debt Based Economy
by John Kelley / July 31st, 2007
Yesterday, the Dow Jones dropped 300+ points, down over 400 at its low for the day. Today, it will probably be just as volatile as it has been, but the shape of things to come is not good. We can only ride this irrational over-exuberance about the market for so long before we have to pay the piper. It’s quite simple. While the market was setting a new record July 20th by breaking 14,000, the actual financial underpinnings of the country were growing quite bleak.
Virtually unreported over at the Washington Post, Michael J. de la Merced was citing a significant crack in the debt dike preventing a flood of defaults on leveraged buyout deals. Most of the run-up on Wall Street has been based on the idea that there is an unlimited amount of debt that can be piled up to buy and flip companies, kind of like the housing market speculators. In fact some of them are the same people. To them the important thing is that they collect fees at every transaction along the way.
What the general public doesn’t understand is that the wealthy have been taking their extra money from tax breaks and investing it in speculation. The theory of trickle down economics is that the rich will invest it in increased production capacity, hire more people and generally lift everyone (“a rising tide lifts all boats”). But, true to human behavior, that’s not what happens. Instead, when people have extra money over their needs they tend to invest it in more speculative investments because the potential loss won’t affect their lifestyle while the potential gains are higher than from a more stable but slow-growing investment. In other words, a cabbie might make a bunch of $5 bets on long shots at the track and even may splurge on the Trifecta but a CEO can afford to make $10,000 bets. Both are gambling an amount that, if he loses, doesn’t impact his lifestyle, but if he wins, he wins big.
Private Equity and Hedge Funds have been the chief investment vehicles used by the wealthy to speculate on these long shots. Wealthy investors, institutional funds (pension) and other money pools have been joyously jumping on the bandwagon. As more and more people and funds (up to 9,000 hedge funds now) scout for undervalued companies to buy, the competition has grown fierce, driving up prices. In fact, many of the companies bought don’t justify the price, but what the heck? Neither did that $100,000 house you bought for $150,000 because it was going to be worth $175,000 next week. Right?
Much of their supposed profit does not expand production/create wealth but only increases profits based on tax advantages of their structure and the speculative behavior that inflates the value. The key to all of this is that these buyouts are not occurring with much real money involved. The initial investor in a Private Equity or Hedge Fund usually borrows up to 80% of the money they invest in the fund. The funds pool this capital from multiple investors and then use it to borrow up to 95% of the money they use to purchase the company. Then once the company is purchased and their fees paid, the newly owned company sells bonds, which the company hopefully will pay back.
But not to worry, the Private Equity and Hedge Fund boys make their money off of the amount of money they manage (2% fee) and a percentage of the profit (20%). The investment bankers made a bunch of money from arranging the financing and a bunch of others made money from issuing the bonds. Just like the mortgage brokers and investment houses that bundled the mortgages and resold them as bonds, their profits came from the transaction fees. These bonds have been typically easy to sell because of the high interest return as their risk increases (like subprime loans) and the cheap cost of financing.
Several indicators say that the end of this bubble is near. One of the first is when Hedge and Private Equity Funds go public as several have attempted to do recently. What this means is they believe the best times are over and they are selling their track record to get one last big bite of the apple before the downtrend comes. Everyone wants a crack at the action, not realizing that most of the action is over. Read the fine print on any stock purchase, past performance is no guarantee of future earnings. Having made millions and billions already at the peak of the frenzy, they now sell off a portion of their ownership for a big ka-ching. Even if the stock value of their remaining holdings in the company goes down they are still way ahead. Indeed billionaires became multibillionaires by selling off some of their ownership in these firms, only to see their stock price go below the Initial Public Offering (IPO) price within weeks. Losses in housing notes caused Bear Stearns to have to bail out two failed hedge funds in one week. It’s just reality that when there are more and more dollars chasing fewer and fewer deals that someone is going to lose and previous gains will not be as big as those in the past, even for the winners.
Another is that debt buyers are getting a belly full and beginning to question the value of the debt whether in the form of loans or bonds. Merced reports that 20 recent debt offerings, including debt to finance the Chrysler Group buyout, have joined $235 billion dollars in loans sales that have been have been postponed. Bond sales are also suffering with billions in offerings being put off by First Data, Alliance Boots, U.S. Foodservice, Service Master International and Dollar General.
Investment bankers jumped on the deals to get the high interest rates and fees, even putting up part of the money themselves to get the loan and bond action. Now they are stuck, unable to resell their equity. JP Morgan, Bank of America and Citigroup provided $1.5 billion in equity bridges that they now can’t sell without sweetening the pot or waiting for things to get better.
The housing market has only revealed the tip of the iceberg in defaults. Last week, Country Wide Mortgage, one of the biggest in the business, revealed that creditworthy mortgagees are falling behind in their payments and the decline in the housing market would continue until 2009. That may be optimistic as almost $1 Trillion of adjustable rate mortgages (ARMs) will reset this year.
Almost unnoticed is the commercial real estate market that is badly overbuilt and is starting to show its weakness. Local banks, shut out of the mortgage market and not wanting to be left out, have lent heavily in the commercial real estate market, sometimes at a rate of four to five times their reserve requirements. And we thought the S&L scandal was bad.
Inflation is low according to the government but that is “core inflation” and excludes food and energy costs, by far the biggest costs to the middle class other than housing. According to Mark Felsenthal in a Reuters article on July 12th, food prices have risen faster than core inflation every month since February and energy prices every year for the last four years. And it shows. The banks report that credit card sales and missed payments are both reaching all-time highs, indicating a worsening financial situation for the middle class. Retail sales are down across the board except at WalMart who had to make big price cuts in over 60,000 products to shed inventory. Those weren’t new sales. They were taken from other retailers.
Sadly, with crude oil reaching $75 a barrel and, as John Kilduff of Man Financial said, “We are one headline away from $100 a barrel.” The credit card is the last fading hope of the middle class. This drives up the cost of other necessities, like food. Of course the Fed doesn’t include the cost of gas or food in the “Core Inflation Rate” because it doesn’t affect the investor class much; you can only eat so much caviar.
Cheap financing advanced to consumers in the middle and working classes, who have had declining real income since the ’70s, has been purposeful public policy that forces consumers to borrow more and more to maintain their lifestyle. Incomes have not kept up with inflation, off shored manufacturing jobs have been replaced with service jobs that pay an average of 20% less, federal and state governments have shifted more cost to local entities, increasing property taxes, and the costs to participate in the legal economy for everything from daycare, to college, to medical insurance have been shifted to the worker. The result is a massive transfer of wealth over time from the general population to a very small percentage of super wealthy.
This process began during the Reagan administration and has continued, except during the Clinton years, until the present. It is nearing its inevitable end. As we learned in 1929, great disparity of wealth (which this process has increased tremendously) leads to a disproportionate investment in speculation, driving up prices to unsustainable amounts that then crash back to their real worth. Eventually the transfer of wealth from the working and middle class through increased debt deprives them of both purchasing power and the ability to borrow more, triggering deflation. Of course the devastation occurs mostly to the middle and working class who were already deprived of sharing the wealth of the speculative bubble, but now pay the consequences with layoffs and pension losses.
Our whole economy is built on consumer spending and as we produce less, ship good paying jobs overseas, increase our national and trade deficits, we have become a nation mired in debt. It’s no accident; we long ago passed the point were we “needed” more stuff, so we used advertising and planned obsolescence to create need and cheap financing to acquire it. Debt itself became the primary product. Whether it is the working poor at the window of the payday loan outlet, the Hedge fund manager at the conference table of Goldman Sachs or George W. Bush racking up $10 million an hour in Iraq, debt is the major creative enterprise in America today. In fact it is that government production of money to pay the cost of the war and recycled by the rich after low tax rates into speculative “high yield debt” that propels over inflated prices and over valued assets.
Most money being made today is from the financial transactions—the interests, the fees, and the creation of new kinds of exotic financial products that parse debt and resell it. Dealing in debt is quite lucrative. None of this actually produces wealth; it merely redistributes it more and more to the people at the top who have the money to lend.
The seventies stagflation were produced when the government stopped printing money to pay for the Viet Nam War and will happen again when this war ends. But it may happen sooner because as the economy becomes less secure and deflation becomes an eminent threat, China, Japan and Middle Eastern oil countries that are buying that debt may decide the Euro may be a better bet. When that happens as the old saying goes, “It will be Katie bar the door” to stop the rush to the exits.
At some point this must come unraveled in a rather nasty way. Whether it happens tomorrow or not is not the question, the answer is, it will happen and when it does it will be catastrophic for individuals, businesses, and government entities at all levels. What will happen to the big boys who created all of this? Well, most of them learned from the experience of Michael Milken the “Junk Bond King” who developed junk bonds, or “high yield debt”, to (guess what) finance leveraged buyouts. Indicted on 98 counts of racketeering and securities fraud, he pled guilty to six securities charges. He served twenty-two months. According to Forbes, he paid a total of $900 million in settlements and fines and still had a net worth of over $1 billion upon his release. His current net worth is estimated at $2.1 billion.
The private equity and hedge funds are not regulated by the SEC and most are registered offshore for tax and liability purposes. When it all falls apart most will be able to retire to their homes in the Mediterranean and live off their money in the Caymans, while the rest of us pick up the pieces.
Summary
It is now time to pay the piper for the speculative frenzy of the the rich and affluent.
The lower and middle classes will continue to be squeezed (real disposable incomes have been falling for some time now).
China is reorganising it's military to reduce quantity and increase quality
"to enable a conflict against a tecnologically superior foe" according to the CIA.
China is now confident enough to issue direct threats against the US (in the area of finance).
We are some decades away from the crunch point.
But it will come.
Regards,
Ian
Forecast.
New lows to come.
We do a low the week after expiry to complete abc down from 19th July.
a of c should complete early Monday.
b of c will be during OE.
c of c will complete the week after expiry.
Tomorrow may well see a gap up and should see a high between 10am and 10:45am at $rut circa 795.
From this lateish Aug low we will rally in a choppy fashion, but we will not take out Jul hi.
There will be a significant decline 4th qtr.
This will be wave C with the July/Aug declin being wave A.
Regards,
Ian
Looks like the Dems are getting worried about Ron Paul.
Hatchet job on Ron Paul on Kos but there seems to be nothing similar for the other Republican candidates.
I'm sure the Dems would rather face Rudy, Thompson or Romney come November.
Regards,
Ian
I think that the 9/11 truth movement should go after Condie first.
Cheney and others are much harder nuts to crack.
Condie made a televised statement a short time after 9/11 that no one could envisage an attack by airplanes like that.
This statement is a provable lie.
There were military exercises to simulate just such an attack on the morning of 9/11.
Project Bojinka from 1995 is well documented.
There was also the failed Paris attack which was stopped in 1999.
There were multiple warnings from several foreign governments about impending attacks by aircraft on US soil in the few months prior to 9/11.
Putin issued a personal warning of this, when the Russian warning via normal diplomatic channels was ignored.
Widely publicising the military simulations on 9/11 would be a useful exercise and would open doors to other questions.
As would an enquiry as to who ordered these simulations on this date.
Regards,
Ian
P.S. Putin probably used his knowledge of how and why 9/11 happened as a form of blackmail against the US.
He used 9/11 as the green light to go after the Russian Oligarch's and take back State control of Russia's oil and gas and other resources, as well as cracking down on Russia's press.
Mineta's testimony to the 9/11 Commission.
The author of this overstates his case.
It is not a slam dunk argument but it does offer some extremely interesting information and theories.
http://911research.wtc7.net/essays/green/HowTheyGetAwayWithIt.html
Regards,
Ian
Ron Paul supports the Constitution.
Perhaps that has now become an extreme position.
No one else in Washington seems to support it.
Do you support the Constitution?
Are you in favor of a strong US?
Regards,
Ian
There are some relatively minor things which I do not agree with Ron Paul on.
However to reverse the current slide into servitude of the middle classes and to prevent my grandkids growing up in a Chinese dominated world, Ron Paul is the last best hope for the US and the Western world in general.
Real incomes for the lower 90% of the US population are declining by 5% p.a. and it is set to accelerate.
This started during the Bush Presidency.
We have seen a 100+ year trend change, whereby the US now owns less of the rest of the world, than the rest of the world owns in the US.
The Democrats do not have policies to reverse these trends.
A vote for anyone else but Ron Paul is a a vote for poverty and a decline in US power.
In the face of this, my disagreement with a few of Ron Paul's social policies is trivial in the extreme.
So if you want to vote for poverty go ahead and vote for the Dem's.
Regards,
Ian
Hmmm - I don't agree with Ron Paul voting against this.
I would like to hear his explanation of why he did.
Regards,
Ian
US recession
Extracted from WSJ aricle link below.
More than two-thirds of Americans believe the U.S. economy is either in recession now or will be in the next year, a new Wall Street Journal/NBC News poll shows. That assessment comes despite the fact the economy has experienced sustained growth with low inflation and unemployment and generally rising stock values ever since the recession that ended early in President Bush's tenure.
http://online.wsj.com/article/SB118600572789185278.html?mod=hpp_us_whats_news
Regards,
Ian
Journal of 9/11 Studies.
Lot's of good info in this.
http://www.journalof911studies.com/
Regards,
Ian
The planes only had about 1/3 of full tanks.
The range of a 767 is 7,700 miles.
Regards,
Ian
Another possible reason to invade Iraq.
A considerable quantity of cuneiform script has been excavated from the birthplace of civilisation.
Some interesting results have been obtained from the limited amount so far translated, with unorthodox explainations for the origins of civilisation (and major religions).
David Rockefeller is a collector of Sumerian and Assyrian art.
Perhaps they wanted to investigate some more.
Regards,
Ian
The evidence strongly suggests Larry Silverstein's involvement in the plot not just profiting from it.
The amount of asbestos in the buildings was a problem and would have cost a fortune to address.
Larry over insured the buildings before 9/11.
Access to the building was required to plant the method of demolition.
The security company for the buildings had a Bush brother as director.
Larry called the shots to pull WTC-7.
Having the owner of the site on board or looking the other way when asked, ensured access to plant the demolition explosives and ensure that they were not discovered prior to the event.
Regards,
Ian
"Troop deaths are 15,000 to 17,000 not the 3,500 official number".
Is there any other evidence to back up this claim?
Torins insight as a combat nurse reveals that the actual amount of dead troops numbers around 15,000-17,000, not the 3,500 we have been told. “If you get shot in combat – Bam! Clock goes off. If you die in transit [to a hospital out of Iraq such as Ramstein in Germany] you are not an official Iraq casualty.” The same holds true if the troops out of the country die 24 hours after they were hit in Iraq. The official troop death number is just those that have died in action on the ground.
http://www.prisonplanet.com/articles/july2007/310707expert.htm
Regards,
Ian
Excellent again.
Let Ed Thompson do the heavy lifting on 9/11 truth whilst Ron Paul remains less controversial (for now).
Regards,
Ia
Excellent.
Couldn't agree more.
Regards,
Ian
Keeping an open mind or receptivity to new ideas or evidence, asking questions, seeking and evaluating evidence are all healthy rational approaches.
Also an awareness that there are things that you do not know, some things that you are unlikely to know and some things that you can enquire upon or assess further.
It is the scientific approach.
Paranoia on the other hand is an emotional response based on not knowing.
It is the superstitious approach.
So asking if Ron Paul is a double agent with an alternative agenda to that stated is a valid scientific question.
The overwhelming evidence over 30 years is that he is not.
He has consistently supported the Constitution, been in favor of small government and generally been a complete pain in the ass to the rest of the Washington gravy train.
Neither is he rich, having used his position in Congress for personal gain.
Asking another question as to whether there is a group of very wealthy individuals who seek to enhance their power and wealth both within the US and abroad is also a valid scientific question.
And again the overwhelming evidence is, yes there is.
Regards,
Ian
9/11 timeline
http://www.cooperativeresearch.org/timeline.jsp?timeline=complete_911_timeline&startpos=1300
Don't know if this has been posted on here before.
Regards,
Ian
Ron Paul has said he will abolish the Federal Reserve and adopt a limited foreign policy.
The only 2 Presidents in the last 150 years who issued money by the Government instead of via private bankers at interest were both assassinated.
How brave and forthright do you want the guy to be?
Of course the so called war on terror is a campaign to create a new enemy and curtail civil liberties enshrined in the Constitution, or as you term it, a war OF terror.
But this is not the prevailing orthodoxy.
It would be counter productive for Ron Paul to openly say this.
He has said he wants a limited foreign policy and to protect the Constitution.
He has said the Islamists are against us because of decades of interference by the US.
Surely you of all people can read between the lines.
Regards,
Ian
"It cannot be only Ron Paul. It has to be we the people."
Yes, exactly.
If change is to come, it has to be from the grass roots and individual members of the public.
All the institutions are against change.
Speak out.
Write letters to the papers, write letters to your congressman, attend Ron Paul events, speak to your friends and acquaintances, hand leaflets out on the street, put a bumper sticker on your car, speak to your work colleagues, speak in your church.
The message will not be disseminated via the mass media.
They are an enemy.
They seek to discredit and undermine Ron Paul's message.
And when you speak out, do not start at stage 92, when your audience is only ready for stage 1.
Stick to the easier and least controversial subjects first.
Galileo was branded a nutcase, heretic and subversive and was forced to keep quiet in the early 1500's.
Ron Paul is in the same position, with no powerful friends.
Regards,
Ian
P.S. you have listed the main organisations.
There are many other round tables, lobby groups, think tanks etc. :)
P.P.S.
If Ron Paul is not being honest and true about wanting radical change then he has operated as a very effective sleeper cell or double agent for 30 years or so.
Is it better to stand out in the open to be shot at or is it better to arrive at your objective with caution taking cover where possible?
He is currently outnumbered 1,000's to one.
Calling for a new enquiry into 9/11 is certainly a better election prospect than coming out with a statement such as :-
I believe the US Government deliberately allowed 3,000 American's to die in 9/11 or something stronger.
Calling for the abolition of the Fed was a risky move.
The public do not understand the significance of this statement, whilst the powers that be understand only too well.
Statements such as advocating a limited foreign policy approach, why the Islamists are against the US, the withdrawal from Iraq, advocating smaller government (and therefore lower taxes) all hit an electoral target.
More could be made of the Constitution and speaking out against un constitutional laws such as the Military Commissions Act and the latest moves to impound property if you speak out against Government policy on Iraq.
The message needs to strike a chord with your Constituency, preferably without supplying ammunition to your enemies.
Regards,
Ian
When you are surrounded by enemies it is better to tread carefully.
The enemies include the mass media, the bankers and most of Congress.
It is not to the likes of you that Ron Paul needs to get his message across to.
You already have a good understanding of what goes on.
The American public are not ready to listen to much of what Ron Paul knows.
He has made a good start and good choices in planting seeds.
His message is growing.
It will take some time.
New shoots can be planted as his message grows.
He has already been branded a nutcase and a fringe candidate, but the efforts to discredit him have so far not worked very well and certainly not as well as the mass media and the powers that be, would have liked them to work.
Regards,
Ian
Ron Paul is undoubtedly the only candidate with policies that support the US Constitution.
However there are many other factors to consider, e.g. :-
1. The current political system.
The Democrat Party which is ultimately controlled by the same people as the Republican's has not been discredited.
No one from the Democrat camp has spoken out about the true agenda and reasons for the Iraq invasion.
Who has spoken out from the Democrats on what $1tn would have done at home instead of being spent on war?
Who from the Democrats has spoken out about the Military Commission Act and other non Constitutional laws?
2. Iraq
There are no good solutions for the Iraq mess and the Bush regime is trying to leave the Saigon helicopters scenario for the next President.
Any withdrawal will be messy.
If the US stays it will be messy.
3. The economy at home
3.1 US recession
The probability of a US recession in the near future is high.
Technically the US is already in recession.
GDP for 2nd Qtr reported at 3.4%, but GDP inflation reported at 2.7% (a reduction of 1.5 % from 1st Qtr).
Even by the Government's own official statistics CPI is currently running at 8%.
Technically the US is currently in recession to the tune of 5-6% GDP for 2007.
3.2 Real standards of living
The lower 90% of US real incomes and spending power are currently being reduced by circa 5% a year.
3.3 The housing market.
Is going to get a lot worse, before it gets better.
3.4 Summary
There will be a lot of dissatisfaction with the US economy by the general population over the next few years.
Conclusions
1. If Ron Paul was voted in in 2008, he will inherit a mess on all fronts, both foreign and domestic.
2. The bankers could exacerbate this situation by triggering a US depression by drastically withdrawing liquidity and staging false flag terrorist events.
How would Ron Paul counteract this?
It would be very easy to discredit Ron Paul and blame all (or most) of the trouble on him.
The media is still on the side of the enemy.
3. Would it be better for someone else to take this hit, whilst Ron Paul mounts a strong campaign and came second in the Republican nomination or (just) loses the November election?
I realise that Ron Paul's age would be a problem if he ran in 2012.
If the US Constitution as we know it, is to be saved; and America's pre-eminence as the global power is to be preserved radical changes are required to be made.
The only candidate proposing this, is Ron Paul, but how would he actually be able to do it?
The mass media, the bankers and most of Congress would be against him.
Time is rapidly running out for the US, but it still might be better for things to get worse in order to facilitate making them better from 2012.
What we certainly don't want to see is more un Constitutional laws like the Military Commissions Act.
The message needs to get out now via a strong Ron Paul campaign, but it takes time for a message to sink in and a super tanker to be turned around.
Regards,
Ian
War is littered with examples of subordinates shooting zealous and idiotic superiors in the interest of self preservation and common sense.
The fact that Tilman gave up a multi-million football contract to go to Iraq in an illegal and unwinnable war is proof of his zealous and brainwashed nature.
Mebbe those around him had more common sense.
A monument should be erected to Pat Tilman.
Here lies the body of an American idiot.
Take care that you avoid the same fate.
Regards,
Ian
Yes.
Confucious he say :-
The most valuable lesson is how to think, not what to think.
By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.
Pat Tilman got stuck at 3, by 3 American bullets to the head.
This lesson/problem is not confined to America but applies equally across most of the Western world.
Do NOT let it happen to your offspring.
Regards,
Ian
Which scenario is the best prognosis for the US for the next 20 years or so?
1. Ron Paul wins in 2008.
2. Republican win in 2008 (by someone else).
3. Democrat win in 2008.
Regards,
Ian
Pat Tilman is a potent symbol of the current problems facing the US.
I.E. the persistent perspective of the general US population that the US government is working for their interests.
Nothing could be further from the truth.
It is sad that 99% of American's do not receive a robust education sufficient to enable their well-being in current circumstances.
Vote Ron Paul.
Regards,
Ian
Of interest this week (from John Maudlin):-
This week in Outside the Box good friend George Friedman of Stratfor delves into that enigma that is Executive power and Presidential elections. George ventures to assess the current President in light of former Presidents, utilizing a methodical rubric of measure to analyze the capabilities of what in all perceptions is a lame duck President with respect to domestic influence and foreign perception. He also analyzed the presidential race. I found this a very interesting piece.
George's company Stratfor provides some insightful and comprehensive research on geopolitical events and global affairs. George continues to kindly provide my readers a discount to his normal subscription rates, obtained by clicking here.
I hope you find the article informative, providing a degree of inference into the current complex political landscape.
John Mauldin, Editor
Gaming the U.S. Elections
By George Friedman
Domestic politics in most countries normally are of little interest geopolitically. On the whole this is true of the United States as well. Most political debates are more operatic than meaningful, most political actors are interchangeable and the distinctions between candidates rarely make a difference. The policies they advocate are so transformed by Congress and the Supreme Court -- the checks and balances the Founding Fathers liked so much, coupled with federalism -- that the president rarely decides anything.
That is not how the world perceives the role, however. In spite of evidence to the contrary, the president of the United States is perceived as the ultimate "decider," someone whose power determines the course of action of the world's strongest nation. Therefore, when presidents weaken, the behavior of foreign powers tends to shift, and when elections approach, their behavior shifts even more. The expectation of change on the burning issue of Iraq is based on the misperception that the American presidency is inherently powerful or that presidents shape the consensus rather than react to it.
The inability of Congress to make any decisive move on Iraq demonstrates that immobility isn't built only into the presidency. The two houses of Congress are designed to be gridlocked. Moreover, the congressional indecision reveals that behind all of the arias being sung, there is a basic consensus on Iraq: the United States should not have gone into Iraq and now that it is there, it should leave. There is more to it than that, though. The real consensus is that the United States should not simply leave, but rather do it in such a way that it retains the benefits of staying without actually having to be there. To sum up the contradiction, all of the players on the stage want to have their cake and eat it, too. We are only being a trifle ironic. When all is said and done, that is the policy the system has generated.
The United States has been in roughly this same position with the same policy since World War II. The first time was in 1952 in Korea, when the war was at a stalemate, the initial rationale for it forgotten and Harry Truman's popularity about the same as President George W. Bush's is now. The second time was in 1968, when any hope of success in the Vietnam War appeared to be slipping away and Lyndon Johnson's presidency collapsed.
In both cases, the new president followed the logic of the popular consensus, regardless of whether it made sense. In the Korean instance, the national position favored decisive action more than withdrawal -- as long as the war would end. In Vietnam the demand was for an end to the war, but without a defeat -- which was not going to happen.
During Korea, Dwight D. Eisenhower appeared a formidable enemy to the Chinese and his secret threat of using nuclear weapons seemed credible. The war ended in a negotiated stalemate. In the case of Vietnam, the public desire to get out of Vietnam without a defeat allowed Richard Nixon to be elected on a platform of having a secret plan to end the war. He then continued the war for four years, playing off the fundamental contradiction in the consensus. Adlai Stevenson, who ran against Eisenhower, might not have been nearly as effective in convincing the Chinese to close the deal on Korea, but we doubt that Hubert Humphrey would have differed much from Nixon -- or that Bobby Kennedy, once in power, would have matched his rhetoric with action.
Yet the fact is that the world does not see the limits of the presidency. In the case of Iraq, the perception of the various players in Iraq and in the region is that the president of the United States matters a great deal. Each of them is trying to determine whether he should deal with the current president or with his successor. They wonder who the next president will be and try to forecast the policies that will break the strange consensus that has been reached.
Therefore, we need to begin handicapping the presidency as we did in 2004, looking for patterns. In other words, policy implications aside, let's treat the election as we might a geopolitical problem, looking for predictive patterns. Let's begin with what we regard as the three rules of American presidential politics since 1960:
The first rule is that no Democrat from outside the old Confederacy has won the White House since John F. Kennedy. Lyndon Johnson, Jimmy Carter and Bill Clinton were all from the Confederacy. Walter Mondale, Michael Dukakis and John Kerry were from way outside the Confederacy. Al Gore was from the Confederacy but lost, proving that this is necessary, but not a sufficient basis for a Democratic win. The reason for this rule is simple. Until 1964, the American South was solidly democratic. In 1964 the Deep South flipped Republican and stayed there. If the South and mountain states go Republican, then the Democrats must do extraordinarily well in the rest of the country. They usually don't do extraordinarily well, so they need a candidate that can break into the South. Carter and Clinton did it, while Johnson did extraordinarily well outside the South.
The second rule is that no Republican has won the White House since Eisenhower who wasn't from one of the two huge Sunbelt states: California or Texas (Eisenhower, though born in Texas, was raised in Kansas). Nixon and Reagan were from California. Both Bush presidents were from Texas. Gerald Ford was from Michigan, Robert Dole from Kansas. They both lost. Again the reason is obvious, particularly if the candidate is from California -- pick up the southern and mountain states, pull in Texas and watch the Democrats scramble. Midwestern Republicans lose and northeastern Republicans do not get nominated.
The third rule is that no sitting senator has won the presidency since Kennedy. The reason is, again, simple. Senators make speeches and vote, all of which are carefully recorded in the Congressional record. Governors live in archival obscurity and don't have to address most issues of burning importance to the nation. Johnson came the closest to being a sitting senator but he too had a gap of four years and an assassination before he ran. After him, Former Vice President Nixon, Gov. Carter, Gov. Reagan, Vice President Bush, Gov. Clinton and Gov. Bush all won the presidency. The path is strewn with fallen senators.
That being the case, the Democrats appear poised to commit electoral suicide again, with two northern senators (Hillary Clinton and Barack Obama) in the lead, and the one southern contender, John Edwards, well back in the race. The Republicans, however, are not able to play to their strength. There are no potential candidates in Texas or California to draw on. Texas right now just doesn't have players ready for the national scene. California does, but Arnold Schwarzenegger is constitutionally ineligible by birth. In a normal year, a charismatic Republican governor of California would run against a northern Democratic senator and mop the floor. It's not going to happen this time.
Instead, the Republicans appear to be choosing between a Massachusetts governor, Mitt Romney, and a former mayor of New York, Rudy Giuliani. Unless Texan Ron Paul can pull off a miracle, the Republicans appear to be going with their suicide hand just like the Democrats. Even if Fred Thompson gets the nomination, he comes from Tennessee, and while he can hold the South, he will have to do some heavy lifting elsewhere.
Unless Obama and Clinton self-destruct and Edwards creeps in, or Paul does get a miracle, this election is shaping up as one that will break all the rules. Either a northern Democratic senator wins or a northeastern Republican (excluding Thompson for the moment) does. The entire dynamic of presidential politics is in flux. All bets are off as to the outcome and all bets are off as to the behavior of the new president, whose promises and obligations are completely unpredictable.
If one is to ask whether the Iranians look this carefully at U.S. politics and whether they are knowledgeable about the patterns, the answer is absolutely yes. We would say that the Iranians have far more insight into American politics than Americans have into Iranian politics. They have to. Iranians have been playing off the Americans since World War II, whatever their ideology. In due course the underlying weirdness of the pattern this year will begin intruding.
Here is what the Iranian's are seeing: First, they are seeing Bush become increasingly weak. He is still maintaining his ability to act in Iraq, but only barely. Second, they see a Congress that is cautiously bombastic -- making sweeping declarations, but backing off from voting on them. Third, they see a Republican Party splitting in Congress. Finally, they see a presidential election shaping up in unprecedented ways with inherently unexpected outcomes. More important, for example, a Giuliani-Clinton race would be so wildly unpredictable that it is unclear what would emerge on the other side. Any other pairing would be equally unpredictable.
This results in diplomatic paralysis across the board. As the complexity unfolds, no one -- not only in the Iraq arena -- is sure how to play the United States. They don't know how any successor to Bush will behave. They don't know how to game out who the successor to Bush is likely to be. They don't know how the election will play out. From Iraq and Iran to Russia and China, the United States is becoming the enigma and there won't be a hint of clarity for 18 months.
This gives Bush his strange strength. No president this low in the polls should be acting with the confidence he shows. Part of it could be psychological, but part of it has to do with the appreciation that, given the strange dynamics, he is not your normal lame duck. Everyone else is tied in knots in terms of policy and in terms of the election. Bush alone has room to maneuver, and the Iranians are likely calculating that it would probably be safer to deal with this president now rather than expect the unexpected in 2008.
Come what may, the current political cycle, with YouTube debates and such, is certainly a move away from our accustomed to Presidential elections.
Your finding Arnold's presidential prospects amusing analyst,
John F. Mauldin
johnmauldin@investorsinsight.com
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Division of labor is the route to wealth creation.
The creation of multiple specialties aids this process.
These principles were outlined by Adam Smith in 1776 and further refined by Henry Ford in the 1920's.
The Government should stick to it's own assigned specialties according to the Constitution and not meddle in others.
These principles and the divison of labor (read reponsibilities)were espoused by the Founding Father's.
The next 5 or so years are critical to US hegemony.
Whether the US continues on it's current track or radically reverts to earlier principles will determine whether the US gives up global hegemony to an Asian centred power base.
Ian56 2007.
I don't think I have ever read such a collection of moronic posts.
Let's see if we can put this in words of one syllable, so that you might understand a little.
1. How many of the alleged 9/11 bombers were Iraqi's?
How many of the alleged bombers were Saudi's?
2. After 9/11 the US invaded Afghanistan to remove the Taleban and the terrorist training camps.
A move that was supported by the majority of the world.
3. After 9/11 there was a wave of sympathy for the US including a sizeable proportion of Muslim countries.
There were demonstrations in some Arab countries showing support for the US.
4. How much world wide support does the US now enjoy, 4 years into it's occupation of Iraq?
5. If the US was serious about tackling Islamic Fundamentalism and extremism there are two countries notable for their contribution in these areas.
Saudi Arabia with their fundamentalist Wahhabi sect, taught in all state schools.
Pakistan with their Madrasa's, also a breeding ground for extremists and terrorists.
So why didn't the US invade Saudi or Pakistan?
Why did they invade a secular state?
6. Iran has become more militant since the Iraq invasion.
It was becoming more Westernised up to the US invasion.
Now Iran can thumb it's nose at the US, because the US is militarily and diplomatically weakened thru it's invasion of Iraq.
Iran is now developing nuclear weapons as a necessary defense against potential US aggression.
7. You try and make a comparison with WW2.
How many ICBM's, aircraft carriers, strike aircraft and tanks did Iraq possess that would provide a legitimate threat against the US?
It could hardly be compared to the Imperialistic ambitions of Japan (or Germany).
Overall
The next challenge the US will face will be primarily an economic one, not a military one.
And it will not come from the Muslim world.
The US is currently singularly ill equipped to fight this battle.
The Bush regime has placed the US in a far inferior position for this challenge, than before they came to power.
Regards,
Ian
Thanks. nm
Anyone know what time Alcoa are likely to report today?
Regards,
Ian
Hasn't that guy worked out why he was sent to Peru in September 2001 yet?
Regards,
Ian
CDO's and CDS's from a bear site.
http://news.goldseek.com/GoldSeek/1183475130.php
Regards,
Ian
It rather depends on whether the mkt volunteers a measured decline into the fall, as per one of your previous posts, to take account of rising borrowing costs and less access to borrowing, denting profits.
Or there is a sudden correction.
We have already seen tentative signs of a liquidity crunch with bond offerings being withdrawn.
LBO spreads are also widening.
Which will see a reduction in M&A activity.
Regards,
Ian
China has a new strategy?
http://wallstreetexaminer.com/blogs/winter/?p=864
Regards,
Ian